One of the most pressing issues to be addressed with regard to the politics of the People's Republic of China is authoritarian resilience in the face of substantial market reform. Structural Marxism, modernization theory, and transition theory all lead us to expect that strong economic growth (markets and, to a significant extent, privatization), the emergence of a middle class, and the presence of fragmentation within the Chinese leadership might very well unleash forces of democratization. Of course, twentieth-century capitalism does not replicate the Anglo/American experience in which the bourgeoisie is seen to have ushered in democratic institutions, and so some scholars would argue that there is no conundrum to be explained. Nevertheless, the expectation that China's economic transformation will encourage pro-democratic forces persists among those who do and do not know China well.
Mary Gallagher's Contagious Capitalism is one important take on these events. In a nutshell, the book posits that the one-party state has been rejuvenated in part by a capitalist transformation of labor and by the liberalization of foreign direct investment (FDI). FDI liberalization placed competitive pressure on state-owned firms to produce more efficiently, such as through the introduction of new labor practices. Foreign-invested firms also provided a laboratory in which politically sensitive labor reforms were tried out and then extended to other parts of the economy. Finally, firms with new labor practices helped to establish a new model of successful national industry—with the effect of depoliticizing the distinction between private and public industry and replacing it with nationalist visions of competitive Chinese industries. In other words, openness to FDI and the labor pressures it sparked fragmented the working class, reduced labor's ability to resist reform, and therefore helped strengthen the reformist regime.
Dependency theory has long posited the likelihood that extensive foreign capital inflows would link with a business elite and an authoritarian state, and against labor, to retain the power of the state and the strength (and sometimes autonomy) of business. Peter Evans's “triple alliance” tended to assume a relatively weak state vis-à-vis foreign capital and business, however. What makes Gallagher's work interesting from a broader political economy/comparative politics perspective is its examination of these dynamics in a socialist state. In contrast to the role of foreign capital in a weak state, in China there is a mutual dependence between FDI and the state, but with the state calling many of the shots. Hence, the author tells us that economic reform, and particularly its sequencing—FDI first, before privatization—has mitigated the potential mobilization of labor, and in addition has failed to empower a business elite. This was not a conscious strategy of self-strengthening but, rather, the result of employing a combination of the very Maoist tradition of experimentation with the Dengist effort to grab the low-hanging fruits offered by certain types of reform.
While China's experience may not be replicated in other countries, it does suggest that the presumed linkage between economic reform and globalization, on the one hand, and significantly increased political contestation, on the other hand, must be examined in light of other significant variables having to do with the specific path of reform, as well as the nature of structural forces (labor and business especially) in society. Gallagher's book is valuable on another level. In a field where the study of Chinese labor has been insignificant in the past decade, the author reminds us of the importance of a key historical constituency for the Communist Party. Her work gives us insights into the nature of labor-capital-state relations in China that complement works by Elizabeth Perry, Dorothy Solinger, and Anita Chan, which document the declining class position of labor in post-Mao Chinese society. In contrast to these other scholars, though, Gallagher takes pains to show us how labor is in key respects being reconstituted to help uphold the regime.
My quibble with Contagious Capitalism concerns its treatment of the nature of ownership. I am not fully convinced that the debate over ownership, as it has evolved in China in the past two decades, has (as Gallagher claims) made the question of public ownership irrelevant in Chinese discourse. Indeed, the question of the disposition and ownership of state assets has come to the forefront of China's development strategy with the construction of new institutions to protect and manage state assets. Yet there is no doubting that we must seriously consider the author's argument that the question of legitimate ownership in “socialism” has been deliberately clouded by the state, and that this clouding has allowed the party-state to continue to claim legitimacy as much of the underlying structure of ownership has shifted, if not to privatization then to some unnamed hybrid system.
Mary Gallagher has provided scholars much food for thought on issues that are at the core of our understanding of China's political economy.
