By now, it is almost a truism that China needs to “rebalance” its economy in order to create a more sustainable development path. In this book, Florian Butollo addresses the tensions surrounding the quest for rebalancing and industrial upgrading towards higher value-added functions, in particular the much neglected relationship between “social upgrading,” i.e. improvements in wages and working conditions, and economic rebalancing. The central assumption is that workers' incomes need to rise substantially if economic rebalancing towards higher domestic consumption is to be achieved. Butollo, however, demonstrates that a technology-centred version of industrial upgrading fails to yield improvements in wages and working conditions and thus hampers economic rebalancing.
To support his argument, Butollo provides evidence based on an assessment of the recent efforts to rebalance the economy and rich case studies of enterprises in Guangdong, which are based on interviews (mainly conducted in 2010–11) with representatives of enterprises, associations and government institutions and secondary analyses. His findings from the low-tech garment and the high-tech LED lighting industries indeed reflect a profound trend towards industrial upgrading. Yet, he also reveals that upgrading in fact rarely supports qualitative improvements in working conditions and wages for the mass of employees. While Chinese firms are “climbing up the value chain,” thereby creating a higher demand for a few highly skilled and better-paid employees, this is complemented by a trend towards a strong division of labour within firms, which leaves basic manufacturing tasks to be performed by low-skilled and badly paid workers who are mostly migrants from other parts of China. This failure to accomplish social upgrading undermines economic rebalancing. Although there is an increased request for higher-skilled staff at the level of R&D or marketing, such requirements do not trickle down to the bulk of workers in manufacturing. Here, short training periods and a high turnover rate in flexible labour regimes remain typical. While this notion of a polarization of skills and wages may not be surprising in low-tech sectors such as the garment industry, it is surprising in the case of the LED industry where on average wages are even lower.
In its three main chapters, the book advances our knowledge by identifying social upgrading as a key challenge for economic rebalancing, by developing practicable concepts (inspired, inter alia, by critical political economy scholarship) for the empirical analysis of social upgrading at the firm and industry level, and by delivering rich case studies of scarcely investigated industries. It thereby contributes to research on industrial upgrading in global value chains which often implicitly assumes that economic upgrading automatically translates into social upgrading. In addition, it complements research by labour scholars that often neglects an assessment of wider dynamics in production networks and of socio-economic development. By theoretically linking detailed empirical investigations to the issue of rebalancing, the book is a valuable intervention into the present academic and political discourse. Its main contribution is to forcefully demonstrate that most assessments of industrial upgrading and rebalancing suffer from the failure of technology-centred views to take into account that labour regimes need to change if an increase in domestic consumption is to be achieved. Despite these achievements, I find that one important aspect remains debatable: Butollo acknowledges a trend of rising wages due to labour shortages and increases of minimum wages, i.e. developments evolving outside of the firm-level labour regime. Yet, he still argues that there is no end of “cheap labour” in sight. But even if no full-scale social upgrading at the firm-level is realized, gradual wage increases for (migrant) workers might have a stronger impact on rebalancing than Butollo concedes. Production may continue to rely for some time on cheap, ultra-flexible labour and workers may continue to work under poor conditions, but they still could be expected to earn more on average, which would result in a corresponding macroeconomic impact. It would therefore be desirable to complement his study with investigations about the macroeconomic effects of such wage increases on rebalancing.
While there are other small issues of interpretation where Butollo and I could have fruitful discussions, all in all, this is insignificant compared with the overall power of the analysis and the magnitude of his accomplishment. The book makes a major contribution to the critical historical discussion of industrial upgrading, labour relations and economic development. Its insights are of great value for anyone interested in Chinese studies, development studies and industrial sociology, and it addresses a sizeable audience in politics, economics and sociology.
