China: The Roots of Worker Revolt

Kim Moody

Smashing the Iron Rice Pot:
Workers & Unions in China’s Market Socialism
By Trini Leung
Hong Kong Asia Monitor Resource Center, 1988, 233 pages, $5.

ONLY DAYS AFTER the massacre at Tiananmen Square, the government of the People’s Republic of China arrested the leaders of the fledgling independent trade unions that sprouted during the pro-democracy movement.

Compared to the hundreds of students arrested, the dozen or so labor activists may have seemed insignificant But when, in Being and Shanghai, the government began publicly executing workers who had thrown stones or burned tanks, just as countless students had, the message became clear. Student opposition was intolerable, but worker opposition was terminal.

In reality, the small Workers Autonomous Federations that appeared in the streets of Shanghai and Beijing in June were hardly an immediate threat to the Chinese Communist Party (CCP), which controls official unions with a membership of 80 million. Nor is there evidence that either the students or the workers were out to overthrow CCP rule per se. Indeed, the vision of some sort of democratic capitalist ‘revolution around the corner” peddled in much of the Western press was an illusion in the China of 1989.

The danger of working-class involvement, from the vantage point of the CCP bureaucracy, was not the imaginary rise of anti-collectivist consciousness among the workers, but it’s opposite. If the unified demand of the democratic movement spelled trouble for the CCP’s bureaucratic rule, the disaffection among workers pointed toward intractable problems with its economic program.

In purely numerical terms, China’s 130 million urban workforce still represents a small minority of its more than 1 billion citizens. But it is this urban working class and most particularly its industrial sections that has been the carrier of China’s economic development since the early 1950s. Through all the twists and turns of the Great Leap Forward (1958-59) and the Cultural Revolution (1965-76), China’s vast agricultural sector grew only enough to match population growth, if that According to the CCP’s own accounts, it was industry that provided all of the surplus and, hence, growth.(1)

The growth rate of China’s industrial economy slowed from 11-13% growth rates to 9.8% during the Cultural Revolution. Some of this decline in growth could be attributed to the political disruption of that era, but much of it was due to the chronic imbalances and irrationalities that characterize the centrally planned bureaucratic economies: overproduction of basic industry, extensive rather than intensive investment, hoarding at the enterprise level, poor quality, etc.(2)

Reform and Its Consequences

As in Eastern Europe, China’s rulers turned toward two expedients to deal with its economic problems. One was foreign borrowing, the other, sweeping economic reforms.

Like Soviet perestroika, the Chinese reforms that were implemented in the late 1970s were couched in the language of the economic market. The reforms included the dramatic abolition of the commune system in agriculture and its replacement with private family farms, an act which threw about 40% of the economy out of the formal state sector. In the minds of most Western observers, however, the key aspect of China’s market reforms was the opening of private production and foreign investment in industry.

The coastal region of China has seen a decade of private investment, including the Special Economic Zones (SEZ) that are the envy of South Korea and Hong Kong for the cheap labor. Capital from Hong Kong, Japan and the United States has led the way in creating China’s private sector.

The Western press lauds China’s 1980s growth rates of 10%-11%, comparing favorably to almost any capitalist economy these days. While this growth remains less than that of the 195( and 1960s, the business press is quick to point out that growth rates in the more market-oriented coastal region are more than twice the national average.(3)

Yet, for all the editorial hype about capitalism triumphant East and West, China’s industrial sector remains overwhelmingly state owned. Of the perhaps 3% of the industrial output that is in private hands, 70% is accounted for by tiny factories in the rural areas of the coastal region. These factories are technologically primitive, typically owned by well-to-do farmers and entrepreneurial- minded party officials—not much of a model of economic development Chinese industry remains in the hands of the party bureaucracy.

Thus, the heart of China’s economic reform program has occurred in state-owned industry. Just as China’s state-employed industrial working class was key to its earlier growth, so it is key to the reform program.

It was, at least in part, the social dynamics of the state-sector reforms that brought hundreds of thousands of workers into the streets to defend the students and often take the lead in confronting the government. These events ranged from heroic confrontations with the People’s Liberation Army in Tiananmen Square to mass demonstrations throughout the urban centers. They included the birth and death of independent trade unions in Beijing and Shanghai.

The urban setting and national breadth of this worker involvement make it clear that it was primarily workers from the state sector that took to the streets in May and June.

Smashing Workers’ Security

Socialists seeking to understand the economic reforms in China as they affect the working class face a dearth of information. To be sure there are academic studies of China’s economy from which one can infer something of the impact on Chinese workers. But works, at least in English, dealing with the working class itself are scarce.

Smashing the Iron Rice Pot: Workers and Unions in China’s Market Socialism by Trini Leung Wing-yue is a unique and important contribution toward a critical understanding of what has led to the events of 1989. The book was published in 1988 by the Asia Monitor Resource Center, a left-oriented, Hong Kong-based organization doing labor solidarity work throughout Asia.

Smashing the Iron Rice Pot is based on extensive interview material in China as well as on statistical and historical research. It is a useful short course in the history of China’s labor movement, as well as a valuable description of the impact of reform on the working class in both the private and state sectors.

The “Iron Rice Pot” refers to the system of job security and welfare benefits that accrued to the workers in China’s Large-scale state enterprises prior to the unfolding of the reforms in the 198(k. Leung uses the example of the giant Wuhan Steel Works, where she interviewed workers and managers, to illustrate how the old system worked and how it is changing.

The Wuhan Works, which began operation in the 1950s, employs about 140,000 workers. Until recently, these workers could count on life-time employment and a relatively egalitarian wage scale. Housing, medical care, education, retirement and other benefits were a function of employment and membership in the official trade unions and were provided within the massive complex that is like a city unto itself. According to Leung, Wuhan workers did well economically not only by Chinese standards, but by those of industrial workers in other parts of Asia as well.

This sort of economic security has a special meaning for China. Unlike the Soviet Union, where full employment is in part a result of a general labor shortage, China is awash in surplus labor. The surplus rural labor form alone is estimated at 150 million. To sustain the level of economic security that exists in plants and industrial complexes like Wuhan required the absence of market forces.

The economic reformers know this and hope to change things. The now-deposed reform leader Zhao Ziyang stated that a third of China’s workers had no real function in their workplace. The reforms that both Zhao and his detractor Deng Xiaoping advocate are meant to eliminate that surplus.

The immediate introduction of market-induced unemployment was not considered wise by any faction of the bureaucracy for reasons that are not difficult to imagine. Instead, as Smashing The Iron Rice Pot describes, they introduced a system of temporary contract labor into the commanding heights of state industry. Contract labor has existed in China throughout Communist rule, but until the mid-1980s it operated outside the favored bastions of heavy industry.(4) Now it was to operate as a means of cracking the iron rice pot.

Contract workers are hired by a state enterprise for a period of years, usually two to five As temporary workers they are not entitled to the extensive welfare and benefits system. The initial 1984 contract labor “reform” embraced only newly hired workers at Wuhan and similar enterprises. But by April1987, 75million workers within the slate industrial sector were contract workers.

“Ultimately,” Leung writes, “all China’s workers would come under a labor contract system, even existing permanent employees.” Even if this goal proves unworkable, it is evident that a second tier of temporary workers without benefits will tend to undermine the security and conditions of the permanent employees.

Another central feature of the reforms is the change of the wage system in state industry. Some of the “excess” wages of industrial workers can be and has been eroded by price reforms that lead to inflation. But the basic method of attempting to tie wages to performance has been to remove decisions about wage changes from the political center to the enterprise management.

In China, as in the Soviet Union, Hungary and Poland, greater initiative and flexibility by enterprise management is the heart of China’s reform. This has often had contradictory results. In fact, for a time it seems that this decentralization of wage determination actually created a wage inflation, as managers sought to gain the cooperation of their workers in increasing output.(5)

But the decentralization has another consequence as well. As Leung points out, significant wage differentials have developed between plants, jobs and locations. She cites surveys that show that Chinese workers see this as unfair and object to it.

One of the most interesting chapters describes the particular effects of these reforms on women workers. The growth of contract work is particularly devastating to women because benefits such as childcare, maternity leave and healthcare are tied to permanent employment. The figures cited at Wuhan also indicate that women are prime targets for the contract system. In the Wuhan steel works there are 39,000 permanent women workers, but 56,000 female contract workers.

As might be expected in a program seeking to reduce the surplus labor force, women are also the prime target for removal from the workforce Women are induced to “return to the kitchen” by the promise that their husbands will receive the benefits of permanent employment. There is, however, resistance.

Problems of Official Unions

Another unique aspect of this book is that it doesn’t just describe the problems faced by workers in China’s changing economy. It speculates on the impact of the specific changes on the collective struggle of workers and on the behavior of China’s official trade unions.

Leung makes it clear that China’s official unions and their federation, the All-China Federation of Trade Unions (ACFI1J), are creatures of the government and the party. But she also argues that the decentralization and, at the periphery, the private-market sector, create new problems for the unions as well as the workers.

Specifically, they create a latitude for bargaining over wages and conditions that did not really exist when wages were centrally determined and largely standardized. Even if, as other studies show, today’s flexible plant manager tends to grant concessions across the board, rather than individually within an enterprise, the rise in inequality between enterprises is a goad to workers on the losing end.

Indeed, while the wage inflation that began after the wage reforms of the mid-19806 is often portrayed as the result of collusion between managers and workers, it is more than likely that the pressure for increases by the workers accelerated as disparities develop between enterprises and geographic areas. A conflictual element necessarily arises as the enterprise’s resources are taxed.

This creates anew pressure on the official unions. As Leung says at various points, the stated goal of China’s official unions is to encourage greater productivity, on the one hand, and, on the other, to administer the distribution of housing and welfare benefits. But now, not only wages, but housing and welfare funds as well, vary according to the performance of the enterprise. Both the levels and the distribution, while formally determined by management, become the object of pushing and pulling, if the official trade unions do not engage in such bargaining, it will be done informally or through the enterprises’ “workers’ congresses,” which are supposed to monitor management.

Leung clearly believes the official trade unions should play a traditional adversarial/advocacy role, even though she recognizes the barriers to such a transformation. Even in the private sector and the SEZs, where such a role seems obvious, the official unions play “a role almost akin to personnel managers.” Still, the book concludes with a quote from ACFIU Chairman Ni Zhifu in which he confesses that the unions were “not representative of the interests of workers.” The implication is that they should take up these interests. Leung seems to be saying as much.

Smashing the Iron Rice Pot was written in 1988. The events of 1989 have most certainly laid to rest hopes that the economic reforms are a prelude to democratic reforms by the bureaucracy itself if there are to be even modest democratic reforms, such as those in the Soviet Union or Poland, they will have to be pried from the hands of the rulers by force.

Leung has, during and since the May-July events, followed her loyalty to the working dam rather than her hopes for trade-union reform. She was, in fact, one of the first to report favorably on the formation of the Autonomous Workers Federations in Beijing and Shanghai this spring.(6)

The weakness of Smashing The Iron Rice Pot is ultimately that its author assumes China to be a socialist society, albeit a very bureaucratically disfigured one. The book, for example, limits the sources of industrial conflict largely to the implementation of the new reforms and the rise of a private sector. In point of fact, the sources of such conflict lie far deeper in the nature of China’s social system.

Precisely because bureaucratic central planning is inherently inefficient, the bureaucracy needs a variety of political instruments to effect its frequent adjust-merits or changes in emphasis.
The official trade unions have always been one such instrument in China as in the Soviet Union. Their central function, as Leung points out, has always been to encourage greater efforts by the workers. They do this by the stick of “education” or emulation, or the carrot of housing and welfare benefits. They are run by the party for the party.

At times, these unions can be a transmission belt of worker opinion from the workplace to the central bureaucracy, which is why they occasionally disagree with their party chiefs. And, of course, their leaders can side with one faction of the party leadership against another.(7) But fundamentally, they are as much a part of the control apparatus as the enterprise party secretary or the economic ministries.

Smashing the Iron Rice Pot may not provide the analytical framework for assessing the future of China’s trade unions, but it does provide a clear picture of the reforms as they have affected the industrial working class. These reforms will continue, despite some reluctance in the West to return or increase investments. This book will prove an important contribution to understanding the roots of the next great upheaval in China. [Smashing the Iron Rice Pot can be ordered from the Asia Monitor Resource Center.]

Notes

1. Nigel Harris, The Mandate of History: Marx and Mao in Modern China (London, 1978) 1901, 7.
   back to text
2. Harris 190-19; Richard Smith, “Class Structure and Economic Development: The Contradictions of Market Socialism in China,’ UCLA, unpublished thesis, 1989, Chapter 3, 1-16.
   back to text
3. For example, Business Week, June 5,1989: 38.
   back to text
4. Harris 132-134.
   back to text
5. Smith 37-43.
   back to text
6. Labor Notes, July 1989; “Echoes From Tiananmen,” Friends of Chinese Mlnzhu (Hong Kong, 1989) 12-13.
   back to text
7. This may have been the case this spring, as the ACFTU did issue a statement of support for the students in mid-May. So far as I know, however, they were silent on the executions of workers and the military suppression of the democracy movement in Beijing.
   back to text

November-December 1989, ATC 23