Mary Gallagher

[Jonathan Lassen <jlassen@clarku.edu>]

Marc, thanks for reminding me. 

TITLE    	Contagious capitalism: Globalization and the politics of labor in China
AUTHOR 	  	Gallagher, Mary Elizabeth
DEGREE 	  	PhD
SCHOOL 	  	PRINCETON UNIVERSITY
DATE 	  	2001
PAGES 	  	274
ADVISER 	White, Lynn

How does a state renegotiate its duties and obligations to society? One of the
key explanations for the disintegration of socialism in the Soviet Union and
Eastern Europe is that these states failed to keep up their end of the 'social
contract.' As scholars of the regions point out, the fusion of economics and
politics under socialism made the failure of the economy a moment of political
opportunity, leading to the end of socialism. In the Chinese context, however,
the state has extricated itself out of the'social contract' with the urban
working class without losing its grip on political power. This dissertation
analyzes this significant Chinese exceptionalism. I argue that a key factor in
China's ability to reform the economy without sacrificing political control is
the timing and sequencing of its foreign direct investment (FDI) policy.
Liberalization of FDI began China's retreat from state-owned industry and its
endorsement of diverse forms of ownership and, by extension, diverse forms of
labor relations. I argue that this process of ownership diversification,
including foreign ownership, sets the Chinese experience apart from other
socialist transitions that relied mainly on privatization of the state sector
and/or the further liberalization of a nascent domestic private sector. FDI
played three roles in the process of China's reforms. First, the foreign sector
served as a 'laboratory' from where difficult and politically sensitive labor
reforms were extended to other parts of the economy. Second, as FDI's economic
importance grew, it placed 'competitive pressure' on the state sector to produce
more efficiently, thus necessitating new labor practices. Third, the existence of
a foreign sector gave 'ideological justification' for deeper reforms. It
legitimated the rapid growth of a Chinese private sector and it legitimated state
sector managers' demands for greater enterprise autonomy and less onerous welfare
burdens. Openness to FDI, thus, led gradually to the expansion of capitalism
labor practices, a contagion of capitalism that permeated ownership boundaries.