The contradictions of the socialist market economy and the emergence of capitalist production relations
Reform in both China and the Soviet Union stimulated workers’ aspirations, which were often thwarted by increasing inequality and insecurity and, above all, a sense of injustice. It was these pressures that underlay the emergence of mass protest at the end of the 1980s, with the 1989 strike wave in Russia, led by the mining regions (Clarke et al. 1995), and the democracy movement, culminating in the Tiananmen events, in China in the same year (Lu 1991). In both cases, the workers’ protest was launched outside and against the established trade unions, bringing to the fore the fact that the latter were not able to articulate the grievances of their members. The reaction of the Party-state to these events in Russia and in China was very different, which had important implications for the role of the trade unions in the transition to an unambiguously, even if in China as yet undeclared, capitalist market economy.
In Russia, having rejected conservative pressure for repression, Gorbachev sought to harness the workers’ protests to generate pressure for ‘perestroika from below’ through the reform of the trade unions, which implied the democratisation of trade union structures and an end to the ‘democratic centralism’ that had secured their subordination to the Party (Ashwin and Clarke 2002: 30-33). In practice the reform of the trade unions had only a marginal effect, even the unions’ official history acknowledging that changes on the ground were few and far between as officials continued in their habitual ways (Gritsenko, Kadeikina and Makukhina 1999: 316 –20).
In China, the reaction to the workers’ involvement in the democracy movement was one of severe repression of any attempts to organise outside the official trade unions. The official trade unions, which had acquired a degree of independence and some of whose cadres had participated in the protest actions, were immediately brought under much stricter Party control (White 1996; Li 2000 Chapter Three; Taylor et al. 2003 Chapter Two).4 At the same time, however, the Party-state also appreciated the importance of the unions as a means of maintaining social and political stability in a period of rapid social change, so the official trade unions’ status was increased. Their strict subordination to the Party did not necessarily imply that they would serve merely as an instrument of the Party-state. ACFTU President Ni Zhifu noted that ‘The trade unions must avoid simply acting as agents of the government and work independently so as to increase the attraction to workers and enjoy more confidence from the workers, leaving no opportunity to those who attempt to organise “independent trade unions”’ (Xinhua News Agency, 25 July 1989, cited Ng and Warner 1998: 55). Thus, ACFTU lobbied very actively for measures to protect workers’ interests and promoted its own position in debates regarding the legislative and policy framework of reform, with considerable success (Chan 1993: 52-5). In particular, ACFTU pressed strongly for the collective regulation of labour relations, against their regulation on the basis of individual contracts that was favoured by the Ministry of Labour (Ogden 2000; Clarke, Lee and Li 2004). The significance of the trade unions to the regime was endorsed when the ACFTU President, Wei Jianxing, who had made active efforts to strengthen the trade unions’ influence and their role in protecting workers’ interests since his appointment in 1993, was elevated to the Standing Committee of the Politburo of the Central Committee of the CCP in 1997.
The Tiananmen events in China initially brought reform to a halt, as the conservative elements in the leadership gained the upper hand. However, following Deng’s Southern Tour in 1992, reform was resumed at an accelerated pace, with the official proclamation of the ‘modern enterprise system’, a euphemism for the ‘modern capitalist corporation’. While foreign capitalists had already been welcomed and private capitalists encouraged, now state enterprises would be transformed into independent state-owned corporations. It was not long before corporatisation was followed by privatisation, as the shares in publicly owned corporations and Township and Village Enterprises (TVEs) began to be sold off, with only the commanding heights of the economy to be retained in state hands.
In Russia, too, the 1989 events strengthened the hand of the conservative opponents of perestroika, but after two years of prevarication, the failure of the putsch of August 1991 opened the floodgates of reform. In both China and Russia, the decentralisation of state management of the economy had stimulated the appetite of some enterprise directors for independence and provoked widespread dissatisfaction among workers, which was directed not at enterprise management, but at the state as the ultimate employer. The response of the state was not to reverse economic reform, to take matters back into its own hands, but to abdicate responsibility for the management of state enterprises and to initiate a programme of corporatisation and privatisation that would seal the independence of enterprise management and give them full responsibility as employers for their relations with their employees (Clarke 1990).
In both China and Russia, the transition to a ‘socialist market economy’ inexorably developed into a transition to a capitalist market economy. Whatever the form of its ownership, the reproduction of the enterprise was immediately conditional on its ability to cover its costs and to realise a profit to finance its future development. The institutions of workplace democracy were at least implicitly a barrier to managerial prerogatives, though management control of these bodies was rarely seriously challenged. Nevertheless, the first stirrings of independent activism within the Labour Collective Councils in the Soviet Union provoked their suppression. The significance of the Workers’ Congress progressively declined in state enterprises in China, while they were never established in the private and foreign-invested sectors and were optional bodies with limited powers in joint ventures (we were informed by senior officials of the Ministry of Labour and ACFTU in 2002 that the status of the Workers’ Congress in China is currently under review). The erosion and abolition of the institutions of workplace democracy implied an increasing role for the trade union as representative of the interests of the employees of the enterprise in negotiation with enterprise management (Zhang, 1997). However, to fill this role effectively would imply a radical transformation in the character of the enterprise trade union.
In Russia, trade union independence had freed the trade unions from their subordination to the Party, but the change in the political status of the trade union had done nothing to change its institutional form within the enterprise. In both Russia and China, the enterprise trade union was still constituted as a branch of management, staffed by management appointees, drawing on enterprise resources and performing management functions and so dependent on management for its own reproduction (Ashwin and Clarke 2002, Chapter Eight; Clarke, Lee and Li 2004; Ding et al., 2002; Taylor et al. 2003). There was little likelihood that the enterprise trade union organisation would seek or be able to transform itself into the representative of employees in opposition to the employer on its own initiative, since to do so would be to compromise its own institutional survival. Change could only be expected if pressure from below was combined with pressure from above.
While the trade unions remained weak at the enterprise level, even in Russia they still disposed of considerable assets, they were still responsible for the performance of many state social and welfare functions, and they enjoyed considerable legal protection. This provided the trade unions with a valuable legacy from the Soviet past, but also made them very vulnerable to threats from the state to deprive them of their property and privileges. In the first two years of Yeltsin’s rule the trade unions oscillated between accommodation and militant opposition to Yeltsin’s programme, but in response to dire threats from Yeltsin after his second putsch in 1993, the Russian trade unions committed themselves to a system of ‘social partnership’, within which they would serve as guarantors of social peace, while preserving their traditional functions, property and privileges. They sought to perform this role by diverting conflict into bureaucratic and juridical channels and by conducting symbolic protest actions (Ashwin and Clarke, 2002, Chapter Three).
In China, the reassertion of the authority of the Party over the trade unions in the wake of Tiananmen limited the unions’ room for manoeuvre, but at the same time it gave them much greater authority and significance. As noted above, subordination to the Party did not imply that the trade unions were required to continue to function simply as the Party’s transmission belt. As in Russia, for the government, the role of the trade unions in the transition to a capitalist economy was primarily to maintain social peace and social stability. To perform this role, and to forestall the rise of autonomous workers’ organisations, the more progressive elements in the Party and the trade unions recognised that the trade unions would have to be more active in representing workers (interviews with senior ACFTU officials and staff of China Labour College, June 2002). Trade union organisation and representation would also have to be extended from the state sector to the private and foreign-invested sectors where it was almost entirely absent or, where present, entirely ineffective. In principle, therefore, the trade unions enjoyed the support of the Party for any aspirations they might have to extend their organisation and to represent their members more effectively. In practice, the aspirations of the trade unions were more restrained and the support of the Party for increased activism was more equivocal. On the one hand, trade union bureaucrats could enjoy a comfortable existence continuing to work in traditional ways. They had no interest in the hard and often dangerous work of encouraging the greater activism of enterprise trade unions or trying to organise the unorganised. Above all, they did not want to take the risk of articulating conflict that might even provoke the social unrest that it was their role to neutralise and contain. On the other hand, the first priority of the Party and local authorities was always to maximise economic growth and they were not prepared to endorse any actions that might compromise that priority merely to avert the hypothetical possibility of social unrest (Chiu and Frenkel 2000: 35, 41; Howell 1998: 161). The optimal strategy for all concerned was to do nothing and hope for the best.
The continued subordination of the trade unions to management and the state presented a formidable barrier to any trade unionists that might want to take the initiative in representing the grievances of their members in either Russia or China. However, capitalist development led to an accumulation of such grievances as enterprise directors sought to ensure the profitability of their enterprises by all the means at their disposal. Moreover, employers sought to avert conflict with their employees by trying to turn the workers’ grievances against the state, so that capitalist development implied not only an increase in the potential for industrial conflict, but also the transformation of such conflict into social protest with the formulation of political demands (Ashwin and Clarke, 2002: 252-9; Sheehan, 2000).
In both Russia and China, the management of insolvent enterprises sought to adapt to the market situation by laying-off workers, eroding welfare provision and delaying the payment of wages, social insurance and other benefits. Most workers responded to such violations of what they regarded as their traditional rights with a resignation born of a sense of impotence, but the accumulation of grievances and a sense of desperation could lead to explosive outbursts of social protest, directed as much against the political authorities as against their own management. Many new private enterprises secured their profitability by paying low wages and forcing workers to work illegally long hours in appalling conditions, in violation of labour and health and safety legislation. Protest at such conditions was constrained by the vulnerability of such workers, most of whom were young and many of whom in China were rural migrants, but strikes and protests became increasingly common events in China, particularly in the South (Chan 2001). Even the more successful enterprises, paying higher wages and providing better working conditions, did not avoid violating workers’ traditional aspirations (Chan 1993: 29-44). In both Russia and China, many successful capitalist enterprises were marked by increased wage differentiation, the erosion of the status of manual labour, increased labour discipline and employment insecurity, the crude assertion of managerial authority and the increasing use of temporary and migrant labour.
The accumulation of grievances and the ensuing industrial and social unrest, almost entirely spontaneous and outside trade union structures, presented a challenge to the legitimacy of the trade unions as representatives of the interests of the workers and to their function for the state of neutralising industrial conflict and maintaining social peace. This presented the trade unions with a dilemma. On the one hand, to maintain their status and role they had to become more effective representatives of the interests of their members. On the other hand, to the extent that they articulated the grievances and aspirations of their members, they risked undermining their function for management and the state. The traditional role of the trade unions as a branch of the state and enterprise administration was coming into growing contradiction with the role of trade unions in a capitalist society of articulating the rights and interests of their members.