A Brief History of Neoliberalism by Harvey David;

Author:Harvey, David; [Harvey, David;]
Language: eng
Format: epub
ISBN: 9780199283279
Publisher: Oxford University Press
Published: 2005-01-15T07:00:00+00:00

During the 1980s it became clear that most of China’s phenomenal growth rate was being powered from outside the SOE sector. In the revolutionary period the SOEs provided job security and social protections for their workforces. But in 1983 SOEs were allowed to hire ‘contract workers’ with no social protections and limited tenure.12 They were also granted greater managerial autonomy from state ownership. Managers could retain a certain proportion of their profits and sell any surplus they produced over their targets at free market prices. The latter were much higher than the official prices, thus setting up an awkward and, it turned out, short-lived dual pricing system. In spite of these incentives, the SOEs did not flourish. Many of them fell into debt and had to be supported either by the central government or by the state-owned banks, which were encouraged to lend to them on favourable terms. This later posed serious problems for the banks as the volume of non-performing loans to the SOEs grew exponentially. Pressure for further reform of the SOE sector mounted. In 1993, therefore, the state decided ‘to turn targeted large and medium state enterprises into limited liability or shareholding companies’. The former would have ‘two to fifty shareholders’ while the latter would have ‘more than fifty shareholders and could offer public issues’. A year later a far more extensive programme of corporatization was announced: all but the most important of the SOEs were to be converted into ‘share-based co-operatives’ in which all employees had the nominal right to purchase shares. Further waves of privatization/conversion of the SOEs occurred in the late 1990s so that, by 2002, SOEs accounted for only 14 per cent of total manufacturing employment relative to the 40 per cent share they had held in 1990. The most recent step has been to open both the TVEs and the SOEs to full foreign ownership.13

Foreign direct investment, for its part, met with very mixed results in the 1980s. It was initially channelled into four special economic zones in southern coastal regions. These zones ‘had the initial objective of producing goods for export to earn foreign exchange. They also acted as social and economic laboratories where foreign technologies and managerial skills could be observed. They offered a range of inducements to foreign investors, including tax holidays, early remittances of profits and better infrastructure facilities.’14 But initial attempts by foreign firms to colonize the internal China market in areas such as automobiles and manufactured goods did not do well. While Volkswagen and Ford (barely) survived, General Motors failed in the early 1990s. The only sectors where clear initial successes were recorded were in those sectors exporting goods with high labour content. More than two-thirds of the foreign direct investment that came in during the early 1990s (and an even great percentage of the business ventures that survived) was organized by the overseas Chinese (particularly operating out of Hong Kong but also from Taiwan). The weak legal protections for capitalist enterprises put a premium on

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