But even before their Five-Year Plan ended, Chinese leaders began edging away from the Soviet model. First they rejected “one-man management” of factories, seeking broader party and worker involvement, and began abandoning individual incentive pay. Then, in the preliminary planning for a Second Five-Year Plan, priority shifted from huge, capital-intensive projects to smaller-scale, more widely distributed plants, seen as more appropriate for China’s limited financial capacity.
The Second Five-Year Plan never was completed because of a more radical departure, the Great Leap Forward, launched in 1958 in an effort to accelerate economic growth through mass mobilization and decentralized innovation. The Great Leap Forward had a deeply disruptive, antibureaucratic thrust. In industry, the new policy embraced “walking on two legs,” continuing capital-intensive, large-scale, modern factory development while also promoting small-scale, labor-intensive, technologically simple industry that used local resources. Microindustry was meant to take advantage of underutilized rural labor and materials, serve agriculture, and provide inputs to large-scale industrial concerns. Most famous were the several hundred thousand very small “backyard” blast furnaces built across the country, which, along with small mines to feed them, at one point employed sixty million workers. Local initiatives took on a more prominent role in industrial development, while the importance of central directives diminished.
In addition to experimenting with factory scale, supporters of the Great Leap Forward also tried to break down the division between management and labor within the factory and the unequal distribution of power and privilege between them. In May 1957, the Central Committee of the Communist Party directed that all managerial, administrative, and technical personnel in factories spend part of their time directly engaged in productive activities, exposing them to the conditions, concerns, and views of workers. At the same time, workers were given greater opportunities to participate in the management of factories, or at least to have some say over the behavior of managers. Periodic congresses of workers evaluated managerial action while wall newspapers provided a more immediate outlet for criticism. Some administrative tasks, including accounting, scheduling, quality control, job assignments, and discipline, were shifted from managers to teams of workers. To enable workers to engage technical and administrative issues in an informed way, the country launched a massive program of technical education, reminiscent of the Soviet Union during the 1930s.
The efforts to create small-scale rural industry and give workers greater say over factory management reflected a Maoist belief in the centrality of popular mobilization to economic development and building socialism. But the Great Leap Forward, including its radical experiment with industrial scale, proved a disaster. Output of some goods soared, but they were of such low quality and often in unneeded varieties that they proved virtually useless. Meanwhile, pulling labor out of agriculture to local industry, along with the chaos that came with a weakening of central planning and wild misestimates of upcoming harvests, led to a severe famine. Even the strongest backers of the Great Leap Forward, including Mao, had to acknowledge that economic growth could not be achieved simply through mass mobilization.
Yet even as the Chinese leadership shut down most of the backyard iron furnaces, reasserted central control, and put experts back in charge of industry, experimentation continued, promoted particularly by Mao, in an effort to avoid what were seen as the flaws in the Soviet model and the hardening of hierarchy and bureaucracy at the expense of communist ideals. While again embracing industrial giantism as a path of national development, Mao hoped to grant large enterprises considerable autonomy in order to diminish the complexities and rigidities of central planning and create an environment for greater worker involvement in management.
The Anshan Iron and Steel Company, along with the Daqing Oil Field, became a model for the leftist approach to industrial management promoted by Mao. Anshan, located in the northeast, had been one of the two largest steelmakers in precommunist China, expanded with Soviet help during the First Five-Year Plan. In 1960, Mao approved a “constitution” for the management of the mill, supposedly written by its workers. Though its details were not published, its general principles stressed putting politics in command, relying on mass mobilization, bringing workers into management, avoiding irrational rules and regulations, and creating work teams that joined together technicians, workers, and managers. The “Anshan Constitution” was presented explicitly as a counter to the management approach at Magnitogorsk, which subordinated workers through restrictive rules and regulations.11
Giant industrial enterprises, Mao believed, could become anchors for new social arrangements. Rather than simply pouring out a narrow range of goods, a steel plant could also operate machinery, chemical, construction, and other enterprises, in effect becoming an all-purpose commercial, social, educational, and even agricultural and military organization. The factory would be the core of an all-encompassing community, going beyond even the expansive role of large factories in the Soviet Union and Eastern Europe. The Daqing Oil Field, like Magnitogorsk, developed in what had been a sparsely settled area, presented an opportunity to conceive a new type of settlement to break down the urban-rural divide. Unlike at Magnitogorsk, where the Soviets built a new city along conventional lines, at Daqing the Chinese developed dispersed residential areas, while providing support for agricultural production and a range of social and educational services.12
Mao believed that the key to the advance to a socialist society, with both greater equality and more rapid growth, lay in the relations of production, not simply in the level of material development. Who ruled the factory made all the difference. But there were plenty of critics among Chinese leaders as a debate unfolded in the late 1950s and early 1960s—somewhat reminiscent of the debate in the Soviet Union during the 1920s—over economic policies and industrial practices. Many Chinese leaders, in the wake of the Great Leap Forward, rather than promoting enterprise self-sufficiency and worker self-rule, called for greater specialization of enterprises and workers and greater use of material incentives.
Minister of Labor Ma Wen-jui represented one side of the debate when in 1964 he argued—much like Trotsky four decades earlier—that modern industry, with its complex machinery and coordinated activity of large numbers of workers, required a particular form of organization, regardless of whether it operated in a capitalist society or a socialist one. Maximizing output “to satisfy the needs of society” remained the “basic task” of state-owned enterprises. Socialism eliminated the inherent class conflict within the factory under capitalism because all output was for the benefit of society as a whole—workers and managers no longer had different interests. But the actual internal organization of the factory need not differ significantly from capitalist models. Ma endorsed worker involvement in overseeing managers but did not anticipate eliminating the distinction between them.
For others, though, a change in ownership constituted only the first step in the transformation of the factory and the larger society. Politics, they argued, needed to take command inside the factory as well as outside of it, promoting not only greater equality but also “the revolutionization of man.” Socialism should lessen the distinctions between mental work and manual work and between manager and worker. Practically, that meant requiring everyone associated with the factory to do some physical labor, bringing workers into administrative and leadership bodies, and having the Communist Party oversee factory management. Workers might continue to engage in highly specialized activities within a detailed division of labor, but that would not be all they would do. With their colleagues, technical personnel, and political cadre they would join with managers in determining all aspects of plant operation.13
The Cultural Revolution that began in 1966 intensified the struggle over who should run the factory and what it should be doing. The factory, though slow to be drawn into the escalating political strife, eventually became a center of battle as the turbulent polit
ical climate encouraged attacks on entrenched factory leaders and the powers and privileges they enjoyed. Worker critics and their allies challenged what they saw as bloated bureaucracies, full of officials doing little of real use, while workers were locked out of participation in such key areas as technical innovation. More radically, supporters of the upsurge questioned the notion that the factory should be understood simply as an economic unit responsible for maximum production. Harking back to Mao’s view during the Great Leap Forward, they argued that the factory should be a social institution, serving the multiple needs of its workers and the surrounding community, even at the cost of diminished production and profit. Some pushed for the despecialization of factories, especially in rural areas, so that their equipment and expertise could be used to serve local needs and make varied products for local consumption, rather just a narrow range of products for the national market.
The period of radical experimentation proved short-lived. As political conflict in schools, government agencies, and factories intensified and threatened to spin completely out of control, top communist leaders moved to reassert their authority using the army as their agent, as local Communist Party units were hopelessly sundered. As order was restored, so was hierarchy, though with great variation from factory to factory, as some degree of worker participation in management and experimentation with organizational forms continued. Still, the shift in the tide was clear.14
“Feeling the Stones”
The Cultural Revolution led to a break between the first Chinese industrial revolution, based on capital-intensive, state-owned enterprises making producer goods like steel and petrochemicals, and a second, based on labor-intensive consumer-goods manufacturing by privately owned enterprises. The chaos of the Cultural Revolution, followed by Mao’s death in 1976, left an opening for reformers, led by Deng Xiaoping, who sought to revive the stagnant Chinese economy and improve Chinese life. In many cases themselves victims of the Cultural Revolution, the reform leaders rejected basic Maoist tenets, including the centrality of mass mobilization and the need to reject all capitalist forms of organization. By the late 1970s, many communists came to believe that China’s continuing poverty, and its lag behind not only developed Western countries but also rapidly developing Asian nations like Singapore, stemmed from the country’s lack of markets.
To stimulate growth, the reformers sought at least the limited introduction of markets. They also pressed for a shift away from state investment in heavy industry. Somewhat like Bukharin and others in the Soviet Union a half century earlier, they argued that labor-intensive production of consumer goods would provide a more effective path to economic growth and rising living standards in a country lacking in capital but with plenty of underutilized labor. Over time, funds generated by light manufacturing could be channeled into more advanced, capital-intensive endeavors.15
Deng and his allies sought foreign capital and expertise to help expand industry without having a long-term blueprint. Instead, Deng called for “crossing the river by feeling the stones.” As an experiment, in 1979 the government established “special economic zones” in Guangdong and Fujian provinces, designed to attract foreign businesses. Within these zones, firms would be taxed at lower rates than elsewhere in the country. Additionally, companies could obtain tax holidays of up to five years; repatriate corporate profits and, after a contracted period, capital investments; import duty-free raw materials and intermediate products going into export products; and pay no export taxes. Local authorities within the zones were granted considerable autonomy and generally aligned themselves with the privately owned businesses being courted. Seen as a success, additional special zones were established over the course of the 1980s in other coastal areas and, in 1990, in the Pudong New Area of Shanghai. Two years later came a new set of zones in other parts of the country.16
During the 1980s, Chinese leaders came to share the cultlike faith in the power and efficacy of markets associated in the West with Margaret Thatcher, Ronald Reagan, and their followers. The dream of modernity in China, wrote Hong Kong–based social scientist Pun Ngai, became associated with “the great belief in capital and the market,” a one-hundred-and-eighty-degree shift from the prior belief that socialism represented a more advanced phase of history. “Search for modernity” and “quest for globability” became catchphrases as the marketization of a once almost completely socialist economy began.17
A similar swing took place in Vietnam. The long war with the United States, the subsequent wars with Cambodia and China, and the international boycott after the Cambodian conflict had severely drained the Vietnamese economy. Communist leaders had great difficulty integrating the capitalist economy in what had been South Vietnam with the socialized economy in the North. Measured by per capita income, Vietnam was one of the poorest countries in the world.
In an attempt to revive the southern economy, in 1981 and 1982 local authorities allowed Chinese merchants in Saigon to resume their activities, leading to a burst of prosperity. By 1986, the communists who had led the Saigon effort had won national-leadership positions, promoting pro-market reforms. The Doi Moi (“renovation”) policy, meant to move Vietnam toward a “socialist-oriented market economy,” included reforms in the state sector and opening up the country to foreign investment, market activity, and export industry. As in China, ideological change accompanied the shift in practical policies, with the Communist Party speaking of the objective laws of the market with a certainty once reserved for the virtues of central planning. Membership in the World Trade Organization (WTO) in 2007 deepened Vietnam’s integration into global markets and further facilitated export manufacturing.18
In China, the new market-oriented policies rapidly transformed the Pearl River Delta region in Guangdong. The region was selected as one of the first special economic zones because of its relative isolation from the major population and power centers of the country and its proximity to Hong Kong and Macao, and that proved critical to its success. At the time, the economy of Hong Kong (still under British control) depended heavily on manufacturing, trade, and transportation. With land and labor costs rising, the opening up of the adjacent part of the People’s Republic provided an opportunity to shift manufacturing to a much lower-cost area with which many Hong Kong businesspeople had family ties. At first, Hong Kong–run businesses largely aimed their operations within China at its domestic market, but by the middle and late 1980s, as the Chinese government eased restrictions on direct foreign investments, export-oriented manufacturing became increasingly prevalent, first in the garment industry, then in footwear and plastics, and finally in electronics.
The Hong Kong–Guangdong combination proved a remarkable profit machine, reflecting the advantages for capitalists of uneven global development. Hong Kong businesses, in many cases with extensive experience in international trade, initially moved their simplest, most labor-intensive operations to the People’s Republic, taking advantage of far lower labor and land costs and the free reign they were given in managing labor relations. They kept their administrative, design, and marketing operations in Hong Kong and used the territory’s advanced infrastructure, including the world’s busiest container port and extensive airfreight capacity, for exporting Chinese-made goods. As the authors of a study of the Pearl River Delta put it, “Third World level costs are combined with First World caliber management, infrastructure, and market knowledge.”19
As the initial Hong Kong–based forays into manufacturing in China proved successful and the Chinese government further loosened regulations and spent heavily on infrastructure serving the special economic zones, more investment flowed in. Hong Kong firms began shifting more complex manufacturing processes, logistics, quality control, sourcing, and packing to China. At the same time, companies based in Taiwan began manufacturing in mainland China, too, soon followed by companies from Japan and Korea, at first almost always operating through Hong Kong or Macao middlemen. Many of the Taiwanese firms were headed by executives with
family ties to the mainland. Terry Gou, head of Foxconn, which built its first Chinese plant in Shenzhen in 1988, was a charismatic army veteran whose family came from north-central China and whose father fought with the Kuomintang before fleeing with Chiang Kai-shek to Taiwan in 1949. Once the United States granted China permanent normal trade relations in 2000 and China joined the WTO the following year, American companies began shifting manufacturing operations to China as well.20
Dagongmei and Dagongzai
A measure of the explosive growth of export-oriented Chinese manufacturing can be seen in the dizzying rise of Shenzhen’s population, which shot up from 321,000 in 1980 to more than seven million in 2000, one of the most rapid urban growths in history. Most of the new residents were migrants from elsewhere in China who came to work in the factories that were popping up all over.21 With the local labor pool quickly exhausted, a system of migrant labor developed that has been central to China’s second industrial revolution and which has made possible the hyper-giantism of twenty-first-century Chinese manufacturing.
Soviet and Eastern European factories recruited peasants displaced by the collectivization of agriculture. In China, it was the decollectivization of agriculture that freed up a workforce no longer ensconced in the benefits and obligations of the collective farm. After Mao’s death, communal farms were broken up, with small parcels of land leased to individual farmers under the “household responsibility system,” which allowed them to sell produce exceeding quotas on the open market. Initially, the new system brought a rapid boost to the rural standard of living. But further changes, including opening the country to food imports and rising costs for health care, education, and other social benefits, left the countryside far poorer than the cities. Many children from farm families, seeing limited economic and social opportunities at home, moved to the new export-oriented manufacturing centers to take factory jobs.
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