CC BY
42
УДК 316.422
ZHU YAN,
Assistant Research Professor, Institute of Sociology, SASS
MARKET TRANSITION, INEQuALITY AND SOCIAL pOLICY: SHANGHAI IN THE REFORM
China's three-decade reform has witnessed a perplexing relationship between market transition, social inequality and sets of social policy. Dividing into three different stages, the author delineates that market transition has given rise to social justice concern and called upon social policy to tackle these issues. To be specific, the first stage of reform has undertaken "market-planning" dual track system, which opens room for those willing to take challenge and risk in the market. At this time, feeling of injustice mainly comes from market-based distributive principles. The second stage of reform has adopted "pro-efficiency" strategy and radical marketization, which demolishes most part of state sector, causing large groups of laid-off socialist workers and migrant labors left in helplessness. Lack of basics for subsistence and protection, lack of proper social policy make the feeling of injustice roar. The third stage, which lasts until now, sees a gradual return to re-emphasis on social welfare and social policy which tries to eliminate tension and anxiety legacy from the previous time.
Keywords: market transition, social inequality, social policy.
переход к рыночной экономике, неравенство
И СОЦИАЛЬНАЯ ПОЛИТИКА: ШАНхАЙ В ПЕРИОД РЕФОРМЫ
В Китае реформа, длящаяся три десятилетия, свидетельствует о запутанных отношениях между переходом к рыночной экономике, социальным неравенством и аспектами социальной политики. Выделив три разных этапа, автор отмечает, что переход к рыночной экономике породил интерес к социальной справедливости и призвал социальную политику к решению этих проблем. Говоря более конкретно, первый этап реформы предусматривал систему двойного курса «рыночного планирования», который открывал возможности для тех, кто был готов принять вызов и рисковать на рынке. В это время чувство несправедливости главным образом исходило от рыночных распределительных принципов. На втором этапе реформы была принята стратегия «про-эффективности» и радикальные рыночные реформы, уничтожившие большую часть государственного сектора, в результате чего остались беспомощными большие группы уволенных социалистических работников и трудовых мигрантов. Недостаточность средств для существования и отсутствие надлежащей социальной политики вызывало чувство несправедливости. На третьем этапе, который длится до сих пор, наблюдается постепенное возвращение к прежнему акценту на социальное обеспечение и социальную политику, которая пытается устранить напряжение и беспокойство, оставшееся в наследство от предыдущего времени.
Ключевые слова: переход к рыночной экономике, социальное неравенство, социальная политика.
Introduction
Social policy is intrinsic to modern society. On one hand, wealth accumulated in huge scale when the kinship-based society transit into a modern one, thus the state
is capable of public goods provision within its territory; on the other hand, transition from a traditional economy gives rise to social inequality and social justice issue. Just as Fukuyama (2011) has pointed out, "the country becomes richer and stronger, which results in the grade disparity, ranging from the master to the slave". Meanwhile, a new set of values start to proliferate, say the emphasis on social equality. This thought sprouts among the intelligentsia and eventually becomes widely embraced, making the ideological foundation for social policies in many countries. We could therefore fairly argue that, the modern states not only create huge amount of wealth, but cause abundant challenges, among which resource distribution and social justice issue unprecedentedly gain attention.
Undoubtedly, we use social policy to improve people's well-being and thus promote social justice. Social policy issue has three basic elements: for whom it serves, meaning the target group; who is the main provider, and how it shall be implemented. The debate on those elements continues during China's three-decade reform, and social policies accordingly differ in various period, causing people's perception about social justice to change over time.
In this chapter, we shall review the change in social policy and its consequence during China's reforming era, including how the government balance between economic development and social policy, how it defines the relationship between market, society and government, and how it makes a choice between efficiency and equity. Before we proceed to the substantial part, we shall briefly review social policies before the reform, to give you a picture of the starting point.
Beginning of the Reform
Since the founding of China, the state sets out to establish a two-track systems: Work-unit (danwei) for urban Chian and People's Commune (renmin gongshe) in the rural parts, which organize production, allocate and monitor labor, and ensure social welfare and security. Omni-potent party-state governs the economy and society as well, thus there was no room for so-called "social policy". Let's start with the ideology behind those practices before the reform.
It is usually held that egalitarian distribution dominates the first three-decade after 1949, nevertheless this is an over-simplified version. In fact, pre-reform socialist China can at least be divided into three periods: from 1949 to the mid-1960s, egalitarian clashed with meritocracy, leading to volatile policies; during the Cultural Revolution (1966-1976), meritocracy was completely suppressed; after the Cultural Revolution ended, appeals to efficiency rose again.
In the early years after 1949, CCP tried to restore socio-political orders and stimulate production. To achieve this goal, the ruling party "must unite the whole society" [1]. Therefore, state tried to reduce income and welfare gap between different social groups, exploiting limited fiscal resources. To be more specific, for those with higher income and welfare before liberation, the living standard largely remains unchanged; for those with lower income and welfare, CCP tries to increase their living standard, alleviating gap between rich and poor. For instance, state offers shelter and assistance to those unemployed; in each industries state builds labor protection system and offers educational and housing services to workers. Majority of workers
gets promoted in their wage level. The number of unemployed decreases rapidly and gets insurance payment from government. Workers having labor insurance also increase in large number in a few years [2, p. 38, 44; 3, p. 18].
Till mid-1950s, the national economy recovered quickly. CCP began to use material incentives to induce workers' efforts, for instance to adopt piece-rate wage system, to set up a new rewarding scheme etc. It unsurprisingly increased productivity but at the same time caused income disparity among ordinary workers, stimulating discussion about social justice and socialist ideology. At that time, Communist leaders increasingly felt that incentive structure causes fiscal burden to the state, and doubted whether the incentive system learned from the Soviet was suitable at all. Then after a while, CCP returned to the egalitarian way of distribution1.
Since early 1960s, material incentives to ensure productivity somehow revived in small scale, however the policy was endeavored to reduce the income gap and to resist formation of a privileged «elite» class. For instance, in state-owned enterprises participatory democratic management was widely promoted to oppose managerial management, the prototype adopted in Magnitogorsk Iron Factory in Soviet Union; they laid off some workers to reduce costs while ensuring various subsidies and relief fund for them [4, p. 319]. Meanwhile, central government began to establish rural cooperative medical system.
During Cultural Revolution (1966-1976), meritocracy and stress for economic achievement was completely suppressed, and radical egalitarianism prevailed. Paradoxically, pro-egalitarian ideology produced a distinct type of inequality, that is inequality based on political status, and particularized consuming goods and social welfare provision. Studies have shown that, Leninist party ideology combined with limited welfare and public goods supply under great scarcity, it would form a politically stratified society. In order to get some advantages in resource allocation, everyone aims to become "a political activist", which is a political status binding advantages and special treatment. People feel necessary to establish "patron-client relationship" with those in position and power, and exchange personal commitment and loyalty for scarce commodity, welfare or various opportunities [5; 6].
To summarize, before reform, political sphere overlapped with and absorbed the social sphere. It is hard to conceive any equivalence of so-called "social policy" which was independent of politics and economy. Social security and welfare were provided through urban work-units and rural communes. Communist leaders devoted to achieving an egalitarian society, which clashed many times with appeals for meritocracy and economic efficiency. Besides, there were quite a few critics and reflections on the Soviet model. But before the economic reform, the egalitarian ideal ironically produced a particularized model of goods and welfare provision based on political status. The status-based inequality differs vastly from class differentiation in the market reform, which we shall turn to in later section.
1 See: the Report of Zhou Enlai on Labor Salary and Labor Security & Welfare Issue in the
3rd Plenary Session of the 8th CPC Central Committee.
Three Stages of China's Reform
How does China end social contract with public and enjoy rapid, liberal economic growth on one hand, and maintain authoritarian rule at the same time? This problem has baffled many researchers. Some scholars attribute China's miracle to "a reform without losers" [7]. In other words, all people benefit from economic reform and social transition, meritocracy has been widely accepted, an emerging market release enormous amounts of energy, and authoritarian state's ability in mobilizing and executing guarantee overall stability of the system, constantly gaining legitimacy through excellent economic performance.
This argument is not plausible to many researchers. They propose that China's reform shall be divided into different stages, in which central/local, market/government relations differ significantly [8; 9; 10]. However, those studies focus mainly on economic policy, especially on fiscal and taxation systems, separation of powers and duties between different levels of government, balance between industry and agriculture. As regard to the social consequences of such policies, existing literature have not given adequate attention. Some studies have discussed income disparity caused by the reform, but missed the point that how people comprehend these changes in distribution, consequential changes in people's perception of distributive justice and how people adjust to the structural change.
We propose that China's reform shall be divided into three stages. In this section, we shall present changes in people's mentality along the transition and how these group mentality formulate legitimacy for further reform. We need to clarify that we do not give clear time-mark for each stage so as not to be arbitrary. We try to spread out a picture which in a certain period of time connects change in policy and socio-psychological consequences, promoting better understanding of reform attitude in China and its institutional basis.
Stage 1: Dual perception of distributive justice under Dual-track System.
The first stage of China's reform starts from late 1970s and ends around 1990, aiming to gradually establish market mechanism under central planning regulation and control, keep the public sector unchanged while starting market reform.
In 1975, then-Vice-Premier, Deng Xiaoping, starts to reform industry and agriculture sector, aiming to "adjust, consolidate, enrich and improve" national economy. The direct measure is to remove ideology in the production and delegate power to direct producers. Before that, China has endured years of mass mobilization, to call on people's revolutionary ethos to restrain consumption and expand production, so as to achieve industrial accumulation and growth. To mid-1970s, it appears to the Chinese leadership that spiritually mobilizing people becomes more and more difficult. Meanwhile, national economy revives in the 1970s, which makes it possible to use material incentives. The 3rd Plenary Session of the l1th CPC Central Committee held in 1979 proposes "Socialist Modernization" as China's ultimate goal, at the same time criticizing economic institutions being too centralized. In 1982, the 12th National Party Congress Report further emphasizes state's imperatives to re-distribute fiscal income between central and local government and to decide on profit-
sharing between state and enterprises, in order to stimulate local state, different sectors and enterprises' enthusiasm in economic development.
Two characteristics feature this stage of reform: firstly, the goal set for the reform is grand, however the measures taken are very cautious. The state sets an annual growth rate at 5~6 %, which is relatively conservative; Secondly, market emerges outside the state sector. They two coexist rather than one demolishing the other, formulating the so-called "Dual-track System". This system also brings about two types of criteria for assessing and rewarding people's performance: one being combination of low-level egalitarian and particularism emphasizing power and political loyalty, the other being meritocracy largely based on marketability, work performance, education and skills. These two types coexist in the early years of reform era, attached respectively to a transiting public sector and an emerging market.
During this period, two types of divergence occur to ordinary Chinese' daily life chances, consequentially changing their perception of distributive justice. One type of divergence occurs within the public sector. At that time, economic reform aims tore-vitalize state sector. In some regions, local states start to delineate property rights for public enterprises, separating the right to own, to manage and to income. Some state-owned enterprises are leased to private [11]; while others lean to "Director Responsibility System", emphasizing meritocracy and weakening administrative intervention in factory's decision-making procedure. Since the enterprises start to "pursue the profit" [12], labor management shall serve this purpose. For decades, workers' wages have stagnated. To further push forward production through non-material reward is simply not enough. Therefore, the enterprises start to re-emphasize a "performance-based allocation", which reward those who contribute to productivity and profits. Meritocracy principle clashes with the old seniority principle and creates tension. Those senior workers, not equipped with up-to-date marketability, worry about what the fierce competition could cause; but those young, energetic maverick only complain that their skills and knowledge have not yet be fairly rewarded.
According to a nationwide opinion poll in 1987, 48 % respondents feel anxious that they might be too old, weak and incapable of adapting to market competition, thus might lose their employment security and social welfare. A saleswoman says to us, "income gap should be controlled within certain extent and the premium shall also cover the elders and female workers" [13]. In contrast, the professionals, youngsters and intellectuals still complain about egalitarian distribution, feeling fettered by this outdated principle. In 1989, several magazines open columns for discussion on "Social Justice and Economic Efficiency". The authors agree upon that, egalitarian principle emphasizes seniority and political status, which are ascribed rather than attributed factor, undermining "equality of opportunity" [14]. Since 1986, state-owned enterprises start to reform tenure employment, moving towards labor contract system. Tenure and contract-based workers might in the same factory. Contract-based workers always complain that "equal job, equal pay" has never been fulfilled, tenure workers enjoying much better housing welfare and work security [15].
The other type of divergence occurs between public and non-public sector. In the 1980s, a lot of collective and private enterprises get established, forming a "Dual-track Property Rights System" with state-owned enterprises. These nonstate enterprises do not have to pay for employees' social welfare, and can exploit cheap labor from the countryside. With extremely low running cost, they enjoy much higher odds in winning market competition over state enterprises. In addition, due to higher annual profits, non-state enterprises can pay much higher to technicians and managers than state enterprises. As some study reveals, private enterprise can pay around 1,000-2,000 yuan a year for a skilled worker, while for managers this can be 100 times higher (Jia Ting, Wang Dekuan, Tang Baoling, 1987). This disparity is utterly attractive to technicians and managers in state sector, but for those cannot find alternatives in market sector, this disparity would be hardly legitimate. Taking advantage of this situation, non-public enterprises engage themselves in a battle with this cumbersome state sector, in grabbing raw materials, market opportunity, resources and labors as long as policy don't set restrictions. Rent-seeking behaviors grow out of these profit-making opportunities, which raise public doubts on the legitimacy of the market-born "Newly Rich".
In 1988, a survey on social attitude, covering 12 thousand workers in 16 Chinese cities, reveals that professionals are the most dissatisfied with the current distribution system. A technician wrote as follows: Hard working for 40 years, a whole decade without promotion, never be bribed and remains poor, which increase all the time is the price [16]. A social psychologist argues that the New Rich has stimulated people's feeling of social injustice. The whole society starts to have sort of an "end-of-the-world mentality", which stressing self-interest above everything. People start to panic and become anxious, deviating from former perception on social differentiation [17]. In the early 1990s, the income gap between public and private sector stands out as the most concerned issue. According to four waves of social survey in Guangdong, over 80 % respondents judge the income distribution as "extremely unfair", among whom those working in government, intellectuals and retirees hold strongest opinion [18].
However, the dual-track system has its advantages. This gradual transition allows the public sector to remain intact, still taking care of workers and their families, while building market institutions outside public sector. This path actually provides alternative to Chinese urban residents in that they can choose to stay under the previous shelter with low but secure payment, or to seek higher human capital returns in the emerging market.
In 1986, the State Council promulgates a reform in labor management system, promoting change from tenure employment to more flexible contract-based employment relations. However, when down to each factory, not many "old" workers actually change its employment status. Labor contract is mainly implemented on the newly employed. For the second job, State Council also issues a document, allowing workers in the state-owned enterprises to take part-time job in their spare time. If we use a metaphor to describe this situation, in the early stage of the reform, those
entering the market are not forced into; in contrast, they have weighed their pros and cons, and choose to take initiative. In another word, they actively "jump" into the market.
Communist Youth League of Tianj in surveys more than 20 thousand workers in 10 industrial enterprises in 1988. They find that 20 % are already engaged in a second job and 64 % more are planning to find one [19]. In 1970-1980s, due to lack of technical support, county and township collective enterprises hire technicians from nearby cities. A large group of technicians thus commute between city and nearby suburb to offer know-how every Sunday, so they are called "Sunday Engineers" (Liu Maosen, 2010).
Market system is built while the basic living standard of ordinary people is not demolished. This strategy makes "market" itself a positive thing, rather than something destructive and negative, which sharply differs from former Soviet Union. At that time, everyone is talking about how to make the market run more effectively. Some already enter the market, while others still wait and see, but they all believe that marketization head towards the right direction and shall have a bright future. Several polls in the middle and late 1980s showed that the public were optimistic for the results of the reform. A survey on 1,158 scientists and technicians in Shanghai reveal that 78 % are optimistic about the reform, believing that reform shall achieve its goal (Association of Shanghai Science and Technology Institutes, 1985). A similar national survey in 1987 reaches a similar conclusion: 72 % believe that economic reform will be a success [13]. When asked about the most urgent social problems, urban workers do not strongly appeal for social welfare, nor do they think that their interest be severely threatened. In 1987, Shanghai Municipal Government conducts a survey, finding that respondents are most concerned with improving housing conditions and public transportation system, not the social welfare system (Shanghai "Do Practical Things" Poll Team, 1987).
To summarize socio-psychological consequences of the first stage reform, we could fairly argue that the Chinese society starts to be suffused with anxiety and sense of injustice, but the source and degree of such anxiety are different from those in later periods. At that time, the sense of injustice was due to tension caused by new market-based distributive principles. It provides extra rewards for a small group of people, leaving the rest feeling relatively deprived. Different social groups have divergent opinions on how to allocate resources and income, seniority, meritocracy or simply need-based egalitarian, which stimulate conflict and dissatisfactions. Those with skills and knowledge, such as professionals, cadres and teachers, hold the strongest negative feeling, since they remain in the public sector and cannot fully enjoy market returns for their human capital. After the market reform, their feeling of relative deprivation and in security is utmost strong.
Stage 2: "Pro-efficiency" strategy in Radical Marketization and its Social Consequences.
If the first stage reform can be regarded as "a reform without losers", then it ends in the early 1990s. Market-oriented reform starts to unfold after 14th National
Congress is held. The congress proposes an annual GDP increase rate up to 8 % to 9 %, puts forward to building a "Socialist Market Economy", and for the first time advocates a fundamental role for the market to allocating resources.
CCP leaders draw a lesson from late-80s political turbulence that an affluent economy may solve many socio-political problems. Then-CCP leader, Deng Xiaoping, expresses concerns on stagnated economy in 1991. He believes that political events in Soviet and Eastern Europe are due to economic stagnation. "It's no problem to develop the economy at the growth rate of 4 % or 5 % in 1 or 2 years, but in the long term, the economy will slide, especially compared with East and Southeast Asian countries... What's the impact of the low-speed economic development? It's not an economic problem but a political problem actually" [20].
The 3rd Plenary Session of the 14th Central Committee held in 1993 further specifies its political agenda. In order to achieve high growth rate, central government clearly states its goal as "Efficiency first and then social justice". Discussions over "efficiency or social justice" are abruptly put an end to. Reforming the state-owned enterprises is formally set on the agenda. For the first time, Beijing leadership decides to reform the old management system and establish real modern enterprises. Large and medium size state-owned enterprises can be re-organized in property rights structure, turning to be joint-equity or privately-owned company; small enterprises can be sub-contracted, leased or sold to collective entity or individuals. The enterprises can decide employees' wage system and incentive structure. In 1996, "The Implementation Manual of State-owned Enterprise Reform" proposes further reforming strategy of "seizing the giants, while selling the small", meaning that maintaining 1,000 large and medium-size enterprises while restructuring, merging, contracting or selling the left smaller ones. 18 cities, including Shanghai and Tian-jin, are selected as the first wave experimental sites, while the other 32 cities are added to this list, including Beijing and Shijiazhuang.
The labor and personnel system reform also starts. Although labor contract system has been on the lips of reformers since 1986, it is seriously put forward by Labor Law until 1995. And this law clearly states that despite its form of ownership, no enterprise is immune to this personnel reform. Before that, Public Industrial Enterprises Management Law, promulgated in 1988, allows enterprises to employ and fire workers if necessary, but it is only literally feasible to do so. In reality, employees in state-owned enterprises often condemn non-state enterprises for acting in an irresponsible capitalist way in protecting workers' rights. Therefore, until the mid-1990s is it still quite strange for public enterprises to sign a labor contract with workers, specifying years of duration and terms of termination. For Socialist workers, to sign a labor contract means to change their socio-political status, and nature of their relations to government. They become "hired labor for Socialism", and this transition is carried out in the name of a Chinese revival [21].
State-owned enterprise reform aims to better equip those entities, making them more capable in market competition. Foremost important is to remove social function from public enterprises, which inevitably affects workers' social security and
welfare, causing bunch of social problems. In 1997, National Re-employment Conference proposes to establish a Socialist "survival of the fittest" mechanism. To be specific, many procedures are taken to increase operational efficiency, for instance downsizing, workers laid-off, bankruptcy and merger. Although central government also requires paralleled reform in establishing pension, unemployment and medical insurance systems, so as to create social institutions for the retired and unemployed, these reform procedures are far lagged behind. Workers, especially old and uncom-petitive, are thrown to the society, but in the lack of alternative protection, they face severe difficulty in life.
Just in a few years, a new social group emerges in China - the Urban Poor. By rough estimate, from 1997 to 1998, number of employees in state-owned enterprises decreases nearly 30 million, among which only a small portion find jobs in non-public sector. Most are the victims of radical market reform. Considering how much an ordinary state worker's wage means to the whole family, we estimate that this reform has brought about negative impact to over 80 million urban residents in China at that time.
Since the reform gets more profound, social tension and conflicts increase rapidly. According to National Bureau of Statistics, number of labor disputes in every 100 thousand workers rises from 6.6 in 1994 to 32.1 in 19981. And labor conflicts are more frequently in group. Group-based conflicts rise in number from 3150 in 1996 to 11024 in 2002, involving more than 370 thousand people2.
The government finally realizes that, to abruptly end the social contract with public and deprive workers of social welfare have tremendously undermined people's trust towards government and potentially threaten reform, social stability and economic development. From 1997 to 1999, government signs several documents to build social safety net, including the Minimum Livelihood Guarantee Scheme for urban residents. It targets on the urban low-income families, especially the laid-off workers from state sector.
During this time, issues concerning rural development, agriculture, farmers' well-being and migrant workers also stands out. Life chance in rural part becomes worse and it is getting more difficult to increase income through farming. For those migrating to urban area to make a living, they are in the low end of urban social structure due to lack of labor protection and discriminant policies.
In 1980s, farmers' living standards get largely improved. After Land Contract Reform, agricultural yield continue to increase [22]. State raises purchasing prices for crops and peasants can thus earn much more from farming [23]. At the same time, county- and township-based enterprises employ a large number of rural surplus labor, giving farmers alternative way to increase income. During 1978 and 1988, 72.26% of surplus rural labor are absorbed by county- and township-based enterprises [24].
1 Based on China Statistical Yearbook.
2 Based on China Labor Statistical Yearbook.
But in mid and late 1990s, the situation changes greatly. On one hand, peasants' income growth rate gets down, the number of labor force outweighs the land, and rural family find more difficult to rely merely on farming to afford elderly caring, child rearing, medical care and social security [25; 26]; on the other hand, development of county- and township-based enterprises is stagnated, restraining its capacity to further absorb surplus labor force [27; 28; 11; 29]. In 2000, a local official writes a letter to then-Premier of State Council to report severe rural conditions, which attract huge public concern and discussion. Government starts to change its policy imperatives from purely urban-oriented to a balance between rural and urban development.
Waves of farmers flow into the urban areas, hoping to make living and wealth. When urban workers face crisis of being laid-off, these new migrants formulate the new working class. However, their income and welfare security were in the bottom of the urban social structure. In 1993, the urban crops quota system is abolished. The same year, about 51 million farmers go to towns and cities for a job, meaning 1 in every 8.6 rural laborers leaves their native place [30]. They work in the low-end service sector, e. g. bicycle repair, shoes amending, haircutting, as well as industrial sector such as construction and manufacturing. To reduce labor costs, employers prefer to hire migrants, who accept lower wages, social welfare, unstable employment and overtime work. Many studies have shown that during this period, government at all levels look at migrants from a city-centric angle [31]. They represent the capital (especially the transnational capital) and ensure that employers can have cheap, flexible and abundant labors, while waving their duties in supervising use and management of labor, often neglecting harsh working conditions, overtime work, unbearably housing facilities, scarce welfare etc. [32; 33; 34; 35].
Socio-psychological consequences in the second stage of the reform shall be divided into two periods, before the state-owned enterprises reform and after. In the first period, people have largely accepted new criteria for assessment, concepts such as market, competition, profit and time being legitimized and ground in people's cognitive frame. In 1980s, many people still doubt and question the legitimacy of new rules and standards brought by the market transition; but this voice disappear in the early 1990s. Instead, people start to worry about how can they adapt to new rules and maintain advantages and survive market competition.
Surveys conducted in 1993 and 1994 depict that opportunity, competition, autonomy and utilitarianism have turned to be the main concern, replacing former key words such as stability, morality and dream in people's discussion and concerns [36; 37]. Everyone believed that market transition would bring opportunities and they could compete for better chance. "To get rich is glorious", this view is widely accepted. People are psychologically more independent, and more ready to take risk. They believe in a better future as long as can seize the opportunity. People no long attack the new rich; instead they try to find better odds in winning the competition. Frustration caused by the original crisis in value system disappeared. People begin to enthusiastically pursue material interests. A survey on social attitude carried out
in Shanghai asked the respondents "how you would deal with market competition and income gap", 74,6 % of the respondents agree to equip themselves to adapt to it (Social Attitude Mentality Research Group, 1994).
From 1980s to the early 1990s, large wave of migrant workers flow into the city and live in harsh condition, but they seem not have strong sense of injustice. Despite facing prevalent discrimination and social exclusion, they largely accept terrible working and living condition, without decent facilities and basic social security. In their opinion, native place still lies there as their ultimate destination, current urban life is something temporary [38, p. 42-43, 216]. They not only obtain social and psychological support from native connection, but hold to sacrifice for their family as well. They make comparison with relatives in their hometown, which weakens feeling of injustice. This situation persists until the turn of century, when rural migrants depict internal differentiation among cohorts: the new generation does not have that strong native connection as their older counterparts, and their tolerance to the current discrimination and exclusion declines.
Overall speaking, ordinary Chinese' life chances change dramatically since mid-1990s. In urban area, state sector reform gradually brings down the previous safety net and the social contract between state and ordinary citizens are ended with little compensation. After the 15th National Congress of the CPC in 1997, the property rights reform of state-owned enterprises and the personnel system reform lay off millions of workers and severely violate workers' rights and interests. In the rural part, farmers have to pay heavy taxes but enjoy scarce source of addition income. Millions of surplus labors leave their native place and try to make a living in the urban market, forming a demographic pattern of "old, female and kids" in the village. Migrants work for private and foreign enterprises. In lack of governmental supervision, these factories exploit workers and blatantly violate labor law.
Unbridled market development without any balancing counterforce has brought about prevalent poverty in both urban and rural areas. According to several surveys in 1997 and 1998, there were approximately 5.8 million households in poverty by official standard, covering more than 21 million people, accounting for 5 % of the urban population. The per capita monthly income of those families was 182 yuan, accounting for only 42 % of the average income of urban residents. Considering the total state relief fund amount to 360 million yuan, annual relief per capital is only 112 yuan.
Marketization and economic restructuring caused roaring number of protests. As statistics show, the total number of appeals (xin-fang) nation-wide increase from less than 5 million to nearly 12 million during 1994 and 2002 [39]. The collective protest also increases in number rapidly, at an annual growth rate of 10 % in the early 1990s, but up to 25,5 % annually after the state-owned enterprise reform in 1997. The figure was 32 thousand in 1999 and 58.5 thousand in 2003, involving more than 3 million people. The State Planning Commission and Social Development Research Institute conducted a survey in 1999 and finding that in people's perception, laid-off workers, widened income gap and heavy burden of farmers are three most urgent social issues which would impair China's social stability.
In short, the comprehensive market-oriented reform in this stage destroyed the last security line of many socialist workers. At the same time, international and domestic capital's "race to the bottom" demolish people's living standard; the lack of governmental supervision make the situation worse. Rapid urbanization also causes a series of social conflicts with brutal land acquisition, stimulating unprecedented tension between appeal for economic growth and public well-being. The "beneficial to all" reform in the first stage abruptly ended. The spillover effect of economic development begins to cease and negative consequences of pro-efficiency development turns to be more prominent.
Stage 3: Gradual Return to emphasis on social Policy.
Radical marketization in the second stage has caused so many tension and concerns that warn the state to take prompt action. Government realizes that the tension would hamper social stability and economic growth if they could not be properly solved. It poses another more profound challenge that how to balance between social justice and economic efficiency, between market mechanism and government regulation. What's the state role when fostering market competition? How to ensure those who are incapable of market competition to lead a decent life? How to adjust social policies to economic development?
This stage starts in 2002. Social policies concerning urban and rural areas are both largely promoted. At that time, state announces to integrate 19.31 million urban poor into Minimum Living Security System in China, for the first time to realize full coverage. The vagrants and beggars in the cities are not been crudely repatriated to their native places, but be regarded as "needy for salvation". Medical and health care, education, income increase scheme in rural areas get further promoted.
The 3rd Plenary Session of the 16th Central Committee of CCP held in 2003 ideologically redefined the relationship between economy and society, and between market and government. The session passed the Resolution of Certain Issues of CPC Central Committee on Perfecting the Socialist Market Economic System, proposed five overall plans, concerning integrate urban and rural development, economic growth and social development etc. The session pointed out that in order to ensure sustainable development, we must redefine the issue of distribution, with market playing larger role in resource allocation and government managing, regulating and providing public service on the other hand.
A series of policies slows down the rising number of collective protest. During 2004 and 2007, officially reported incidents amount to 80 thousand per year. But after the new Labor Contract Law promulgated in 2008 and the impact of financial crisis, this number again starts to roar [40]. In 2013, the director of the State Bureau for Letters and Calls reveals that, most of the appeals are about rural land acquisition, urban apartment demolishment and labor disputes, many of which can be traced back to the second stage of reform. Government relies heavily on radical urbanization through land acquisition, and neglects laborers' rights and interests during the economic transition. We are still paying the cost for radicalism at that time.
4. Conclusion: Market, Society and Government.
The classical economics created in the Victorian ear believes that the competitive and self-regulating economy can function to self-healing and eventually lead to equilibrium and order. Governmental intervention through various social policies unavoidably breaks the balance and optimal allocation of resources, therefore unnecessary. Individuals should be responsible for their well-being in the competition and deliberate protective measures shall harm efficiency. The emphasis on the state role as mere "night-watcher" or even radical anarchism shows strong proponent for free and omnipotent market mechanism.
However, social economics and old institutionalism believe that individuals have the social attribute of being the member of the community; thus human beings have other motivations besides mere pursuing economic interests. They are willing to give up part of their resources and freedom in return for public goods. Scholars try to seek balance between rational choice theory emphasizing individualism and socialization theory stressing altruism. They hold to the point that market failure is common, which usually brings disasters to individuals. Therefore, intrinsic inability of market mechanism defines fundamental role of social policy, which means that state shall provide necessary resources and opportunities for a decent life.
It concerns how to allocate resources and opportunities. Market mechanism and centrally-planned economy are two theoretically opposite ways, however in reality they often co-exist. Interestingly enough, in a market economy, governmental re-distribution can offset inequality caused by free market competition, compensating people's loss after they lose their ground; On the contrary, for the mandatory planned economy with strong government intervention, market mechanism can reduce social inequality through leveling differences in political status and ascribed attributes [41]. Market Transition Theory aiming to explain transitional states and subsequent debates has offered insightful evidences [42; 43; 44].
China's reform in the last 30 years has followed a path which mixed the above two lines: it first introduced market mechanism into planned economy; after the market blossoms, it re-defines state role and intervention. However, reality is far more complicated than mere words. The relationship between market, society and government require more profound study.
Just as the western counterparts, social policy in China largely reflects the efforts to combat pro-economic development. China embraces market transition against the background of a highly central-planning system. In the first stage, it cultivates market while leaving public sector intact, which slow space of change and maintains basic security. It also allows people more time to adjust; in the second stage, radical marketization leads to a rapid restructuring of interest structure. Many people are passively forced to join the market completion and lost everything. In lack of social function, government's neglect for social justice has triggered intense social conflicts; in the third stage, government starts to realize that the social policy should be promoted jointly with the economic policy, and social stability and conflict resolu-
tion are vital for sustainable development. There fore more and more social policies are now in place.
On April 26, 2013, Central Committee of CCP points to a clear goal of social policy at this moment to "covering the low-end of the population" (tuodi). Premier Li Keqiang stresses that government shall make a nation-wide social safety net, including compulsory education, basic health care, pension, housing etc. Obviously, on one hand, it's the government responsibility to protect market's decisive role in distributing resources, while on the other hand to vigorously carry out supervision, to constrain market mechanism within certain boundary.
Many scholars believe that China's success is due to its "gradual" characteristics. In other words, it does not experience large-scale rapid privatization. However, considering the demolishment of public sector in the second reforming stage, this standpoint is doubtful. Other scholars hold that China carries out "a reform without loser", which is more difficult to accept. Especially for those studying laid-off state workers, migrants and other vulnerable social groups, this viewpoint is far from real. China, which bears huge amount of social tension, has maintained high growth rate for decades. Communist Party's authoritarian rule continues with few fatal challenges. How to explain this miracle? There was a variety of opinions. But at least, the first decade cautious reform has played a part. During that period, market mechanism is established mainly as a favorable alternative way of development, which greatly eliminates public's resent and resistance against market. Market mechanism establishes its public legitimacy. Even for those later deprived of social protection, "market competition" is largely a positive word, setting firm foundation for further development. In subsequent radical reform, "reform" as such has never been questioned or challenged.
Ethos of China's reform is to constantly adjust the boundary between government and market, gradually removing governmental functions to the market or social organization. Market and social forces need space to grow and need neutral discipline and regulation. Government still has a long way to learn to be a neutral regulator and supervisor. The rise of market and society does not mean a laissez faire state. Instead, it requires a more capable state. We still need to wait and see if the state can truly balance the equity and efficiency, market and government, economic growth and social justice issue.
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Date accepted 18.10.2015.
