The Subsumption of Space and the
Spatiality of Subsumption: Primitive
Accumulation and the Transition to
Capitalism in Shanghai, China
Daniel Buck
School of Geography, University of Oxford, Oxford, UK;
[email protected]
Abtract: Based on extensive interviews, this study is the first systematic attempt to map the
spatio-temporal evolution of production networks linking urban, state-owned enterprises and
rural, township and village-owned enterprises in reform-era China. It identifies two distinct
regimes of urban-to-rural subcontracting patterns and conventions. The first, which developed
and prospered from the mid-1980s until the mid-1990s, brought rural workers and the countryside
into a relatively extensive relationship with urban capital, and thus represented a partial transition
to capitalism. Its violent reconfiguration in the wake of a series of sectoral crises in the late 1990s
led to the widespread privatisation of rural enterprises, and the emergence and consolidation
of a second regime that simultaneously constituted a significant intensification of relations,
the capture of the rural by the urban, and a new stage in this region’s transition. This paper
argues that these regimes are analogous to the formal and real subsumption of labor to capital,
respectively, and that subsumption may be a more useful analytic for understanding the process
of capture and transition than primitive accumulation: the latter concept alone, without reference
to the dynamics of the social/spatial division of labor, risks missing other ways that exploitive
connections can be constructed between places. This paper thus seeks to recast the relationship
between these two concepts, and to develop a larger vocabulary in which subsumption, like
primitive accumulation, is both spatial and ongoing and internal to capitalist accumulation.
Keywords: primitive accumulation, China, commodity chains, privatization, networks, neoliberalism, accumulation by dispossession
Will the urban fabric, with its greater or lesser meshes, catch in its nets
all the territory of industrialized countries? Is this how the old opposition between town and country is overcome? (Lefebvre 1996:120).
The history of . . . the modern [age] is the urbanization of the countryside (Marx 1973:479).
Crises have no existence outside the matrix of spatio-temporalities that
capitalism itself creates. Crises are as much about reconfiguring the
spatio-temporal form of class relations (through all manner of stressful
adjustments) as about the internal class contradictions of capitalism
specified in some absolute and immutable space and time (Harvey
1999:xiv).
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The post-socialist transition to capitalism in China has been geographically uneven, and may be better characterized as disparate regional
transitions.1 Most well known is the story of the south coast, where the
establishment of experimental special economic zones after 1979 combined cheap labor with Hong Kong and Taiwanese capital and know-how
to drive the development of a vast, free-wheeling, export-oriented production economy (for excellent studies, see Cartier 2001; Hsing 1998;
Lee 1998; Lin 1997; Smart 2000). A very different but equally important story, if not quite as famous, is the spectacular rise of townshipand village-owned enterprises (TVEs) in the lower Yangzi River delta.
Here, foreign investment played a minimal role until recently, and most
scholarly accounts focus on the “corporatist” role of the local state in fostering development (Byrd and Gelb 1991; Huang 1990; Naughton 1994;
Oi 1992, 1999). Ostensibly, the transition to capitalism came much later
here than on the south coast, with the widespread privatization of the
TVEs in the late 1990s (Li and Rozelle 2000, 2003).
Usually told as a story of rural industrialization, the narrative about
the lower Yangzi all but overlooks how most TVEs were closely connected through subcontracting relationships to state-owned enterprises
(SOEs) belonging to the municipal governments of the region’s cities,
especially Shanghai. This study is the first systematic attempt to map the
spatio-temporal evolution of these networks. It argues that this regional
transition occurred in phases and cannot be understood separately from
shifts in these urban–rural linkages.
There were two distinct regimes of urban-to-rural subcontracting patterns. The first regime prospered from the mid-1980s until the mid1990s. In important ways an outgrowth of the planned economy (still
largely unreformed in this region until the 1990s2 ), it brought rural workers and the countryside into a relatively extensive relationship with urban
capital, and thus represented a partial transition to capitalism. Its violent
reconfiguration in the wake of a series of sectoral crises in the midto-late 1990s led to a second regime, one that constituted a significant
intensification of subcontracting relations, the capture of the rural by the
urban, and a new stage in this region’s capitalist evolution.
This capture of the country by the city has long been an integral part
of the Marxian problematic of transitions to capitalism (often discussed
in terms of modes of production), as have the concepts of primitive
accumulation of capital and subsumption of labor by capital. The most
salient characteristic of the second regime was the widespread privatization of the collectively owned rural TVEs. From the vantage point
of the enterprises and their localities, the transition process appeared as
privatisation, or rationalization of property rights—primitive accumulation, or what David Harvey calls accumulation by dispossession (Harvey
2003). But the radical restructuring of these urban–rural networks did
more than create property rights. It also swept away a set of industrial
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linkages that had allowed rural localities and their workers to retain a
significant portion of the value they produced, and replaced it with one
which reduced them to producing at or below cost. From this vantage
point, the transition process appears as a more complete subordination
of rural workers, together with their enterprises and localities, to the
imperatives of urban capital, or what Marx called the subsumption of
labor to capital. The two socio-spatial regimes identified in this study
represent periods of “formal” and “real” subsumption, respectively.3
Both views may be correct, depending on the vantage point, and the
two can be seen as mutually constitutive processes. But the dual nature
of this process highlights a danger in understanding this kind of capture
as primitive accumulation alone. An overly narrow focus on property,
furthermore, ignores the dynamics of the spatial division of labor and
risks missing other ways that exploitive relations can be constructed
between places. This paper seeks to recast the relationship between these
two concepts, and to develop a larger vocabulary in which subsumption,
like primitive accumulation, is an ongoing and internal part of the process
of capitalist accumulation (and deeply spatial, as well).
The paper is organized as follows. I turn, first, to a short examination
of the theoretical questions of subsumption and primitive accumulation,
followed by a brief description of the methodology of the larger research
project. The subsequent section traces the historical construction and
consolidation of the first urban–rural regime, followed by a description
of its demise and the emergence of the second regime. A concluding
section discusses the implications of this study.
Transitions, Subsumption, and Primitive Accumulation
For Marx the main identifying characteristic of capitalism was commodity production in which labor power was itself commodified and
subordinated to capital. The development of wage relations was thus
the key to any “transition” to capitalism, rather than property rights or
markets per se. On the one hand, the development of wage relations
was predicated upon the often violent separation of people from their
means of production, or primitive accumulation. On the other hand, the
subsumption of labor to capital was described as occurring in successive
historical stages: the formal subsumption of labor to capital occurs when
labor begins to work for capital, rather than itself. The capitalist form is
not fully realized, however, until capital actually reworks the labor process, which is real subsumption of labor (Marx 1976). The difference has
been usefully summarized as that between “hand-loom weavers working
under the putting-out system, where the actual mode of work is no different from that they would have pursued had they remained independent
craftsmen, and power-loom weavers working in large factories” (Sayer
1987:31–32). Marx apparently understood primitive accumulation and
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subsumption to be intimately related: he discusses the incorporation
of weaver labor into the circuits of capital in the context of primitive
accumulation in the Grundrisse (1973:510), but in the context of formal
and real subsumption in Volume I of Capital (1976: see “Results of the
immediate process of production”, especially pp 1019–1038).
Looking only at concrete forms of the labor process, it could be argued
that China achieved real subsumption in its factories during the socialist
period. But Marx was theorizing shifts to capitalism from feudalism, not
modern and industrial socialism, and he also meant these two forms as
not only successive historical stages of capitalist development, but also
as different, and increasingly intense, modes of exploitation of labor.
This opens an important analytical space in which the wage relation is
never absolute—it can always be more or less intense. This is something
Marx himself recognized in his depiction of political struggles over the
length and definition of the “working day”, line speeds, and so on, but
did not theorize more fully.
In The Agrarian Question, Karl Kautsky ([1899] 1988) argued that
when the expansionary logic of capital encounters obstacles to the penetration of non-capitalist sectors, penetration proceeds unevenly and
imperfectly as capital finds ways around these barriers. A robust literature has theorized how agricultural production’s basis in nature
impedes penetration, and how capital finds indirect and piecemeal ways
to incorporate aspects of agricultural production into its circuits (Mann
and Dickinson 1978; Goodman, Sorj and Wilkinson 1987). More recent
work has built on this tradition and employed explicitly the language
of subsumption to explain how firms “seek to subordinate biophysical
properties and processes to the dictates of industrial production” (Boyd,
Prudham and Schurman 2001:556–557; Goodman 2003). I invoke this
agrarian literature to suggest that while Marx makes a clear technical distinction between formal and real subsumption, one need not be trapped
by those two moments into missing the wider point about the ongoing incorporation of people into the circuits and logics of capital. With
a somewhat broadened view of subsumption, it is possible to imagine
subsumption as piecemeal, uneven, and nonlinear. It is also possible to
imagine a much wider range of points at which subsumption can take
place, including place itself.
This view of subsumption resonates strongly with the understanding
of primitive accumulation as internal to the ongoing processes of capitalist accumulation (De Angelis 1999, 2001; Harvey 2003; Perelman
2000) that recently has become an important analytic in human geography (Glassman forthcoming). Harvey argues that the line between
accumulation (M-C-M’) and accumulation by dispossession is a fine
one, and constantly shifting; and that primitive accumulation is an
ongoing process, internal and not just prior to the capitalist mode of
production. The dual nature of this case study suggests that if these
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characteristics are true for primitive accumulation, they must also be
true for subsumption.
In China today, an important component of the shift to capitalism is
the privatization of TVEs and the scooping up of devalued assets by
nonlocal concerns—both straightforward examples of primitive accumulation. But the rubric of primitive accumulation does not necessarily
capture the manner in which wage relations are emerging, a process
mediated through a radical restructuring of industrial networks and the
relationships between places.
Mapping Commodity Chains
To date there have been no systematic studies of the mutual constitution of China’s SOEs and TVEs, and of the contours and dynamics of
the production networks that connect the two.4 Unlike existing studies,
I employ an industrial sector and commodity chain analysis. Sectoral
analysis is important because it captures the variations in competition,
production and consumption in different industries more fully than general studies of “the market” or “the economy” (Massey and Meegan
1979; Storper and Walker 1989). A commodity chain analysis helps
uncover the spatiality of these sectors, notably how the real social relations may be extended across a regional economy rather than contained
within firms (Friedland 1984; Sayer and Walker 1992). This approach
follows the vertical “slice” of a product from start to finish as it journeys
through a particular production chain and its social-spatial division of
labor (Gereffi and Korzeniewicz 1994). It considers processes within
each “node” of the chain, but also highlights the “linkages” between
nodes and how changes in one node affect other nodes. It further draws
attention to the interaction and power relations between actors at different levels (Bernstein 1995; Friedland, Barton and Thomas 1981;
Watts 1994). Because those actors are spatially situated,5 the approach
combines well with the relational conception of space elaborated by
Doreen Massey (1984, 1994) and others to provide a strong analytical
and methodological framework for examining interactions and power
relations between places.
My fieldwork focused on mapping the evolution of commodity chains
in six sectors: automobiles, motorcycles, refrigerators, sewing machines,
bicycles, and meters and instruments. In 1995 these six sectors constituted a significant portion (at least 28%) of Shanghai’s total industrial
output (Shanghai jingji nianjian 1996). Each has been considered a
major Shanghai industry at one time or another during, if not throughout, the 1980s and 1990s, with brand names recognized nationwide for
quality.
I was introduced to a number of enterprises through scholars at the
Shanghai Academy of Social Sciences, and when possible I continued
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with snowball samples. Most interviews, however, were arranged on
my own, using either the Shanghai Yellow Pages or the 1995 Complete Listings of Municipal Shanghai Industrial Enterprises (Shanghai
shi gongye qiye daquan 1995) to contact enterprises directly. Between
1997 and 2000, I interviewed managers at 41 urban enterprises and 96
rural enterprises6 and conducted an additional 44 interviews with officials of the Shanghai Municipal Government, the governments of suburban counties, townships, or villages, and local scholars. Interviews
with enterprise managers focused on factory histories and the evolution
of their links with other firms. Special attention was paid to the relationships between changes in subcontracting arrangements and product
and material markets, labor markets, and shifts in ownership structure
and government policy. I found important similarities across all six
sectors, so the account here draws more heavily on similarities than
differences.7
Constructing the First Spatial Regime
In the 1980s, SOEs, mostly owned by the Shanghai Municipal
Government, took advantage of pent-up and increasing market demand
and structural holes in the planned economy to expand production above
and beyond the plan (Naughton 1994, 1995). Though essentially unreformed socialist entities (Mok 1996; Weng and Yu 1997), these SOEs
nevertheless comprised large pools of capital and know-how. They
expanded in part by mobilizing existing pieces of the early post-socialist
economy—including, very significantly, TVEs—in a form of bricolage
(Stark 1996), reaching out and molding existing resources in an expansive round of geographical industrialization (Storper and Walker 1989)
that tied together the city and the country. This SOE–TVE nexus cohered
into a kind of stability, a particular spatial formation that continued to
make profits and places from the early to mid-1980s until the mid-to-late
1990s.8 While relatively stable, this formation was not static; indeed, the
forms taken by its growth and change eventually would play a key role
in undermining that very stability.
Unlike SOEs in other parts of China, many in Shanghai were fantastically successful in the 1980s and 1990s: the Shanghai automobile sector
increased production from 3356 cars in 1985 to 225,000 in 1997; the
motorcycle sector went from a total of 78,249 total accumulated units
between 1980 and 1984 (“Xingfu zhi lu” bianzuan weiyuanhui 1994), to
more than 600,000 units in 1996; the refrigerator sector increased from
less than 10,000 units in 1985 to more than 1 million units in 1995;
and the bicycle sector from 2.8 million bicycles in 1979 to 6 million in
1988 (Xie 1990:3). While the ideal degree of specialization (integration
or dis-integration of production) was a subject of debate throughout the
socialist period, and Shanghai itself may have been more disintegrated
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than other places (Donnithorne 1967), production was still largely integrated (factories were daerquan, xiaoerquan, or, big and complete, small
and complete) in the early 1980s. But as they grew—in order to grow—
the SOEs established subcontracting relations with other factories.
Indeed, setting up these relations often required establishing new factories, as SOEs supplied equipment, know-how, and capital to the rural
producers (Huang 1990). By the late 1980s, they had developed large
supplier systems, subcontracting out component production to hundreds
of factories and converting themselves into large final assembly plants
(which still made some key components). A careful analysis of 1995
industrial census data (included with each enterprise listing in the Shanghai shi gongye qiye daquan 1995) reveals that a significant portion of
subcontracting factories were rural TVEs in the Shanghai hinterland;
overall in these six sectors, there were 712 rural versus 246 urban
subcontractors, or 74 and 26%, respectively. The main SOEs, urban
subcontractors, and rural subcontractors each had approximately onethird of total workers, with rural subcontractors thus representing 50%
of total subcontractor labor. Similarly, rural subcontractors produced
25% of added-value, which was 52% of total subcontractor production. This pattern was strongly corroborated by anecdotal evidence from
interviews.
By all accounts, everyone expected rapid growth to continue indefinitely, and huge profits were continuously reinvested in expanded
capacity through the addition of subcontractors. As the SOEs continued to grow, and they contracted out increasing quantities and numbers
of components, the rural governments running the TVEs were more
than happy to oblige. Responsible for local welfare, rural governments
wanted to capture even more industrial surplus, and create more industrial jobs. It made sense for them to do so in the same sector, because they
had developed the relevant manufacturing knowledge and contacts. And
as the TVEs grew large, they too specialized, passing on excess work
or simpler production tasks to newly created factories, often within the
same township, or a subordinate village.
By the mid-1990s the expansion and consolidation of these production
systems had localized and embedded a tremendous amount of production capacity within a large, agglomerated, dis-integrated production
complex comprised of thousands of factories. Importantly, a significant
portion of the value produced by rural enterprises remained there, circulating through rural enterprises in the form of investment in expanded
capacity and capability; through local governments in the form of expenditure on new enterprises, infrastructure and services; and through workers in the form of wages and savings (the latter often recycled through the
locally controlled rural credit cooperatives, in turn an important source
of investment in TVEs).9 In the rural counties of Shanghai, total industrial output increased nearly seven-fold between 1980 and 1990 (Chen
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1998:4), and industry accounted for a full 75% of total output (Ling
1993:15).
The whole region prospered in this rosy dawn of market-driven industrialization. A researcher working in one of Shanghai’s suburban
counties reported that peasant incomes, adjusted for inflation, increased
at least seven-fold between 1977 and 1995 (Wilson 1997:94). Another
source indicates TVEs as the origin of 50.3% of rural Shanghai household income in 1997, larger than incomes from agriculture, urban jobs,
and government and service sector jobs combined (Ju and Wang 1998:5,
7). The qualitative evidence for anyone who has visited rural Shanghai
is equally convincing: large and small factories rise out of rural villages
and rice fields everywhere; rural villages and townships are replete with
modern new infrastructure, including paved roads, hospitals, schools,
apartment buildings, and (garishly postmodern) office buildings housing local governments. Three generations of peasant housing complete
the picture: low brick houses with dirt floors from the socialist period
crumble beside the two-story concrete houses with windows built in
the 1980s. And the latter already pale next to the three- and four-story
houses of several thousand square feet, with television antennas and air
conditioners in the windows, built in the late 1990s.
Crises, (Re-)Constructing the Second Spatial Regime
While there had been ongoing expansion of the SOE–TVE nexus, two
crucial things had not changed: the conventions of contracting and labor
relations. These were strikingly homogenous across all sectors. All
evidence suggests they changed very little from the mid-1980s to their
demise in the late 1990s. In interview after interview, TVE subcontractors depicted a halcyon period when they considered themselves
essentially part of the SOE planned economy, even referring to themselves as “secondary SOEs” (erci guoyou qiye). They filled the orders
passed down by the SOEs, according to regular monthly plans, and in
turn were paid, in full, every month. They then paid their worker’s wages
and benefits regularly. Market socialism was in full flower.
Most subcontractors worked for only one SOE customer (70% of surveyed factories), but the SOEs did not take advantage of this dependence. Even when duplicate suppliers were completely dependent on a
given SOE, the SOE did not force them to compete with each other,
or threaten to switch suppliers if they did not lower prices. By all
accounts, the SOEs never pushed down subcontracting prices in spite of
high profits, and they almost never switched suppliers.10 Everyone was
happy, and everyone was getting rich.
But in the mid-to-late 1990s, the rest of China caught up with
Shanghai. The shortage economy of socialism, which had provided these
SOEs with a seller’s market for so long (Kornai 1980, 1992; Naughton
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1995), gave way to what Chinese economists have termed a new “surplus
economy” when production capacity in one sector after another caught
up with and surpassed demand (Qin 1999; Zhang and Bao 1999; Zhongguo gongye fazhan baogao 1999; Zhu 1998). Suddenly nothing was in
shortage, price wars ensued, and real market competition became the
rule. So comfortable for so long, the Shanghai production systems—an
important component of which was constituted by their interfirm divisions of labor—had not been changing. Unable to compete with cheaper,
more flexible start-ups in other parts of China, they could no longer sell
their products. The market was no longer their friend—nor the friend of
lingering socialist relations of production.
As crises hit each sector, the SOEs at the top of the production
systems did not react at first, as if in shock. When they did respond,
their actions drove the restructuring of subcontracting relations—which
simultaneously constituted a fundamental reworking of rural class relations, rural localities, and the very fabric of the urban–rural relationship.
These restructurings would cohere into a new, though shakier, stability
or somewhat institutionalized set of practices by the end of the 1990s, a
second spatial regime that differs remarkably from the first.
The first response by the SOEs was to reduce production, and then
to delay and reduce payments to their subcontractors. The multitude
of subcontractors—the huge build up of capacity during 10 years of
steady growth—now represented a glut. In a sharp and sudden break
from past practices, the SOEs began taking advantage of multiple,
dependent subcontractors. They ruthlessly forced down prices and
started to switch—or at least threatened to switch—to cheaper suppliers
(often privately owned factories in other provinces). This was something they had seldom, if ever, done before. These actions reverberated
down the commodity chains, with dire consequences for subcontractors.11 Some were able to keep their places in their commodity chains,
but only on drastically different terms. Others, either unable or unwilling to accept those terms, or more often simply left completely without
work, were forced to seek new opportunities. In a harsh market flooded
with a glut of desperate subcontractors, many enterprises simply languished with no work, while those that found new opportunities were
forced to accept terms that were much worse than before.
As production decreased or trickled to a halt, many SOEs and TVEs
simply languished. Subcontractors tried to look for new business but
did not know how, having always relied on one customer. Data I generated on nearly 500 enterprises strongly suggest that between 60 and
70% of the rural subcontractors in these six sectors were essentially
bankrupt by 1999.12 Many of these, in the local slang, were “stopped”
or “half-bankrupt”, meaning that they still existed, but had nothing to do.
Their managers were desperately seeking new business, adding to the
cut-throat environment, and their peasant workers were cultivating their
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fields, living off savings, and seeking urban jobs. The Shanghai countryside in 1999 was littered with padlocked factories, their gates rusting
and tall weeds growing up through their driveways. I interviewed managers in dusty meeting rooms in empty factories. Localities that had
specialized in a particular sector seemed to be hit the worst. Daytime
streets that would have been deserted a few years before, with everyone
working in the factories, were now filled with people playing cards and
gossiping.
TVE subcontractors under SOEs that continued to produce (reduced
amounts) had to fight desperately to hold on to their business, due to
competition from cheaper private enterprises in neighboring provinces.
TVEs were more expensive than private enterprises because of their
high social burdens: owned by local governments, they were obliged
to provide for large numbers of local resident peasant/workers. Like
SOEs, they provided various social welfare benefits associated with the
“enterprise running society” philosophy (qiye ban shehui), including
operating worker cafeterias, nurseries, and clinics, and supporting retired
workers. This local welfare logic bloated the payrolls, as well. Many
managers reported being obliged to retain large numbers of surplus local
workers, and many TVEs became top heavy. One manager complained
that by the time his TVE went bankrupt, there were only 100 workers
out of several hundred people: “too many managers, not many workers.
It was a case of there not being enough gruel to go around for so many
monks (seng duo zhou shao)”. When TVEs did lay off workers, many had
to pay fees (xiagangfei) of up to150–200 RMB per month per worker.
Conversely, private enterprises can hire and fire workers at will, are not
required to provide social and welfare supports, services and benefits to
their workers and to the locality, and are free to hire cheaper nonlocal
workers. Enterprises I interviewed reported average monthly TVE wages
of 700–800 RMB (US$85–95) plus benefits, whereas private enterprises
paid less than 500 RMB per month and few benefits.
Private enterprises were systematically discouraged and almost
nonexistent in the Shanghai region as late as the mid-1990s (Whiting
1999:193–194; Xie and Ling 1994:32). In 1997 a top official from the
Shanghai District and County Industry Management Bureau told me
that almost all of Shanghai’s industrial output was still produced by either SOEs or TVEs. Industrial census data from 1995 strongly agreed:
in that year, 13.4% of listed enterprises in these sectors were private,
ranging from 9% in the bicycle sector to 15% in the automobile and
motorcycle sectors, but they represented only 1–1.5% of the total labor
force and 0.28–0.46% of total turnover in the six target sectors (Shanghai shi gongye qiye daquan 1995). By the late 1990s, however, most
managers pointed out that a growing proportion, and indeed a preponderance, of subcontractors in these sectors were now private enterprises.
They were quick to point out that they were not consciously switching
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subcontracting relations from TVEs to private enterprises; rather, most
of their private suppliers used to be TVEs that had since converted.
Given the widespread sectoral downturns, many local governments
were unable to continue to shoulder accumulated burdens, and were
forced to divest of bankrupt and “half-bankrupt” enterprises by closing
them or selling them to their managers or outsiders for devalued prices.
Concomitantly, as the SOEs switched and threatened to switch to cheaper
suppliers, many localities actively converted enterprises, shaking off
social burdens and enabling the transformed enterprises to maintain their
places in their networks. Either way, a cascade effect drove widespread
TVE privatisations.
One of the principal effects of this was to rework rural labor relations. Many enterprises were purchased by their managers, but urban
and foreign capital also swooped in to purchase defunct enterprises at
wildly devalued prices. Regardless of ownership, the new private enterprises now re-hired a few local workers with special knowledge and
skills for reduced wages, and hired nonlocal workers for the rest, at much
lower wages with little or no benefits. Labor felt the harsh new discipline of the market and wage relations became generalized for the first
time.
Finally, the delay of payments to subcontractors became regularized,
which served to reinforce the new regime. As the cash-flow situation of
the SOEs worsened, they made increasingly late and partial payments,
until many were months and even years behind. Efforts by subcontractors to collect typically ended in frustration. Court action was deemed
costly, time-consuming, unlikely to succeed, and likely to give one a bad
reputation in the sector. The only real way out was to stop producing
for the SOE in question, to escape dependence on a particular SOE.
But for most enterprises it was difficult to find new business, and they
were stuck with their old partner and increasingly unfavorable payment
terms.
Market relations now meant that small subcontractors were trapped
by debt in exploitive subcontracting relationships with large enterprises.
A typical example is a TVE that produced metal electrical meter casings
for Shanghai SOEs since 1980.
The last few years there is a lot of competition. In total, ten SOEs owe
us more than 2 million RMB. But we keep supplying them because
we have to—if we do not fill orders for them, someone else will, and
they will not pay at all. Each time we deliver an order, they pay us
for the previous order, so we always have a large sum of money stuck
there with them. If we do not fill the next order, we will not get paid
for the last order, the one we already filled. We also want to eat rice.
We have already delivered the goods and there is no way to get them
back. So even when we deliver the second round, and they do not pay
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us for the first, then we still have to give them the second delivery,
because we have already spent the money to make it. And since it is
made to their specifications there is no other market for it, so if we do
not give it to them there is no hope we will get the money from the
first time, let alone the second time. There is nothing we can do about
it.
A second tier subcontractor in another sector explained that:
large factories take advantage of the capital of small ones—they do not
pay until a year after receiving the goods. Subcontractors in Shanghai
do not have any way out, they have to do it this way. If you want to
have rice to eat then you must produce, so once subcontractors enter
they cannot get out. Large factories are only concerned with their own
survival, and do not pay any attention to the subcontractors, because
there are a lot of subcontractors available. Under these circumstances,
from the point of view of getting money (zhengqian), producing is
better than not producing, but if you look at it from an economic point
of view, sometimes it is better not to produce than to produce. A lot
of the time you are losing money when you produce, but you must. In
the past, TVEs could generally make money, but now, it’s not bad if
you can just break even.
What had emerged by the end of the 1990s was an utterly new countryside. Thousands of once-successful TVEs had been closed or privatized,
their local residents thrown out of work in favor of cheaper workers
migrating from poor inland provinces. The old SOE–TVE nexus that
allowed localities to retain significant industrial surplus value had been
swept away (the notable exception being remnants in the automobile
sector), along with the rural labor regime that provided peasant workers
with good wages and substantial social and welfare benefits. Lingering
TVEs or newly converted private enterprises, if they can get new business, are often reduced to producing at or below cost, and subsequently
trapped in cycles of debt. A vast surplus army of rural workers and factory units waits to take their place if they decide to exit an undesirable
relationship.
Except for some of the private enterprises that make it through the
current hard times, there are likely to be few locals with control of or
access to the resources necessary to take advantage of the next upswing.
More often than not the source of new investment is urban rather than
local: already, urban capital is sweeping through the distressed countryside in waves, taking advantage of the new economic landscape to
scoop up manufacturing equipment, factory facilities, and skilled and
experienced labor at far below their production costs, and hiring cheap
labor to fill in the gaps. Whatever profits are made are remitted to the
urban sources of the investment, while the countryside is left with greatly
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reduced income from low wages, low rents, and whatever enterprise
taxes local governments manage to collect.
Conclusions and Implications
Nested crises of over-accumulation of capital resulted in shifting the
dynamic time–space horizons of sectoral competition (Harvey 1989;
Schoenberger 1997). Local sectoral crises forced desperate SOEs to exert
tremendous pressure on their subcontracting systems, which in turn
drove the restructuring of those networks. The direction of this restructuring was shaped in fundamental ways by the spatial and material
contours assumed by the first regime, or round of geographical industrialization, as the glut of subcontractors enabled the shift to a second
regime. This stark shift from one subcontracting regime to another entailed and embodied a complex re-ordering of time and space. Time was
reordered: the lengthening of payment times represents a reworking of
the temporal horizons of capital to meet the needs of large enterprises
in a new and much more competitive environment. While delayed and
partial payments mean slower and less convenient cycles for smaller
capitals, they mean quicker and more convenient cycles for larger capitals. Faster turnover cycles can generate profits as surely as higher rates
of exploitation (Harvey 1989; 1999).
This retemporalization of the circuits of capital cannot be separated
from the concomitant respatialization of these circuits. In its most overt
form, respatialization occurred when the beleaguered SOEs started to
switch to cheaper private subcontractors in other provinces, thus breaking out of the heavy local concentration. But the most important changes
were not the respatialization of those subcontracting relations, as much
as a reworking of the spaces of these relations. In huge numbers of
cases, place was transformed as the spatial relations between places
were reworked, that is, as rural localities turned themselves inside out
just to maintain their hitherto profitable but now drastically altered
relations with urban capital. This capture of the country by the city—the
reworking of a spatial relationship—was itself a fundamentally spatial
process.
This reworking of the spaces of subcontracting relations in an important sense took the form of widespread enterprise privatizations, an enclosing of a previously quasi-socialist commons that clearly constituted
primitive accumulation of capital, or accumulation by dispossession.
But just as importantly, they were effectively a reworking of the capital–
labor relation, mediated through the regional division of labor formed
during the first round of geographical industrialization in the 1980s,
and perhaps better captured under the analytic of subsumption of labor.
The two successive spatial regimes of the urban–rural division of labor
can be likened to formal and real subsumption, respectively: the first
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regime grew up in the context of the still un-reformed planned economy, reflected many of its practices, and represented the moment when
the countryside began to work for capital rather than itself. The social
relations of this relatively extensive regime of accumulation were later
swept away, as rural labor, enterprises, and localities were brought in
to a more intensive relationship with urban capital, as capital actively
stepped in to rework the countryside. But it is only logical to assume
that this will not stop here. Just as there is no such thing as absolute
efficiency, and the spatio-temporal horizons of capitalist competition
are constantly shifting (Harvey 1989; Schoenberger 1997; Storper and
Walker 1989), so will the manner and degree of subsumption continue
to change.
Acknowledgements
I would like to thank Richard Walker, Gillian Hart, Michael Watts, Tom
Gold, Bertell Ollman, David Harvey, Gordon Clark, Mark Selden, Vivian
Wang, and the reviewers for helpful comments on various versions of
this paper. Funding for fieldwork was generously provided by the Social
Science Research Council, the National Science Foundation, and the
Committee for Scholarly Communication with China. I am especially
grateful to all those in China that shared with me their knowledge and
experiences.
Endnotes
1
In using the word “transition” I am in no way implying any kind of straight-line,
teleological transition from socialism to capitalism. The processes of transitions themselves are too varied, the outcomes too varied, and more to the point, there are no fixed
endpoints or outcomes. Please see the first section for fuller treatment. For an excellent
discussion, see Verdery (1996).
2
While the central government was willing to experiment with the south coast, it was
much more cautious with its industrial heartland: profits from Shanghai SOEs were one
of its single most important sources of revenue (Ho and Tsui 1996).
3
Many thanks to Bertell Ollman for suggesting this use of vantage point to distinguish
these moments (see Ollman 1993).
4
For one exception see Christiansen (1992). Numerous studies exist of industry in China
or Shanghai, but they tend to focus on enterprise by type (Guthrie 1999; McNally and
Lee 1998; Whiting 2001), particular sectors (Dong et al 1999; Harwit 1995; Liu and
Jiang 1996; Sit and Lu 2000; Yang 1995), or the larger regional economy (Jacobs and
Hong 1994; Mok 1996; Sung 1996). A few recent case studies, notably by geographers,
have begun to apply business network analysis to SOEs, but focus primarily on the
extent of networks (Li 2002), or the localization of MNC supplier networks (Yeung and
Li 2000), rather than the conventions of daily operation.
5
This is even more salient than usual with China’s SOEs and TVEs, which are by
definition part and parcel of particular places.
6
With the following sectoral, urban/rural distributions: automobile 7/31; bicycle 3/18;
meters 4/8; motorcycle 7/14; refrigerator 11/12; sewing machine 2/10; and other 7/3.
7
Sectoral differences will be treated more fully in future publications.
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8
Rather than a structure, or a reified entity now removed from the processes of its own
becoming, I mean this in the sense of Harvey (1996), Thrift (1996), and even Latour
(1993).
9
The literature on this is immense. See Oi (1999), and Byrd and Gelb (1991).
10
Though some non-local suppliers were being replaced by local ones. I supply no
quantitative data here because literally all interviews provided the same account.
11
Large enterprises at or near the first tier in the automobile sector fared well, due to high
asset specificity, high capital and know-how barriers to entry, and the relative modesty
of the downturn in that sector. But the experience of most automobile subcontractors at
or below the second tier was essentially the same as subcontractors in other sectors.
12
Based on my experiences trying to contact nearly 500 of the 958 total listed enterprises
in these six sectors. Many phone calls did not lead to formal interviews, but did provide
opportunities to gather rudimentary data through short discussions.
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