The Globalization of China's Industrial Reserve Army: Its Formation and Impacts on Wages in Advanced Countries / Esther Majerowicz Gouveia

ESTHER MAJEROWICZ GOUVEIA THE GLOBALIZATION OF CHINA’S INDUSTRIAL RESERVE ARMY: its formation and impacts on wages in advanced countries PhD thesis presented to the PhD Program in International Political Economy of the Institute of Economics of the Federal University of Rio de Janeiro, in partial fulfillment of the requirements for the degree of Doctor of International Political Economy, and to the Center of Economics of Paris North of the Paris 13 University, in partial fulfillment of the requirements for the degree of Doctor of Economic Sciences. Supervisors: Prof. Dr. Carlos Aguiar de MEDEIROS; MCF HDR Dr. Cédric DURAND RIO DE JANEIRO MAY, 2016 FICHA CATALOGRÁFICA G719 Gouveia, Esther Majerowicz. The globalization of China's industrial reserve army: its formation and impacts on wages in advanced countries / Esther Majerowicz Gouveia. – 2016. 388 f. ; 31 cm. Orientadores: Carlos Aguiar de Medeiros e Cédric Durand Tese (Doutorado) co-tutela - Universidade Federal do Rio de Janeiro, Instituto de Economia, Programa de Pós-Graduação em Economia Política Internacional; Université Paris 13, Centre d' Économie de l'Université Paris-Nord, 2016. Referências: f. 364-388. 1. Globalização. 2. Industrialização - China. 3. Exército industrial de reserva. 4. Salários. I. Medeiros, Carlos Aguiar de, orient. II. Durand, Cédric, orient. III. Universidade Federal do Rio de Janeiro. Instituto de Economia. IV. Université Paris 13. Centre d' Économie de l'Université Paris-Nord. V. Título. CDD 337.1 To my parents, Nidia and Américo ACKNOWLEDGEMENTS The realization of this thesis has counted with the support and help of numerous relatives, friends and department colleagues, more than I could acknowledge here. I would like then to specially thank my advisors, Prof. Dr. Carlos Aguiar de Medeiros and MCF HDR Cédric Durand, for their support, guidance, patience and encouragement. I thank also Prof. Dr. Franklin Serrano, who supported and guided me when I started researching on the Chinese labor market in the master thesis, an acquired knowledge that was fundamental for the development of this work. I appreciate the extreme generosity of Prof. François Chesnais, which read the thesis project in its beginning and provided me numerous suggestions on it. Prof. Ricardo Summa and Prof. Numa Mazat, whose academic support, friendship and encouragement were a constant throughout this process. I thank Prof. Alexis Saludjian for helping me to pursue the process of joint supervision. I would also like to thank Dr. Marcos Antônio Macedo Cintra, Prof. Eduardo Costa Pinto and Dr. Edison Benedito da Silva Filho, with whom I worked with and had the opportunity to learn from in IPEA’s project on China’s productive articulations with and commercial linkages to its neighbors. I would like to thank Steve Knauss, from whom I learned in our enthusiastic discussions on Marx and Marxism. My dear friends that helped me to format the thesis in its final moments, Felipe Francisco da Silva, Larissa Mazolli, Miguel Henriques de Carvalho, and my beloved cousin Ana Paula Leibruder, and to my colleagues in Paris 13 which helped me to translate the abstract to French, Maria Roubtsova, Louison Cahen-Fourot and Serge Herbillon-Leprince. Serge, I really appreciate all the help you gave me from day one when I arrived lost at Paris 13, with all the practical and administrative procedures, and with your openness and friendship. I thank also my colleagues Idir Hafrad, Bruno Carballa and Abdessamad Rhalimi. To the dear Fernanda Ultremare whose friendship was invaluable in this process. I also thank Tiago Sales, for the companionship during these last six years of Master and PhD, in all the obstacles he knows we faced together at UFRJ. I specially thank my parents, Nidia Majerowicz and Américo Kerr, who always stimulated and provided the conditions for my intellectual development, with the constant preoccupation that this development would not be dissociated from the pursuit of social justice. My grandparents Lea Majerowicz and Szmul Majerowicz, who gave me support throughout these years with all the love and dedication. My grand-aunt Gitel Bucaresky and grand-uncle Pedro Bucaresky. My aunts Nádia Glinardello and Maria de Lourdes de Souza. I appreciate all the support, laughs, friendship, talks and help of my best friend, Felipe Heuseler Ferreira Leite, who stayed by my side during the entire thesis. I am thankful to Marcia Leite, for always receiving me with open arms and a huge smile. I thank my two dear friends who have always been present with me no matter the physical distance, Yssyssay Rodrigues and Priscila Altivo, and my friends Andressa Maxnuck, Bruno Barreto Lino, Ana Beltran, Oriana Garcia and Klaudia. I thank Capes for the scholarship during part of this thesis in UFRJ and the mobility scholarship for pursuing the joint supervision in Paris 13. Last but not least, a special thanks to the beautiful and beloved Laura Picchi and Hector Moles Labat for all the happiness we shared living together in the final months of this thesis and for all the support you gave me even from the other side of the Atlantic. Title: The globalization of China’s industrial reserve army: its formation and impacts on wages in advanced countries ABSTRACT The objective of the present thesis is to assess how China’s integration in the global capitalist economy has been associated with the deterioration of labor position vis-à-vis capital in advanced economies expressed in stagnant real wages and worsening working conditions. By denying the mainstream hegemonic narrative that relates these two phenomena through the Heckscher-Ohlin-Samuelson model and the theorem of factor price equalization, we propose an interpretation grounded on the globalization of China’s vast industrial reserve army as a byproduct of the alliance between the Chinese state and advanced countries’ capitals in their productive form. We construct this interpretation through two analytical moments that contemplate both the ‘inward’ and ‘outward’ dimensions of the globalization of China’s industrial reserve army, namely, how it was formed by the Chinese state and how its access by advanced countries’ productive capitals, in the context of neoliberal globalization, promoted a re-articulation on the international division of labor that undermined the material conditions that historically had put labor in the center in a better position to oppose capital vis-à-vis labor in the periphery. On the one hand, we discuss the formation of China’s industrial reserve army that has underpinned the process of proletarianization in the country as creatures of the party-state achieved through means of primitive accumulation. We claim that the stagnant low wage rates of Chinese unskilled workers which prevailed in the 1990s until mid-2000s, at the core of China’s transformation in the factory of the world, resulted not only from the dismantling of the communes and danweis, but also from the constant alienation of peasants’ increasing surplus product by the state, which promoted farming real income stagnation and impelled peasants to take the proletarizanization road, forming a vast industrial reserve army. On the other hand, we discuss how advanced countries’ capitals access to this vast reserve industrial reserve army in preferred terms, actively enabled by the Chinese party- state, has increased profitability through two crucial outcomes, by immediate and drastically reducing unit labor costs and by making China’s industrial reserve army global, tilting the balance of power back home towards capital. We then consider the interplay of the opposite effects of these two outcomes – the ‘terms of trade effect’ and the weakening of laborers’ bargaining power – over real wages and working conditions in advanced countries. We claim that the globalization of China’s vast industrial reserve army has provided critical mass to break the historical connection between industrial production and consumer markets in advanced countries that provided the material basis in which workers were able to conquer the construction of institutional links between productivity and real wage growth. In contrast, in as much as this globalization was predicated in transforming Chinese peasant-workers in the backbone of the active industrial army of the global economy, it has heightened class conflicts inside China, where peasants’ and workers’ clashes have been expressed in fast rising wages and institutional changes since mid-2000s. Key-words: industrial reserve army; globalization; internationalization of production; China; proletarianization; wages; global value chains; industrial delocalization Título: A globalização do exército industrial de reserva da China: sua formação e impactos nos salários dos países desenvolvidos RESUMO O objetivo da presente tese é estudar como a integração da China na economia mundial capitalista tem sido associada à deterioração da posição do trabalho em relação ao capital nas economias avançadas, expressa pela estagnação dos salários reais e pela degradação das condições de trabalho. Ao negar a narrativa econômica dominante que relaciona esses dois fenômenos por meio do modelo Heckscher-Ohlin-Samuelson e do teorema da equalização dos preços dos fatores de produção, nós propomos uma interpretação fundamentada na globalização do vasto exército industrial de reserva da China como subproduto da aliança entre o Estado chinês e o capital das economias avançadas em sua forma produtiva. Construímos essa interpretação através de dois momentos analíticos que contemplam

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