H. CITIES IN WORLD HISTORY CH. 34 - INDUSTRIALIZATION AND THE CITY - EAST AND WEST.pdf

----INDUSTRIALIZATION AND THE CITY: EAST AND WEST---The genesis of industrial capitalism in Europe, England in particular, has led generations of scholars to ask why this profound socio-economic revolution happened there but not in other equally advanced pre-industrial economies such as China Many t...

----INDUSTRIALIZATION AND THE CITY: EAST AND WEST---The genesis of industrial capitalism in Europe, England in particular, has led generations of scholars to ask why this profound socio-economic revolution happened there but not in other equally advanced pre-industrial economies such as China Many theories have tried to identify the special conditions underlying the great leap forward in agricultural productivity and the subsequent generation of an ample agrarian surplus that fueled the spontaneous capitalist-industrial take-off in 18th-century England. This rural-centric explanation of industrial revolution, however, has been challenged by new discoveries about China’s high agricultural productivity that compared favourably with England in the early modern period from c.1600 to 1800. One explanation that has attracted the most attention is Kenneth Pomeranz’s ecological argument. He asserts that the divergence of the developmental pattern between England and China did not occur until the turn of the 18th century. Before that, both economies were experiencing parallel growth in commerce, population, and agricultural productivity. Towards the end of the 18th century, development in both regions reached the limit that the available and diminishing ecological resources, such as timber and cultivable land, would allow. Whence Chinese development was trapped, but England successfully circumvented the ecological constraint and leapt forward to industrial revolution The single most important endowment that allowed England to overcome this constraint was its access to vast American resources such as raw cotton and sugar through its colonial control of North America. Why did England not capitalize earlier on its easy access to American resources to foster capitalist-industrial development. The availability of American resources to England and their unavailability to China is an exaggeration Provided with a huge silver reserve from several centuries of trade surplus, it was not difficult for China to purchase New World resources from the world market if needs arose Incidentally, Japan also had no access to American resources, but it industrialized successfully in the 19th century through purchasing most of its essential raw materials from the world market To explain sufficiently the variation in the developmental pattern of England and China, this factor must be present in 18th-century England, but absent in 18th- and 19th-century China ----BRINGING THE CITY BACK IN---Jack A. Goldstone developed an ‘engineering culture’ theory to explain the China–England divergence. It stipulates that the key to England’s capitalist-industrial take-off at the turn of the 19th century was the popularization of a unique Newtonian worldview and engineering culture, which enabled entrepreneurs to turn preexisting scientific knowledge into the practical improvement of commercial ventures. How could this engineering culture diffuse outside the scientist community and become entrenched in the world of industrial production? Who were the actors responsible for such diffusion? Robert Allen’s theory of ‘collective invention’ According to this theory, application of abstract scientific knowledge to innovative practical use during the Industrial Revolution required recurrent and costly experimentation by capitalintensive firms and mutual diffusion of the subsequent knowledge among those firms. Likewise, Reeder and Rodger note that English industrialization was enabled by the rise of 19th-century ‘information superhighways’ through which dense networks of entrepreneurs, equipped with the necessary know-how and financial resources for industries, developed in big cities where entrepreneurial human and material capital reinforced one another. Collective invention, or the diffusion of an engineering culture into the production process, was impossible without a critical mass of vibrant entrepreneurs (a mixture of merchants, professional men, manufacturers, and landowners), who were capable of exploiting and appropriating the high income of the rural elite and using this concentrated surplus to execute the costly trial-and-error development of productive technology. The rise of such an entrepreneurial business elite in England was related to the role of the state. Bas van Bavel and his colleagues set out a general model of how states and political institutions impacted on the pre-modern urban economy and highlight the different trajectories of urban growth in Europe. Both abundant agrarian surplus in the form of high landed incomes and a strong urban entrepreneurial elite capable of funneling this income into their hands are necessary for a capitalist industrial take-off Why did this kind of entrepreneurial elite not attain a leading position in 18th- and 19th-century China? Chinese elites normally operated in merchant groups bounded by native-place identities and shared dialects. In contrast to the traditional orthodoxy that the Qing government was always hostile to mercantile activities and eager to curb commercial growth because of a Confucianist loathing of commerce, recent studies agree on the view that ‘the Qing seems perhaps the most pro-commercial regime in imperial Chinese history’. Many officials and rural gentry families saw commerce as an opportunity to diversify their sources of income. Throughout Qing times, a number of well-known merchant groups monopolized the most profitable business sectors Despite the prominence of these merchant groups at large, they were mostly no more than decentralized networks constituted by individual merchant families that rose and fell successively. These families rarely thrived over several generations. The common pattern was that a certain successful entrepreneurial family, after accumulating an initial fortune, pulled out from commerce and transformed themselves into members of the gentry or state elite class With the recurrent departure of the most successful members from commerce, capital accumulation and further expansion of these merchant networks were limited. In contrast, in England established entrepreneurial families supplied many of the first industrialists during the late 18th and early 19th centuries The Qing commercial economy was marked by ‘weak firms in strong networks’, as compared with the ‘firm-based economy’ grounded on enterprises operated by business dynasties in 18thcentury England, and also 19th-century Japan. With the lack of a strong entrepreneurial elite China was short of an agent that was competent in centralizing the abundant agrarian surplus and diverting this surplus to costly and risky productive investment and innovation This tendency for urban entrepreneurial families to leave business was attributable in part to the Qing state’s paternalistic policies that prioritized popular living standards over mercantile profits at times of subsistence crisis. The imperial state supported the urban entrepreneurial elite in normal times, but at times of subsistence crisis or class conflict, such as those between workshop owners and workers, the paternalist state would often give priority to the livelihoods of the lower classes and pressure urban entrepreneurs to offer concessions—either by raising workers’ wages or selling their grain stocks at below market prices. Thus class politics created a milieu of insecurity affecting urban entrepreneurs that shaped their choice of strategy of social reproduction. ----A TALE OF TWO URBAN-INDUSTRIAL CATCH-UPS---The insecurity of urban entrepreneurs faced by popular strife and the lack of state protection against it only worsened in 19th-century China The Qing empire witnessed: Deepening socio-economic Fiscal crises, which were aggravated by China’s successive wars with the Western imperial powers from the 1840s. Intermittent urban riots Violent heterodox religious uprisings White Lotus Rebellion of 1796–1805 Taiping Rebellion of 1851–1864 These rebellions further constrained the growth and continuity of the entrepreneurial elite, both directly and indirectly. The sectarian rebels, with strong egalitarian impulses, confiscated accumulated wealth and executed the rich along the way The indirect impact of these rebellions on mercantile activities was equally devastating. Finding the large, corrupt, and immobile imperial army not reliable in the eradication of heterodox rebels during the White Lotus Rebellion, the Qing state opened the Pandora’s box of local militarization, encouraging the gentry class to collaborate with bureaucrats to organize local militias. Short on financial support from the central government, these military organizations financed themselves by levying heavy special taxes on local towns and commercial centres and on agricultural producers. The landed elite, the main agents of local militarization, reaped handsome profits from the process, as they usually appropriated 20–30 per cent of all funds raised for military purposes for their own ends. This led to the rise of a military-predatory class. The protection they offered did not match the extraordinary tax burden that they imposed on the entrepreneurial elite, who were already suffering from financial losses caused by the upheavals In the 1860s, the Qing state initiated a top-down industrialization programme to nurture an array of state-sponsored industrial enterprises This industrialization effort was hampered by the ever-expanding nexus of the military-predatory elite, who consumed a large portion of the economic surplus that otherwise might have been mobilized by the central government to finance the growth of new industrial firms Only in the Treaty Port areas dominated by the Western powers and Western investment was there any significant modern-style industrial expansion In the early 19th century, the advantages and limitations of Japan’s economy were similar to China. Following the agricultural revolution in the Tokugawa period, the Japanese economy had an agrarian surplus decentralized among peasant cultivators. Japan was not short of resourceful merchants, but they were far from securely dominant. After the Meiji Restoration of 1868, however, the energetic reformers successfully built a highly centralized state that effectively and brutally repressed all kinds of popular contention, clearing the path for the entrepreneurial elite. This managed to concentrate vast economic resources in its hands through heavy agricultural taxes. It employed these resources to construct urban-industrial infrastructure, ranging from railroads to telegraph systems, necessary for industrial growth. It also channeled a substantial portion of its revenue to finance the development of large, vertically integrated, private corporate conglomerates known as zaibatsu. Whereas the expanding military-predatory networks in China eroded the state’s financial capacity and thwarted its effort to cultivate a vital and self-expanding urban entrepreneurial elite from above, a formidable, state-sponsored corporate elite took shape in Meiji Japan, laying the groundwork for Japan’s industrial expansion in the century to come ----URBAN–RURAL DIALECTICS IN THE LATE 20TH-CENTURY RISE OF CHINA---Industrialization in Western Europe and North America in the 19th century was based on a concentration of large industries that had advanced capital and technology levels in big cities, alongside workshop-type industries, with lower capital and technology levels, in both big centres and smaller towns in the countryside that employed their cost advantage to take care of the labor-intensive component of industrial production Increasing labour inflexibility and rising wage costs in the highly concentrated and urbancentred manufacturing system in the developed world were important factors in the long-term crisis in industrial profitability there in the 1970s and after The continuing industrial strength of Germany, which retained the tradition of Mittelstand medium-scale and smaller industries scattered across the country, including smaller towns, as well as the revival of decentralized and flexible manufacturing in other European economies are exceptions that prove the rule The crisis of most other urban-industrial economies in the global North created an opening for a group of Asian countries, above all China, to enter the world stage and become new industrial powerhouses grounded on their low manufacturing labour costs, due to the abundance of untapped rural labour ----MAO’S URBAN-CENTRIC HEAVY INDUSTRIALIZATION----- Facing a countryside devastated by war, lack of investment, and colonialist exploitation for more than a century, the CCP’s task was to channel the small agrarian surplus to promote industrialization. The priority was to develop capital-intensive heavy industries in an attempt to ‘catch up’ with industrialized countries. Party elites reached consensus in the early 1950s on mobilizing the rural surplus to fund urban heavy industry through the state’s monopoly of purchase and sale of grains, cotton, and other agricultural goods. The concentration of resources for heavy industry gave rise to large urbanindustrial centres. Two types of city became particularly important in this industrial schema and thus received more resources than others: one included the cities that already had well-developed industrial sectors before 1949, including port cities such as Shanghai, Wuxi, Tianjin, and Qingdao, and urban-industrial centres in the north-east where the Japanese had built a strong industrial infrastructure The second were new industrial cities that were built close to the sources of raw materials such as coal, oil, and minerals for heavy industry. Concerned about the possibility of war near the coast, the Communist state deliberately built most of these new cities in hinterland regions. Heavy industry, then regarded as the core of modern industry, required high capital inputs. As noted earlier, the Chinese state sought to finance urban industry by monopolizing the purchase and sale of grains and other agricultural goods. This practice was initiated in 1953 and was accompanied by the establishment of the well-known hukou system (the system of household registration) in 1958, which strictly controlled population movements between rural and urban areas. The rural surplus was transferred to the urban economy through state-controlled exchanges between agricultural and industrial products with the terms of trade heavily in the latter’s favour. It was estimated that the state took 600– 800 billion yuan from the countryside before 1978 to fund its industrial investments The expansion of industrial jobs could not keep pace with the natural growth of the urban population, even less absorb some of the rural population. After the initial two years of the Cultural Revolution in 1966 and 1967, the Chinese state started to send urban youths to the countryside. This political campaign, known as ‘up to the mountain and down to the countryside’, continued until the end of the Mao period, during which about 16 million young people from cities were sent to rural areas. The priority of allocating resources to urban-industrial centres to develop heavy industry, the defence industry in particular, remained unchanged throughout the period. Due to this persistent resource-allocation bias, the late Mao period saw the dominance of large industrial-urban centres and the decline of small cities ----DENG’S RURAL-ORIENTED MARKET SOCIALISM---The market-oriented reforms initiated in 1978 shifted the political focus from urban-industrial centres to the countryside. With remarkable successes in agriculture and rural industry, the early reform period, that is, the 1980s, marked a clear break from both the Mao period and the previous Republican period. With the state’s constriction of large capital-intensive urban enterprises and its support for small rural producers, together with Maoist legacies of social reforms in rural areas that created a literate and healthy rural workforce, this period saw the emergence and thriving of rural-based and decentralized industrialization that could be labelled ‘market socialism’ The early reform period saw the emergence of high-profile party elites who supported rural reforms and emphasized rural and smaller town interests. From 1982 to 1986, the central government used the important annual No.1 Document—the first policy directive issued at the beginning of each year setting out the highest government priorities—to cover rural issues, signifying the prominent place of rural development on the state’s agenda. However, such reforms could not succeed without the support of local elites, most importantly, local cadres. The fiscal reforms in the early 1980s granted local governments the right to a share in state revenue and thus greatly motivated local cadres to develop the rural economy, small town industry in particular. Last but not least, local entrepreneurs, with the reinstallation of the market and financial support from the state, also played an important role in expanding rural and small town industry The reforms first started with increasing the purchasing prices of agricultural goods and followed with the institutional change that replaced the earlier People’s Communes with the Household Responsibility System. With more resources and more freedom of production and exchange, millions of rural households, albeit all on a small scale, exhibited surprising capacity and flexibility in transforming the rural economy. Within five years from 1978 through 1984, grain output increased by one-third from 300 to 407 million tons, which made China a net grain exporter in 1985 for the first time since the Great Leap Forward in 1958.41 A more dramatic change was the explosive growth of rural and small town industry, known as Township and Village Enterprises (TVEs) By 1991, rural industry accounted for as much as 43 per cent of rural output. Associated with the rapid rural economic growth was the efflorescence of market towns, which functioned as centres of rural market activities and residential settlement. Between 1981 and 1989, the population in small towns increased 2.9 times from about 60 million to 170 million, while in the meantime the total population in towns and cities increased 1.7 times, suggesting that population growth in small towns was much faster than urban population growth in general. The rapid expansion of small town populations was certainly derived from rural industry’s capacity to absorb labour. In contrast to the labour-saving industrial enterprises of the Mao period, TVEs were mostly labour intensive, employing up to 100 million rural labourers by the end of the 1980s. In addition, the increase in grain output provided the necessary food resources for urban expansion. With the improvement in international relations, China sought to use foreign capital, particularly capital from overseas Chinese in Hong Kong, Taiwan, and South East Asia, to stimulate the economy. The most important policy decision was made by Deng Xiaoping in 1980 to establish special economic zones in coastal regions, where overseas investors were offered favourable policies. These measures led to the expansion of coastal cities and paved the way for China’s integration into the global capitalist economy in the 1990s. However, foreign capital played a relatively small role in the 1980s economic growth and the expansion of coastal cities also fell behind that of market towns. The new rural-driven expansion led to the stabilizing and even narrowing of the rural–urban income gap, in contrast to the urbanization of the 1990s, which as we shall see resulted in an ever widening rural–urban income gap as well as polarization within the city. ----DYNAMISM AND LIMITS OF CHINESE URBAN CAPITALISM SINCE THE 1990S---Driven by export-oriented manufacturing and fixed asset investment in coastal cities, the robust urban-industrial growth paralleled and even surpassed what occurred in the early industrialized countries and other East Asian countries. However, it also included many downsides, such as: widening income inequality regional disparity capital over-accumulation environmental degradation. Inflation-triggered urban unrest in the late 1980s helped force the Chinese state to shift its political focus from rural to urban areas The state moved to placate urban interest groups by controlling the growth of rural industrial enterprises and providing financial support and more subsidies to state-owned enterprises in cities After Deng Xiaoping’s Southern Tour in 1992, investors from surrounding nations and regions followed by Western investors, flocked to take advantage of the low wage costs, developed infrastructure, and favourable policies in Chinese coastal regions. China became the largest FDI (Foreign Direct Investment) receiver among developing countries after 1993, and replaced the United States in 2003 as the largest FDI receiver in the world On the one hand, practices and institutions that facilitated rural and small town growth in the 1980s—such as: easy bank credit for TVEs pro-peasant grain purchase rural infrastructure investment were reduced, stopped, or abolished On the other hand, local governments and banks diverted most of their resources to support urban enterprises or invest in urban fixed assets to court domestic or foreign buyers in pursuit of higher returns in the short term; this was coupled with the central government’s bias in resource allocation and policy support towards large cities and coastal regions. This urban bias has generated large-scale rural-to-urban, labour-to-capital flows through the banking system; the factory system, the fiscal regime, and the forced land expropriation all directly feeding the dynamic urban-industrial growth. Today, the rural-centred TVEs no longer constitute a significant engine of growth. Instead, China’s development has been dominated by export-oriented industries mostly run by domestic or foreign private entrepreneurs concentrated in coastal urban regions, as well as equally urban-centred state-owned corporations. It has led to the rise of a new strata of wealthy urban entrepreneurs, alongside senior management in state-owned corporations and foreign invested companies. The privatization and reform of state-owned enterprises through management buy-outs has accelerated the expansion and consolidation of the new urban entrepreneurial class. Since 2001, the Communist Party has started recruiting private entrepreneurs and managers into the Party, formally instituting an alliance between the new urban capitalist class and the authoritarian state. Large industries in key sectors have also seen the rise of industrial associations engaged in lobbying the different levels of government for favourable policies. Western-style growth has brought Chinese cities serious socio-economic problems, threatening their social stability and weakening the potential for economic development in the long run. The first and foremost problem is the worsening income inequality in Chinese society Due to the surplus flow from the rural to urban sector, the rural–urban income differential has been widening rapidly since the 1990s Besides income inequality there was capital over-accumulation and under-consumption. The problem emerged as early as the late 1990s and has been haunting the Chinese economy ever since. The low capacity of domestic consumption, which was a consequence of polarized income distribution, led enterprises in China to target mainly overseas markets. Overseas earnings will further turn into domestic capital, generating a self-reinforcing vicious circle of over-accumulation and export dependency. Without profitable outlets of investment and encouraged by local governments and the banking system, surplus capital in China moved out of industry and commerce and speculated on the urban estate market after 1998, pushing up urban housing prices and creating asset bubbles in large cities With now more than 700 million people living in Chinese cities, plus industrial production for domestic and foreign markets, the amount of energy consumption such as coal, oil, and electricity has grown rapidly. Statistics show that total energy consumption increased 175 per cent between 1991 and 2008. In addition, more than two-thirds of Chinese cities are facing chronic problems of water shortage, prompting the Chinese authorities to build dams, redirect rivers or over-extract underground water, which may lead to serious ecological crises in the future. With the rapid expansion of the automobile industry in the last decade, millions of cars have crowded the streets of every city in China, burning millions of tons of petroleum and giving off an unprecedented amount of exhaust emissions. The environmental costs of urban industry in coastal regions are now being shifted to the countryside and inland regions, with polluting factories being relocated from the former to the latter.