Markets, workers and economic reforms: reconstructing East Asian labor systems: political opposition can be contained by some combination of economic coercion, market disorganization, tactical retreat, and police suppression, but the institutional tensions that underlie that opposition persist.

• Author: Deyo, Frederick C.
• Position: Strong and weak states: cases of governance

To allow the market mechanism to be the sole director of the fate of human beings ... indeed, even of the amount and use of purchasing power, would result in the demolition of society.'

[Social] institutions ... are disrupted by the very fact that a market economy is foisted upon an entirely differently organized community: labor and land are made into commodities, which ... is only a short formula for the liquidation of every and any cultural institution in an organic society. (1)

Just as Karl Polanyi described the "countermovement" of society to contain and repair the disruption caused by the attempted instituting of free markets in 19th century England, so we have re-entered a period of social reconsolidation and renewal following two decades of sustained and sometimes forcefully imposed market liberalization, particularly in developing countries. While this most recent countermovement is global in scope, it is perhaps most visible and dramatic among those rapidly growing capitalist and transitional economies of East Asia, collectively referred to as the "Asian Tigers." In recent years, these economies reinvented themselves as they shifted from guided or state-led development to market-oriented reform and external liberalization, after which they encountered a difficult period of economic crisis and social turmoil, rooted in part in the tensions and disruptions of continuing market reform. (2) In response to these emergent difficulties, the Tiger economies have now embarked on a new development journey into relatively uncharted territory.

A confluence of economic and geopolitical circumstances initially empowered these countries to chart their own development paths relatively free of the influence of wealthy countries and the Bretton Woods institutions that so dominates the political economies of weaker developing countries. (3) Today, their relative strength enables them to repeat what they achieved before: defining new models and approaches to development by combining market reforms with social initiatives in such a manner as to be adaptive to the pressures and constraints of continuing integration into an evolving world economy. (4)

Given the increasingly important role of the East Asian Tiger economies in redefining agendas of globalization and reform, it is not surprising that so much is now being written on social development in the region. (5) Our goal here is somewhat different: to build on this growing literature to suggest an analytical framework within which to understand and integrate that literature--and the evolving experience it reflects--in a way that foregrounds and emphasizes the foundation of all social economies: the labor systems that harness society to the requirements of economic accumulation.

This article explores the recent experience of market-oriented economic reform and restructuring in East and Southeast Asia, with particular emphasis on Thailand, China and South Korea. (6) It argues that reform in these countries, as elsewhere in the region, has increasingly encountered its own social and political limits as seen in a redirection and slowing of market reform as well as renewed efforts to protect society from its destabilizing effects. Recognizing the on-going and as yet unresolved debates regarding the negative and positive outcomes of economic reform in developing countries, (7) we focus on critical accounts, attending largely to negative social outcomes and the resulting political opposition and compromised reform programs. We have a dual purpose in doing so: first, to locate those points of institutional tensions and strains that have driven recent redirections in the reform process; and second to examine how those tensions have been accommodated (with greater or lesser success) through policy changes at global, national and enterprise levels. (8)

REFORMING ASIAN LABOR SYSTEMS

Our account is organized around the concept of labor systems: (9) the institutionalized social processes through which particular types of labor (10) are socially reproduced, protected, mobilized and allocated via markets or other social arrangements into productive activities, managed and motivated at sites of production, and valorized into profit or surplus. (11) A labor systems approach permits us to identify and locate the often de-stabilizing outcomes of market reform for labor institutions.

The manner in which market reforms may create institutional tensions as well as political opposition was perhaps most forcefully articulated in Karl Polanyi's seminal account of the disastrous social outcomes of market liberalization in 19th century England. More recent critical accounts of the tensions between market and society have emphasized the socially destructive self-contradictory and anti-developmental aspects of the market reforms associated with globalization (12) and most prominently encouraged and sanctioned by the U.S. government, the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF) and, somewhat less stridently, the World Bank.

In discussing the social tensions of economic reform and policy accommodations in developing Asian countries, it is necessary to disentangle the effects of reforms from those of the financial and economic crisis of the late 1990s. We suggest that the crisis had two conflicting outcomes for economic and social reform. First, the crisis was widely viewed as both exposing and exacerbating the negative effects and increased economic and social vulnerabilities attendant to economic reform, which politicized the reforms and hardened opposition among those most affected. But even as the crisis led some to question the major tenets of reform and the multilateral agencies that promoted it, (13) it had the broader and more enduring effect of enhancing the social and political sustainability of a more socialized version of reform by forcing the enactment of a variety of programs to protect workers and domestic firms against the market vulnerabilities that the crisis had so clearly exposed.

This article contrasts the diverse experiences of reform in Thailand, South Korea and China during the last two decades, focusing mainly on those economic reforms of greatest direct importance for labor. These include labor market deregulation, privatization of state enterprises, external liberalization of trade and investment, marketization of social services and their devolution to autonomous or private sector providers, and reduced subsidies for urban consumers and agricultural producers. From the standpoint of labor systems, the most critical of these reforms is labor market deregulation. Indeed, the labor impact of other reforms may usefully be viewed through the prism of this most fundamental reconstitution of employment structures. Labor market deregulation has the enhancement of labor market efficiency and flexibility as its primary goal. It frees labor markets, labor protections and the labor process itself from the institutional rigidities imposed by government intrusion, trade unions and social obligation. In the case of China, for example, agricultural reforms and relaxation of residency requirements created a vast pool of mobile labor free to migrate to cities and coastal areas where new industrial and service jobs are being generated. (14)

Labor market deregulation is sometimes direct, or policy-based, as when a government eases state regulation of labor markets and employment practices, (15) or when companies purposefully casualize in-house work and outsource and informalize production and services previously performed in-house. More often, however, labor market deregulation takes indirect or structural forms, as when state-owned enterprise (SOE) privatization informalizes work by pushing workers out of the regulated world of state ownership and into the relatively unregulated sphere of private employment; when increased capital mobility undercuts the power of trade unions or governments to regulate work rules and pay standards, mandatory employment benefits and severance pay; and when rapid growth in labor-intensive export processing activities expands unprotected work. In these and other ways, labor systems are partially freed from the rigidities of social institutions designed to achieve quite different ends. (16)

Two cautionary notes are necessary at this point. First, we exaggerate when we assert that the primary and intended effect of labor market deregulation is entirely to de-institutionalize, to socially dis-embed, labor markets, and subject them to the unfettered forces of supply and demand. Even those most committed to market reform try to create regulatory institutions to stabilize labor markets. Polanyi himself was very aware of the impossibility, indeed the 'fiction' as he termed it, of turning labor into a commodity to be freely bought and sold in the marketplace. (17)

Second, the very notion of labor market deregulation is perhaps misleading. On the one hand, state deregulation may only lead to enhanced regulation by employers, so that private sector or corporate re-regulation might seem a more appropriate term to use. (18) On the other hand, as we discuss here, deregulation may create emergent institutional and political tensions whose necessary resolution soon forcefully draws the state back in. Either way, deregulation may not actually result in a deregulated work environment. Moreover, Polanyi knew that misguided policies may overshoot the mark by insulating labor markets too fully from the constraints of social regulation. More recent discussion has revisited Polanyi's classic work, (19) noting ways in which the reforms have indeed exceeded their sustainable institutional limits in two important senses. First, policies may create the conditions for social and political tensions as market reforms drive a wedge between the needs of society and populations and the requirements of a globalizing...