When we turn our attention to the Philippines, the pattern of money politics appears superficially to mirror that in Korea: weak parties devolve into personal vote machines that trade pork for payoffs. In both countries, political payoffs allow business influence over policy decisions. In both the Philippines and Korea, access to the state was the avenue to economic success. Yet there was a major difference between the two countries as well. In the Philippines no balance existed between economic and political elites – no mutual hostages existed. The overarching point of this chapter is that the pattern of influence in the Philippines reflects significant bandwagoning, as political and economic elites surged toward power like iron filings toward a magnet. During the democratic period, society held sway and plundered the state. Under martial law, the balance of power shifted to a coherent state elite led by Ferdinand Marcos. Yet the more autonomous and centralized Marcos regime did not have the same incentives and constraints that Park's regime did in Korea and turned to plundering society. The Philippine bureaucracy, although made more autonomous from social pressure, was not insulated from regime interests. Thus, the Philippines lurched back and forth as different groups gained and lost power.

The story of the Philippine political economy approximates much more closely the standard rent-seeking models.

What Lenin said of Russian workers highlights an important but understudied problem of many states that seek to jump-start industrialization through the rapid mobilization of capital and labor: building new factories also requires new norms and rules governing the employment relationship of the people who are to work in factories. These norms and rules can be imposed by fiat, but they are almost always subject to informal negotiation among state officials, managers, and workers. Such informal negotiations take place internally within the firm, especially when unions and other independent associations are repressed or lack the authority to represent workers’ interests. In many cases of state-led industrialization, it is within public enterprises that workers come face-to-face with officials of the regime.

This book examines how officials, workers, and managers created institutions of labor management to cope with the transformation of China's industrial sector, from the early stages of industrial development to the imposition of a centrally planned economy in the 1950s. Labor management institutions can be defined as the formal and informal rules and structures that regulate how workers are hired, paid, organized, and supervised.

In 1989, almost two-thirds (63%) of the bureaucrats in Korea's Ministry of Finance and almost half (47%) of Economic Planning Board (EPB) civil servants over the level of samugwan (Grade III) had graduated from Seoul National University (SNU). Normally these statistics are used as evidence of the superior quality of the SNU students. What tends to be less well known, however, is that faculty members at SNU's Graduate School of Public Administration are often asked to help write the national civil service exam (haengchòng kosi, or haengsi). Although this circumstance does not diminish the accomplishment of those who pass the exam and enter the civil service, it does provide a clue that not all is as it appears within the vaunted Korean bureaucracy.

We begin our exploration of money politics by focusing on bureaucracy. The developmental statist explanation for growth centers on the hypothesis that in successful countries bureaucracies are more efficient than they are in less successful countries.

When the Hanbo Steel Company of South Korea went bankrupt in early 1997, an inquest discovered that at least two billion dollars had evaporated from its accounts, most likely ending up in the pockets of political or business elites. Upon his arrest for bribery, Hanbo's chairman, Chung Taesoo, privately let it be known that if the government pressed its case against him too vigorously he would unleash an “atomic bomb” (poktan) and implicate bankers and politicians who had been involved with Hanbo over the years. Chung was convicted, although the case was not pursued with particular vigor. While numerous observers professed to be shocked – Shocked! – at the revelations, in reality such scandals are a recurrent theme in Korean political history, and the exchange of money for political influence has been not just an open secret, it has been common knowledge. Since independence in 1948, Korea has seen a seemingly endless flow of corruption scandals bring down scores of elites.

The year 1995 saw the emergence of a corruption scandal in Korea that resulted in convictions of three of the nation's former presidents, jail sentences for numerous businessmen, and the early retirement of a number of military officers. Although it was revealed during their trials that Chun Doo-hwan and Roh Tae-woo had amassed over one billion dollars, many suspected that the actual amount was far higher. Indeed, woven into the story of Korea's economic success is an underside of systematic influence peddling and money politics, and both reflect substantial continuity in the institutional foundations of pre- and post-1987 South Korean politics. The 1995 scandals raise a number of questions, including, Why has corruption occurred so regularly in both Korea and the Philippines? Why has it taken the form it has?

In this chapter we turn our attention from the institutions of governance to the larger institutional environment. The series of institutional changes made under the Park Chung-hee regime (1961–1979) is often used as the starting point of Korea's high-growth era. Yet the Park regime was hardly depoliticized, and in fact money politics was pervasive. Not only was corruption extensive, but political connections overrode economic criteria and allowed for overcapacity and bailouts of indebted and poorly managed firms.

China's transition to a command economy in the 1950s created administrative relationships that in effect pulled state industrial enterprises in two directions. Centralized, “vertical” relations emerged as enterprise managers received investment and inputs from, and submitted profits to, central government ministries and commissions in the State Council. At the same time, localized or horizontal relations also developed as municipal and provincial committees of the CCP claimed administrative authority over enterprises within their territorial “jurisdictions.” While local party committees had no legal claim to do so, they frequently usurped managerial prerogatives over wages, bonuses, and other labor management issues. These competing central and local claims on enterprise labor management generated growing tensions over the distribution of jobs, wages, and enterprise welfare benefits. Complicating matters, for central government agencies at least, was the fact that its personnel and departments oversaw by 1957 a total of 58,000 state-owned enterprises and 112,000 jointly owned enterprises, representing an increase of 200 percent from 1955. As the number of industrial enterprises and the administrative burdens to manage them increased, pressure mounted for local authorities to assert greater control over local industry.

The ambiguous lines of authority between the central government departments and local party committees shifted rather suddenly, and decisively, in favor of the latter by late 1957.

In its effort to gain the support of and ultimately control China's small but critical industrial working class, the CCP drew upon the “debris of the old order,” to revisit Tocqueville's metaphor. Just as prerevolutionary institutions whose emergence Tocqueville charted prior to 1789 enhanced the power of the state in postrevolutionary France, so too in China did institutional changes within factories in the 1930s and 1940s culminate in a central organizing vehicle for the Chinese state in the 1950s. While the Chinese state post-1949 significantly expanded its control over the industrial sector and the laborers within it, innovative national policies and top-down mobilization efforts were embedded in and influenced by an existing structure.

The danwei as it evolved in Chinese industry can be understood as a matrix of labor management institutions overlaid at different periods between the 1930s and the late 1950s. Economic and political crises of various sorts described in the preceding chapters mandated state intervention in the relationship between employers and workers. During such periods of crisis, state officials devised new institutions of labor management and workers and managers embedded these institutions within existing norms and rules. For example, when central government officials introduced the eight-grade wage scale, managers and workers within factories resisted the skill-based criteria of the national wage regime. For political and technical reasons, managers and workers maintained an informal wage regime that favored older workers at the expense of newer workforce entrants.

Much of the scholarship on industrial and labor management in China during the FFYP has focused on the areas of heavy industry in Northeast China, which also received prominent coverage in the state media during the 1950s. This earlier generation of scholarship, based largely on such official press accounts, revealed tensions within China's industrial enterprises over the organization of work and the role of intraenterprise organizations such as unions, party committees, and mass organizations. The opening of PRC archives in recent years has permitted scholars to take a closer look at shop floor politics and labor organization. While the perspective remains an official one, internal reports from city-level unions, Communist Party committees, and government departments offer revealing insights into the politics of the factory and the institutions that managers, workers, and intrafactory organizations pursued or resisted during China's transition to a planned economy. Each of the four enterprises discussed in preceding chapters experienced dramatic challenges to preexisting labor management institutions, as external political and economic controls generated new constraints as well as conflicts.

The purpose of this chapter is twofold: 1) to illuminate patterns of conflict that arose over wages, welfare provision, and labor organization as workers and managers resisted new state-imposed formal constraints and 2) to discuss variations in how these patterns of conflict unfolded across the textile and shipbuilding sectors in the cities of Shanghai and Guangzhou.

The Chinese Communist Party's (CCP) ongoing efforts to reduce state sector employment might be called the “third rail” of contemporary Chinese politics. Like their counterparts in the United States for whom social security reform is a politically perilous endeavor, officials in China who are dismantling the state sector are tampering with a highly charged social welfare institution upon which many millions of urban Chinese depend. Despite the risks involved, in the 1990s the Chinese government undertook a comprehensive reform of the state sector, in part because of the enormous financial burdens caused by the provision of enterprise welfare services to state workers. Today, the ranks of state enterprise employees, which once reached 100 million in the 1990s, are declining by five million to six million per year. Those who leave state sector employment, voluntarily or otherwise, stand to lose benefits that previous generations of full-time state workers enjoyed as part of membership in a “work unit” (danwei): free or low-cost housing, medical insurance, meals, educational and cultural resources, and other collective benefits that state enterprise managers in the past were expected to provide. Retirees from the state sector also depend upon their former places of employment for pensions and medical care, as government agencies struggle to take on such functions as social security and health care administration. Rising unemployment, declining social services, and the inability of some enterprises to meet payroll and pension distributions have brought a remarkable number of labor protests, involving an estimated 3.6 million participants in 1998.