In closing，I must pay tribute to the man I once criti-cized.He is Zhu Ronji.As my teacher Armen Alchianoften reminded me: it is results，not motivation，whichmeasure success.The two noted miracles，which I rankabove all others，both occurred during Zhu’s tenure as China’s economic navigator.Future history will not for-get this man.
An Unhappy Epilogue
The above was written in August 2007.Except forsome unfortunate tinkering with Zhu Rongji’s monetarysystem，I felt that there was every reason to celebrate the30th anniversary of economic reform in China.I did notpay attention to the NewLabor Contract Lawat that time.This law was passed on 29 June 2007 to becomeeffective on 1 January 2008.The xians were not consult-ed before the decision.
I received a copy of the law in October 2007，and withone glance at its 98 articles I knew it would be a disaster.But I was in the middle of a series of articles on infla-tion，and could not respond to the newdevelopment untilDecember.When my first critical article appeared on December 13，supporting voices were strong.47However，on 27 January 2008，six government organiza-tions held a conference at the University of Beijing toargue against my views.I have written a total of elevenarticles commenting on the new labor law，mostly elabo-rating relationships between the firmand the market which Beijing apparently did not understand.These arti-cles have not had much effect: After subsequent meet-ings held in Beijing in March 2008，it was clear the authorities are adamant to push this new law into effect.
Essentially what the new law says is that labor con-tracts are no longer free.They must followstringentguidelines determined by the government.Over-timepay is doubled，room-and-board provided by the employ-er cannot be deducted from wages，all contracts must bein writing，holidays and benefits of workers must be such and such，labor unions are encouraged，firing procedures are modified——all for the benefits of workers.
【47】张五常，《新劳动法的困扰》，二○○七年十二月十三日发表于《壹周刊》。
and a tenure system similar to that found in US universities is introduced: a worker will automatically be granted acontract to retirement，if he or she has been employed bythe same firmfor ten years.
Although the timing matches perfectly，I would not venture to say that China’s stock market crashed as theresult of the new labor lawand the serious intent toenforce it as expressed in the March Beijing meetings.As Newton remarked，only God understands the behav-ior of stock markets.48 Nor would I venture to say that the sharp fall in exports during January and February2008，notably in toys and garments，was the result of the labor law.（The snowstorms which hit the country were the worst within memory.）However，I can say that some 120 factories owned by Koreans in a town inShandong province quietly closed during the Chinese NewYear holidays，so when the workers returned theyfound everything shut and no one around.The new lawhurts old establishments more，so that thousands of fac-tories closed down in traditional industrial districts，with multiplier effects going down the supply chain.Worker swere sacked left and right.Many restaurants in the old industrial districts went bankrupt.There were protests in the streets.
【48】After losing a fortune in the stock market，Newton said，“I can calculate the motions of heavenly bodies，but not the mad-ness of people.” See John Carswell，The South Sea Bubble（London: Cresset Press，1960），pp.131，199.
Seeing that the industrial outlook has suddenly turned gloomy，a department in Beijing placed the blame on thesub-prime crisis and recession in the United States.But this is negated by the facts: exports of similar items from Vietnam，India，and Pakistan have been increasing.There is no question that the new labor law has triggereda shift in favor of other cheap-labor countries.Lowerlevel industrial investors in China are moving out，espe-cially to places like Vietnam.They will bring their clients along，when the factories now under constructionare ready for operation.
It is inconceivable to me that Beijing is not aware of what is happening.The authorities must know.So why？Why did they insist on pushing the new labor lawas lateas March 2008，when the negative effects were becom-ing apparent to all and sundry？Except for some l awyersand a tiny fraction of the work force，everybody wouldlose.The governor of Guangdong succinctly stated that any government policy must consider its effects on workers，employers，and the state，and in his viewthenewlabor law would hurt all three groups.He was apparently not welcome in the March Beijing meeting.
I can see very little special interests that can be pro-moted by the new labor law.Even the lawyers I talked to opposed it，saying the expected increase in legal busi-ness cannot compensate the staffing problems they will have to put up with.Considering the newlawis intro-duced on the 30th anniversary of China’s economicreformand the year of the Beijing Olympics，it is trulybaffling.