The Totalitarian Image and the Reach of the State

1
The Totalitarian Image and the Reach of the State

• Original definition of totalitarianism
• an official ideology
• a single mass party
• a system of terroristic police controls
• monopoly of communications
• monopoly of all means of coercion
• central control and direction of the entire
  economy

2
The Totalitarian Image and the Reach of the State

• Other definitions - not referring to specific
  institutional traits, but to the structural
  features between the state and society
• Samuel Finer the entire society is politicized,
  and the viewpoints which so politicize it are
  reduced to one alone and no other viewpoints are
  tolerated. The scope and authority of government
  is not limited, but total.

3
The Totalitarian Image and the Reach of the State

• Tsou Tangunlimited extension of state functions
  the state strives for total power, total
  submission and total social transformation
• Gradual reduction of relying on political terror
  and political mobilization

4
The Totalitarian Image and the Reach of the State

• Andrew Walder
• the ties between the party and its followers is
  impersonal and ideological, based on an
  identification that grows out of psychological
  impulses as much as considered political
  commitment
• social atomization - the abolition of social ties
  that are not directly harnessed to the partys
  aims
• gradual reduction on reliance on political terror

5
The Totalitarian Image and the Reach of the State

• totalitarianism implies a deep penetration of the
  central state into every corners of society
• has the central state effectively extended its
  power and controls into rural China?
• Does the rural society have any characteristics
  that prevent the totalitarian state from
  effectively extending its power and influence?

6
Rural China

• History and the story of state making in China
  the limited extension of state power to the rural
  society
• Structural factors
• vastness of the country
• prevailing organizations in peasants villages
• smallness of administrative group relative to
  rural population

7
State-making in China

• The competition between the ambitions of imperial
  state builders and the prerogatives of the landed
  elite was not resolved in the same manner as in
  Western Europe China has never experienced the
  profound political fragmentation of European
  feudalism and had never solved this problem as
  decisively as in Europe

8
State-making in China

• The struggle between central authority and local
  control still continued in contemporary China and
  had remained a central issue throughout Chinese
  history
• the totalitarian image is therefore not entirely
  correct the central authority has never been
  able to effectively penetrate rural China -
  argues Vivienne Shue

9
Rural Gentry and Local Governance

• Two layers in the power structure of traditional
  China the central government at the top and the
  local gentry class at the bottom
• there is a de facto limit to the authority of the
  central government
• influence from the bottom up
• zone of local politics not penetrated by central
  government power
• the state had little means by which to supervise
  or sanction members of local gentry families

10
Rural Administrative Set-up at the sub-county
level in PRC

• Peoples commune, production brigade and
  production team
• more deeply penetrate the countryside
• two types of rural cadres
• those on the state payroll
• those remaining members of collectives and
  remunerated on the basis of collective income

11
Rural Cadres

• Social revolution did not entirely solve the
  problem of the administrative reach of the state
• the rural leaders were not a dramatic break with
  the past
• rural cadres behave in many ways similar to the
  local gentry in the past

12
Market Reform and the Reach of the State

• Shues argument market reform does not represent
  a retreat of the state as generally understood,
  but very likely facilitates deeper penetration of
  the state
• market reform helps remove the barriers to state
  penetrate in rural society

13
Rural Economic Growth in China in the Reform Era

• Gradualism versus shock therapy
• Rural China as the engine of economic growth
• rapid growth in the absence of privatization
• property rights assigned to local governments,
  not to individuals
• local officials as entrepreneurs
• the role of local governments local state
  corporatism or local governments as industrial
  firms

14
Analytical and Theoretical Challenges

• Why do local officials have a strong
  entrepreneurial motivation to pursue local
  economic development? - fiscal reforms and local
  state corporatism
• Why is the absence of privatization not a problem
  as argued by classical liberal economist? -
  tightened budgetary constraints on local
  governments, and local governments as industrial
  firms

15
Local State Corporatism

• Workings of a local government that coordinates
  economic enterprises in its territorial units as
  it were a diversified business corporation
• loosening of central control but continuing local
  government control and intervention into the
  economy, no real enterprise autonomy

16
Fiscal Reforms

• Changing the revenue sharing arrangements to
  provide incentives to local governments local
  governments are required to submit only a portion
  of their revenues to the upper levels and then
  are allowed to retain most of the remainder
  local governments become independent fiscal
  entities responsible for revenue collection and
  expenditures
• Shortage of budgetary revenue and need to
  increase revenue

17
Budgetary and Extra-budgetary Revenue

• Budgetary revenue (yusuannei shouru) taxes that
  local governments share with upper levels
• extra-budgetary revenue (yusuanwai shouru)
  various fees and surcharges collected by local
  governments no sharing with upper levels
• Shifting of budgetary revenue to extra-budgetary
  revenue

18
Fiscal Reforms and Rise of Rural Industrial

• The problem facing local governments in China has
  been how best to general revenues
• de-collectivization means agriculture was no
  longer a viable source of revenue for local
  governments
• rural industrial enterprises as lucrative sources
  of revenues
• localities that have rural industry can provide
  services and are most likely to be strong
  effective governments those that do not are most
  likely to be weak and ineffective governments

19
Local State Corporatism

• Critical importance of revenues from rural
  industrial enterprises to local governments
• high rates of extraction and other forms of
  controls such as factory management, selection of
  management personnel, and control of investment
  and credit decisions
• extraction of enterprise profits enables local
  governments to operate as corporations I.e. they
  decide how to use profits from various
  enterprises under their jurisdictions and how to
  redistribute income

20
Implications and Problems

• No need for individual property rights and
  government officials are not necessarily
  rent-seeking
• governments as entrepreneurs and the benefits
  flowing from it
• What are the reasons making government officials
  good entrepreneurs?

21
The Argument of Andrew Walder

• Government ownership and soft-budget constraints
  and bargaining - analysis and prediction of
  Kornai
• why does the prediction of Kornai appear in
  China?
• The analyses of Kornai treat as fixed key
  organizational characteristics that in fact vary
  widely in a large and decentralized industrial
  economy
• When variation in the size and scope of local
  industrial bases is introduced, the predictions
  of Kornai change, and the same reasoning that
  predicted the failure of partial reform under
  public ownership provides instead an explanation
  for the success witnessed in China.

22
Soft-Budget Constraints

• Owners of public enterprises have objectives
  other than profitability the supply of scarce
  inputs for other enterprises, maintenance of full
  employment, funding of pensions, medical
  insurance, and provision of housing and social
  services
• flexibility in redistributing funds from
  profitable enterprises to subsidize the
  unprofitable ones
• dependence of public enterprises on government
  for bailouts and subsidies, a mutual dependence
  between government and enterprises, and
  bargaining between government and enterprise

23
How Does the Chinese Case Differ?

• There are many owners of public enterprise, as
  there are many local governments
• the organizational characteristics responsible
  for weakening government financial interests in
  firms, and for creating dual dependence and
  information problems, vary widely according to
  the scale and organizational characteristics of
  governments jurisdictions and their industrial
  bases

24
Local governments as Industrial Firms

• Government, as owner of public enterprises, as
  the principal in a corporate structure and
  enterprise managers analogous to division chiefs
  or plants heads within a corporate firm
• Some corporate hierarchies work and some do not,
  the issue is under what circumstances the
  problems associated with soft-budget constraints
  can be remedied
• variations in industrial productivity and growth
  are linked to the organizational characteristics
  of local governments as industrial firms

25
Hierarchy of Public Ownership in China

• The real meaning of state ownership
• the real issue is the nature of public ownership,
  but the composition and scale of industry and the
  degree to which government rights in enterprises
  are constrained by central regulations
• Local governments have stronger financial
  incentives, less non-financial interests in
  enterprises, and they are also more capable of
  monitoring the performance of enterprises under
  their control. As a result, the conditions for
  soft-budgetary constraints no longer hold.