Smashing a Middle Kingdom myth
Transforming Rural China: How Local Institutions Shape Property Rights in China by Chen Chih-jou.
Reviewed by Macabe Keliher
There are books about China and more books about China; they fill libraries and decorate bookshelves; they tease us about the country's booming growth, or about its coming collapse; they talk of poverty and pollution, or riches and prosperity; they paint in bold and pretentious strokes of colors and cultures and ideas. They say this is China; they say these are the Chinese. And they disagree.
The only thing one can make out of this contradiction (found even within single volumes) is that for all practical intents and purposes, there is no one China, no plenary country of continuity from east to west, no uniform Middle Kingdom from north to south. Social and economic dissimilarity really are as vast as the Gobi Desert, and not even a single national policy can hold it together in homogeneous development.
So much misunderstanding abounds about the great land - in the international literature and media, and even among policy makers - that it permeates debate and scholarship, leading to erroneous views and conclusions about China's economic, political and social development. If the newspapers are not generalizing about layoffs in Hebei, then US politicians are pointing to village elections heralding democracy, or economists praising recent growth figures. Like no other country its size, China is a diversity of micro-economies, which are not necessarily interconnected or related.
Chinese disunity
Hail the brilliance of Chen Chih-jou. He has smashed this common (mis)understanding of China in a book that is nothing short of revolutionary in how we must come to understand China: in disunity. "Although authorities in Beijing may hand down a set of rules by which local governments from the South China Sea to the northern steppe plains must carry out - whether it be privatization or village elections - when central policy filters down to the different localities, it takes on different forms according to local conditions," Chen writes.
Chen is a Duke University-trained sociologist, and now a research associate at Academia Sinica, Taiwan's premier research institution. He spent seven years in the Chinese countryside conducting research on economic and social development - no small feat in itself as outsiders are not welcome by provincial and state authorities, especially a Taiwanese who could be accused of spying. Yet his illicit adventures, which he entertainingly details in the introduction, built a strong web of relationships and trust with local officials and entrepreneurs, which, he says, allowed him to hold "between my fingers everything that had made [the Chinese countryside] go round over the past 20 years ... the secrets of China's economic reforms; the corruption, the nepotism, the contradictions, and the evidence of the wealth grabbed by the elites at the expense of the people."
This exhaustingly well-researched thesis and complex bit of scholarship is laid out in surprisingly engaging prose. After spending the first few chapters on the literature and academic outline of the study, Chen launches into a highly readable narrative of each of his regions, bringing out the intimate character of the local institutions and the people, which are the backbone of Chen's theory.
This is one of the most insightful books on contemporary China, and arguably the most important. Transforming Rural China: How Local Institutions Shape Property Rights in China takes two economically successful regions in coastal China and shows how they have developed very dissimilar economies and societies from each other despite a uniform national policy.
In Fujian province, the economy and society is one of individual entrepreneurs, who usually employ a handful of migrant laborers from other provinces to sew clothes in their living room. In contrast, the Jiangsu province economy is driven by a few large manufacturing plants, which provide jobs for the villagers. In the case of the former, the government had to assimilate the entrepreneurs into the Communist Party, whereas in Jiangsu, party officials became the capitalists and continued to exploit the people.
The story is as follows: In the late 1970s, before the first wave of economic reforms, all of China hid under an umbrella of uniform state regulations and economic control. When Deng Xiaoping launched economic reforms, allowing a semi-free market to rise along with limited forms of entrepreneurship, different areas began to grow in drastically disparate ways, which, Chen argues, only intensified over the next 20 years due to endemic factors such as local cliques or social organizations. As ownership restrictions loosened in the 1990s, and outright privatization was accepted, then ordered, many parts of the country posted double-digit economic growth rates, including both Fujian and Jiangsu - Chen's areas of study - but were doing so under very different economic models. It was thus, writes Chen, that a "single policy of shareholding or privatization turned into disparate economic development in different areas of China".
Local institutions
Chen credits local institutions for the diversity. The Chinese economy over the past 20 years, Chen writes, "came under the control of local institutions that could vary widely in shape, size and power, from one end of the great country to the other. Because of the sometimes rigid control of these local institutions, which allowed them to be flexible to central policy in their own right, the local, and thus national, economy changed and grew."
These local institutions refer specifically to social groups or organizations unique to a certain village or province, and which exert a disproportionate amount of control over the social and economic development. In Fujian, they are the family lineages. Chen's study focused on the Lin family of one village, which acts as the moral and political authority of the village, controlling finances and infrastructure projects. In Jiangsu, the local institutions are the party elites. A close group of party officials run their village and the local economy through centralized power and ownership schemes. Villagers have no say, they also have no voice, to say nothing of the right to vote.
These distinct local institutions - one from the grassroots, and one from the top - are the very substance of which China is made, and on which its economy runs. The key to understanding China and what makes it tick, according to Chen, are the characteristics of each locality. "An analysis of state policies and bureaucratic institutions is not sufficient to explain local and economic development, particularly local diversity in development patterns," Chen writes.
What free market?
Economists and institutional investors often point to the many different economies within China, to be sure, but erroneously credit what they say is China's burgeoning free market. China does not have a free market, as Chen aptly shows through unprecedented investigative research. Property rights and companies are not bought and sold in open auction, rather given away at a fraction of their asset value to officials and cronies. Contracts are not awarded in free competition to the best company, but through an intricate web of connections. Indeed, Chen writes, "village party secretaries ... have become profit-driven capitalist bosses, who have affected, and will continue to affect China's economic development."
China cannot be compared to the once communist bloc countries of Eastern Europe and the former Soviet Union, as so many pundits try. Rather, in China we find an array of separate economies run by local institutions: "local elites who exploit social and economic capital, drawn from their local networks, in order to increase their power and wealth." It is very much, as Chen says, "the wealth grabbed by the elites at the expense of the people."
The consequence of this is not China's slow creep from state-controlled economy into full blow capitalism, but rather the lack of opportunity for social mobility and the deepening of class disparity. Those who reaped benefits under the controlled economy are the same ones who do so now; the people - the masses - continue to be exploited by them, only today under the guise of economic development.
The free market also eludes Fujian province, which has only recently shed itself of corrupt local party officials with the advent of former Chinese president Jiang Zemin's revision to the constitution allowing capitalists into the party. Instead of an Adam Smith-type model of buying, selling and distribution, one finds a complex web of transactions grounded in lineage, traditions and values.
Transforming Rural China is an adroitly profound analysis of the Chinese countryside and its recent development, and has enough to say about the diversity of China's economic structure to posit a new understanding of capitalism in developing countries. Finally, a book about China as it is.
Transforming Rural China: How Local Institutions Shape Property Rights in China by Chen Chih-jou. (Routledge); 212 pages, US$104.95.
Macabe Keliher is an independent historian and journalist, and regular contributor to Asia Times Online. His website is www.macabe.net
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