11 June 2008
Marketization Without Democratization in China
Kellee S. Tsai
Don’t expect democracy to emerge in China any time soon, Kellee S. Tsai says. A booming economy and rising incomes might just bolster the readily adaptive communist government instead, she says. Tsai is professor of political science at Johns Hopkins University in Baltimore, Maryland.
In 1978 China did not even keep official statistics on private businesses because they were illegal and negligible in number. Merely three decades later, the private sector represents the primary engine of growth in the Chinese economy. In 2008 there are more than 34 million private businesses, employing more than 200 million people and accounting for 60 percent of the country’s gross domestic product.
The spectacular pace of private-sector development has led many observers to speculate that the country is developing a capitalist class that will demand democracy. This expectation is based on the logic that an increasingly prosperous merchant class will overthrow the authoritarian government in the spirit of “no taxation without representation,” thereby reenacting the pattern of democratic development in Great Britain and the United States.
Yet this conventional wisdom about the causal relationship between free markets and political freedom does not fit the situation in present-day China. Private entrepreneurs are not acting collectively to push for democracy, and those who have persisted in criticizing the Chinese Communist Party are censored, repressed, or exiled. Instead of political liberalization, the spread of market forces has bolstered authoritarian resilience and regime durability in China.
Capitalists Divided
China’s private business owners do not constitute a distinct “capitalist class” that shares a common identity and interests. Sidewalk peddlers and restaurant owners have different concerns from real estate tycoons and owners of Fortune 500 corporations. The newly minted millionaires and billionaires have amassed their wealth under the current political system. The street hawkers and household factory owners are too busy toiling to consider how a democratic transition might alleviate their day-to-day complaints.
But even the middle tier of capitalists -- that might appear to share an economic interest in political participation to ensure rule of law and protection of private property rights -- lacks common ground. Their differing social and political identities inhibit class-based collective action.
Given the relatively recent introduction of marketizing reforms, China’s private sector comprises people from widely varying backgrounds. Some private entrepreneurs are former peasants who abandoned communal farming to establish commercial businesses early on in the reform era. Some are former state employees who entered the private sector because they were laid off or underemployed. Others are marginalized intellectuals or disenchanted former bureaucrats who gave up on politics to make a decent living. And a good number of private entrepreneurs are Communist Party members who have leveraged their political connections for preferential access to bank credit, land, and other state assets.
These types of differences inhibit class formation and class-based collective action. Indeed, very few private entrepreneurs regard themselves as “capitalists,” preferring, instead, to identify with their former occupations.
China Fragmented
The argument could be made that China’s divided capitalist class is merely a short-term phenomenon. Perhaps the next generation of private entrepreneurs will develop more coherence as a class and decide that a democratic regime type would better serve their interests. Perhaps they would unite to initiate a democratic transition. While plausible, this scenario remains unconvincing.
First of all, in my surveys of private entrepreneurs, most indicate that they would prefer their children -- or more typically, one child -- to become well-educated, white-collar professionals or government officials rather than toiling business owners. In most cases, today’s capitalists do not aspire for generational continuity in their commercial pursuits. To the extent that entrepreneurial parents succeed in getting their way, private profit is merely a transitional means to achieve a more respectable form of livelihood. To the extent that today’s private businesses are passed on to the next generation -- which would be a slim minority given the high turnover in business registrations -- it is still unlikely that they would coalesce into a pro-democratic political force.
Capitalists operating in similar sectors and at similar business volumes have different complaints and political views due to local variation in policy environments towards the private sector. Just as the identities of China’s business owners vary significantly depending on their backgrounds, their actual operating experiences also vary regionally.
Certain localities are known for offering particularly hospitable conditions for private businesses. A notable example is Wenzhou in the southern coastal province of Zhejiang. Well before the central government legalized private enterprises, Wenzhou’s local officials were already permitting its destitute farmers to run retail establishments and small factories.
In contrast, other localities have systematically discriminated against private capital throughout the reform era. Local governments in areas that inherited large state or collective sectors from the Mao era (1949-1976) have been more reluctant to give private entrepreneurs access to key resources (e.g., bank loans) needed to run their businesses. Similarly, localities that have received substantial infusions of foreign direct investment continue to treat foreign investors more favorably than their domestic counterparts.
China’s capitalists thus face different types of challenges depending on what part of the country they are operating in, and their capacity for policy influence varies accordingly. Autonomously organized trade associations in Wenzhou work actively to advocate on behalf of their members, while business associations in other localities are dominated by the government and less helpful for business owners. In this sense, the internal demographic fragmentation of capitalists is mirrored in the spatial variation for private economic activities. If disgruntled entrepreneurs in one locality became more politically assertive, then they would face difficulties in garnering nationwide support for their demands.
Repressed Dissent
Private entrepreneurs are not the only segment of Chinese society that faces territorial limitations for organized political action. Farmers, workers, and intellectuals who harbor grievances face similar challenges in mobilizing cross-regional support.
In recent years, the numbers of mass protests and demonstrations have increased significantly: Official statistics indicate that there were 58,000 protests in 2003, 74,000 in 2004, and 87,000 in 2005. Although increased population mobility and the spread of new communication technologies have eroded some of the organizational barriers of the pre-reform era, these protests have remained limited to particular localities.
The only movement that posed a potentially serious challenge to the regime was the short-lived China Democracy Party (CDP). In 1998 local party committees of the CDP were established in 24 provinces and cities. But authorities promptly detained, arrested, or exiled CDP leaders, which effectively thwarted further efforts to establish a central-level CDP.
The subsequent crackdown on Falun Gong practitioners in 1999-2000, the quarantining of citizens during the 2003 SARS outbreak, and the swift repression of Tibetan protestors in 2008 provide further evidence that Beijing retains the capacity to control its population during times of crisis.
Communist Resilience
Observers who expect a democratic transition in China see that the spread of market forces has been associated with a host of destabilizing effects, including the conspicuous rise in income inequality and increased opportunities for official corruption. While the incidence of protest has been increasing, however, capitalists -- the expected class carrier of democracy -- are notably absent from these outbursts of discontent. Furthermore, few of the protests have been directed at challenging the Chinese Communist Party’s monopoly on political power. Even the attempted establishment of the CDP occurred through standard administrative channels -- that is, within the rules of the current political system.
Ultimately, market reforms in China under authoritarian rule have generated unexpectedly high rates of economic growth, which have benefited a broad cross-section of society. The beneficiaries of this authoritarian capitalist mode of development are not inclined to clamor for political reforms that might destabilize society and jeopardize continued growth.
Moreover, throughout its 87 years of existence, the Chinese Communist Party has demonstrated a remarkable ability to redefine and reinvigorate itself through dramatic shifts in ideology, membership composition, and policy objectives. Thus far, the adaptive turn to marketization has proven to be the party’s source of legitimacy rather than downfall. For these reasons, contemporary China continues to elude the popular association of economic freedom with political freedom.
The opinions expressed in this article do not necessarily reflect the views or policies of the U.S. government.
