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By Root 529 0

starting base, and its high savings rate and high investments, China ought to have grown much faster than the 6.1 percent annual rate recorded between 1978 and 2003.1 A most likely explanation for China’s not living up to its economic potential is the institutional weakness of the political system. Of course, identifying weak institutions as causes of poor performance gives one reasons for both optimism and pessimism. Should China manage to reform these institutions, its economic performance will undoubtedly improve. But if it fails to do so, then its growth rate will probably stagnate or even decline, especially when macroeconomic conditions become less favorable. In fact, China experienced such an episode of slow growth in 1998-2000. Research by Thomas Rawski shows that, contrary to official Chinese data, the Chinese economy barely grew during this period.2

Getting Out of a Trapped Transition

This study raises another important question: how can a partial reform equilibrium end? Put metaphorically, how can a country such as China get out of the transition trap? To the extent that a trapped transition will eventually create conditions that force the ruling elites to make fundamental choices, there are three possible scenarios or ways out. By and large, these choices are similar to those faced by political leaders trapped in an unsatisfactory and unsustainable status quo—as was the case following the end of the Cultural Revolution.

First, given the self-destructive dynamics of a trapped transition, a neoauthoritarian regime will soon exhaust its economic and political vitality. With deteriorating economic performance and increasingly rising social tensions, China’s ruling elites will be forced to choose between maintaining a deteriorating status quo and taking the risks of more radical reforms to restore political accountability and curb decentralized predation. If they opt for reform, they will most likely mobilize new political groups to overcome the resistance of the beneficiaries of a trapped transition and help break the old partial reform equilibrium. As the experience of the former Soviet Union demonstrates, however, mobilizing societal forces to pressure a discredited regime to change can inadvertently unleash an antiregime revolution. Such “run-away reform,” or the “de Tocqueville paradox,” poses great risks to potential reformers.3 Once the previously excluded groups are fully mobilized, reformers will lose their ability to control the agenda and the goals of these newly empowered groups. Therefore, a country can get out of a trapped transition without experiencing social convulsion only if reformers can maintain full control of the renewed reform process. As Guillermo O’Donnell and Philippe Schmitter showed, such an outcome is most likely only when reformers gain the cooperation of the moderate members of the societal opposition.4

Second, one of the alternatives to getting out of a trapped transition through renewed reforms is a regime collapse. The logic of rent dissipation and decentralized predation means that the institutional degeneration of a developmental autocracy will progressively spread, resulting in deteriorating performance of the authoritarian regime, especially in terms of economic growth. Facing declining political legitimacy and prospects of social turmoil, ruling elites with available exit options will most likely take them, particularly during a crisis when the regime’s own survival is imperiled. Under such circumstances, we can expect the political equivalent of a bank run—a panicked rush for the exit by the regime’s insiders who no longer have the will or the incentive to defend the regime. Unfortunately, the collapse of a developmental autocracy under crisis conditions may break the partial reform equilibrium, but is no guarantee of a return to a stable liberal political order, as shown by the difficulties experienced by Russia after the Soviet collapse and by Indonesia after the demise of the Suharto regime.

Third, for a large and diverse country such as China, it is often difficult