China's Trapped Transition_ The Limits of Developmental Autocracy - Minxin Pei [18]
However, to the extent that complete market-oriented reforms will eventually deprive the regime of the resources it needs to buy support from interest groups, an authoritarian regime’s long-term survival will also be at risk—even though its short-term prospects may brighten as a result of economic reform. In addition to status-quo bias, which threatens regime survival, and gradualist reform, which increases risks to the regime’s long-term survival should it truly succeed, there is a third threat: a big-bang reform.45 A big-bang approach may not only mobilize opposition from various quarters simultaneously, but it could also force the authoritarian regime to relinquish its control over vital economic resources so quickly that it would also lose its grip on political power.
This is why all authoritarian regimes in history, including the most promarket Pinochet regime in Chile, have shunned the big-bang approach to economic reform.46 Instead, all authoritarian regimes that have been forced to undertake economic reform have opted for the gradualist strategy, with the state maintaining tight control in vital sectors (Vietnam in the 1990s, Indonesia under Suharto, Taiwan under the Kuomintang, South Korea in the 1960s, and Mexico under the PRI [revolutionary party]). Revealingly, the big-bang approach was embraced only in those countries where the authoritarian regimes had been overthrown, including the former communist regimes in Eastern Europe that had tried various forms of gradualism before.
What makes gradualism a favored strategy for authoritarian regimes embarking on economic reform? The political logic of gradualism is both compelling and straightforward. Few authoritarian regimes can rely on coercion alone to maintain power. Most autocracies mix coercion with patronage to secure support from key constituencies, such as the bureaucracy, the military, and business groups. In the Chinese case, for example, the state controlled more than 260,000 enterprises, with total assets valued at 16.7 trillion yuan in 2001 (or 177 percent of GDP).47 The patronage that the control of these assets can underwrite is the key to the CCP’s survival. The centerpiece of such a vast patronage system is the regime’s ability to secure the loyalty of supporters and allocate rents to favored groups. The CCP appoints 81 percent of the managers of SOEs and 56 percent of all enterprise managers. The corporate governance reforms implemented since the late 1990s did little to change this patronage system. In the restructured large and medium-sized SOEs—which were ostensibly transformed into share-holding companies—the party secretaries and the chairmen of the board were the same person in about half the firms. In the 6,275 large and medium-sized SOEs that had been classified as restructured as of 2001, the party committee members of the prerestructured firms became the board of directors in 70 percent of the restructured firms. Altogether, the CCP had 5.3 million officials—about 8 percent of its total membership and 16 percent of its urban members—who held executive positions in SOEs in 2003.48
To the extent that a big-bang strategy reduces economic distortion and hence an authoritarian regime’s ability to create and allocate rents, that regime’s ability to retain political support will be undermined drastically. Under the logic of political survival, the advantages of gradualism appear self-evident to authoritarian regimes. Unlike the big bang, gradualism allows the ruling elites to protect their rents in vital sectors and use retained rents to maintain political support among key constituencies. Under gradualism, the regime is assured of its ability to decide where it wants to surrender rents and to whom such