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By Root 487 0

were private entrepreneurs, quitting the CCP would be unnecessarily risky because that step would signal disloyalty and could have negative political repercussions. Private entrepreneurs who are not CCP members, however, may see no additional advantages in entering the party because membership would come with burdensome chores and responsibilities. But private entrepreneurs, CCP members or not, seem to have drawn a firm line on the issue of allowing the party to establish its cells inside their private firms. The party’s inability to extend its organizational presence into private firms shows that private entrepreneurs remain wary about having such a presence because it may not only interfere with their business operations, but also threaten the security of their property rights.

The history of post-Mao political reform can be better explained by a choice-based, and not structure-based, perspective on democratization. Documentary evidence suggests that senior Chinese leaders such as Dcng were irreconcilably opposed to the idea of withdrawing from power and allowing genuine political contestation and participation. Their conception of political reform was narrowly and instrumentally defined—the only political reform that will be permitted should serve the needs of helping the CCP remain in power and further the party’s goal of economic modernization. In contrast, political reform as understood by the liberals within the CCP comes much closer to a plan of democratization and institutional pluralism. However, the liberals’ fall from power after the tragedy in June 1989 meant that such a plan would not be implemented. Consequently, the major institutional reforms of the political system that began in the 1980s stagnated in the 1990s. Despite their promise and potential, the strengthening of the legislative branch, legal reform, and grassroots self-government have produced only negligible effects on democratizing the Chinese political system. Most important, this chapter demonstrates that an authoritarian ruling party like the CCP, if determined to defend its political monopoly, does have the means and adaptive skills to confront its new challenges and contain the threats posed by rapid economic modernization and social change. Under these circumstances, democratic changes can occur only at a much slower pace than economic development and depend more on the initiatives of societal forces than on elite initiatives.

THREE

Rent Protection and Dissipation: The Dark Side of Gradualism

AS DISCUSSED in Chapter 1, gradualist economic reform is dictated by its political logic, the essence of which is the political survival of the ruling elites. Constrained by this logic, economic reform cannot infringe upon the ruling elites’ ability to protect and allocate rents in critical economic sectors. This means that reform measures taken to improve the efficiency of these sectors are bound to be partial, compromised, and ultimately ineffective. Another insight from our theoretical discussion on the pitfalls of gradualism is that the rents protected through partial reforms are liable to be appropriated by the agents of the regime who, acting rationally, have the incentive to maximize their own gains at the expense of the economic health of the regime as a whole. This destructive dynamic of rent dissipation implies that gradualism is ultimately unsustainable.

In this chapter, I first apply these insights to case studies of three key sectors—the grain procurement system, telecom services, and banking—where the Chinese government has implemented gradualist reforms. These case studies are designed to test the hypothesis advanced in Chapter 1 about the underlying connection between regime survival, gradual reform, accumulated hidden costs, and persistent inefficiency, and demonstrate in greater detail why gradualist economic reform has not succeeded in subjecting some of China’s most important sectors to market competition. The lessons drawn from these studies are meant to underscore the unsustainability of gradualist reform due to