• Choose a category
• All
• Classic-Fiction

By Root 387 0

local authorities collected these revenues, despite explicit prohibitions from the central government. In aggregate terms, such illicit off-off-budget revenues were considerable. One estimate provided by China’s State Administration of Taxation claimed that they nearly equaled the budgetary revenues of the central government in the late 1990s.33 The use of off-budget revenues was also opaque and subject to abuse. Prior to 1998, half of the off-budget revenues were spent without first being entered into specially designated fiscal accounts—accounts that would facilitate monitoring. 34 Many reports of egregious cases of corruption involved the use of off-off-budget revenue.35 Official data reveal that off-budget revenues had become an important source of finance for the state’s routine maintenance, even though such funds are supposed to be earmarked for social services and public projects. For example, about 20 percent of all off-budget expenditures were on administrative costs in the 1980s, compared to about 10 percent of budget expenditures in the same period.36

The behavior of local revenue collectors confirms the observation, made by Shleifer and Vishny, that independent monopolists have incentives to maximize their short-term revenues, even at the cost of lower aggregate government revenues. Indeed, decentralized predation has squeezed predation by the central state, as shown by the steady decline of the revenues collected by Beijing. It is likely responsible for a 25 percent decline of aggregate government revenue.37 Ironically, contrary to popular belief, rising local revenues at the expense of central revenues have not improved local public finance. In fact, because a considerable (though hard to measure) portion of such revenues has been wasted or stolen, local public finance has deteriorated markedly across China. A Ministry of Finance study of local public finance in seven provinces conducted in the mid-1990s indicated that between half to three-quarters of county governments surveyed reported large fiscal deficits and had difficulty meeting government payrolls and performing routine functions of administration.38

Administrative Decentralization and Predation

If fiscal decentralization has provided incentives for local governments to adopt predatory policies, administrative decentralization has supplied them with the political means to create, for all practical purposes, local predatory states. In theory, administrative decentralization without political accountability creates conditions most conducive to a decentralized predatory state. In such jurisdictions, local officials who wield enormous discretionary power arc poorly monitored by bureaucratic superiors and immunized from popular scrutiny and sanctions. In the case of China, however, administrative decentralization and its effects have not been fully explored because it is difficult to link measures of administrative decentralization to observed changes in local government behavior. Unlike China’s well-documented fiscal decentralization that can be analyzed thoroughly with quantitative research methods, administrative decentralization does not lend itself easily to similar analysis. Nevertheless, the connection between administrative decentralization and decentralization of predation may be established by an examination of changes in the supervision of cadres and the devolution of routine economic decision making.

Supervision of cadres

Few measures of administrative decentralization affect the state’s ability to control its own agents as that of the supervision of cadres. In practice, cadre supervision in the Chinese context means the recruitment, promotion, and monitoring of government officials. Since the late 1970s, the administrative power to recruit, promote, and monitor cadres has both been decentralized to lower-level officials and concentrated in the hands of local officials to whom such power has been delegated. The delegation of such power has greatly exacerbated the classical problem of information asymmetry in the supervision