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By Root 399 0

economy in which the state plays a dominant role. Such power determines the amounts of rents and recipients of such rents. In political systems where the determination and allocation of rents is centralized, the beneficiaries are likely to be powerful interest groups whose support the rulers must court, as was the case in the bureaucratic-authoritarian regimes in Latin America in the 1970s. In kleptocratic regimes, the beneficiaries are most likely family members or cronies of the top ruler (as in Suharto’s Indonesia and Marcos’s Philippines).

But in decentralized systems in which local political bosses control the power of rent-allocation, they tend to distribute rents to those who can offer bribes in return. In some instances, this may result in rent-diffusion, as local political bosses select buyers of rents only on the basis of the amount of bribes they are willing to offer. Yet, such “democratization of rent-seeking” may be the exception in China because of the nepotistic nature of tight-knit local ruling elites. Consequently, the reality may resemble miniature kleptocracies. The devolution of everyday economic decision making and the subsequent formation of local kleptocracies have a direct bearing on the growth and operation of a decentralized predatory state. The ability to determine and allocate rents adds to the predatory capacity of local officials, as they convert such ability into extra private income. The victims of such predation are consumers and local businesses excluded from the network of rent-seekers, as they are forced to pay higher prices, fees, and taxes for goods and services.

Declining Monitoring Capability

The erosion of the state’s capability to monitor and discipline its agents is a key institutional variable in the rise of decentralized predation. The Chinese case confirms this theoretical insight. Specifically, several factors contributed to the decline of the state’s monitoring capacity.

First, as discussed above, a deliberate policy of administrative decentralization implemented in the early 1980s moved a significant amount of appointive and monitoring power from the central government to local governments. One study showed that the central government directly monitored only seven thousand officials after this decentralization. 40 The spillover effects of the decentralization of administrative monitoring were profound. With new administrative powers by the central government but unchecked at the local level, regional political bosses were able to establish fiefdoms and gain monopolistic power. Published reports show that such power was routinely abused, ranging from the sale of government offices by local bosses to their collusion with organized crime.

Second, simultaneous with the declining monitoring capacity of the state was the end of mass revolutionary terror that was the hallmark of the Maoist era. In prereform China, state agents were subject to monitoring and policing by ordinary citizens who could exercise extraordinary power through open or secret denunciations. In addition, enamored of the power of mass terror, Mao Zedong launched periodic mass political campaigns during which citizens were encouraged to expose official corruption and mete out brutal treatment to corrupt officials. Mass monitoring of local officials in the Maoist era was also made easier by the lack of means to consume or hide the spoils of corruption. With China closed to the outside world, few officials could transfer ill-gotten wealth abroad. The lack of consumer goods and the underdevelopment of the service industry in a planned economy meant that conspicuous consumption was practically difficult and could attract unwanted attention. Consequently, officials were discouraged from engaging in the more serious forms of corrupt activities because it was hard to store or enjoy their loot without taking excessive risks.

In the post-Mao era, the end of mass terror and political campaigns meant the end of monitoring by the masses. With the opening to the outside world and the growing availability of consumer