Capitalism with Chinese Characteristics

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What capitalism China has created by now

What capitalism China has created by now

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  • 1. Capitalism with Chinese Characteristics: Perspective of State, Market, and Society ZHAO Wei October 2012, Germany 1
  • 2. 2
  • 3. Income Inequality in China
  • 4. Three China Stories : White, Red, and Black The greatest development story (Stephen Roach) : The China model: Danger Signs: • • • • • Lifted 400 millions from • poverty • Economic growth • • Infrastructure development • • Market authoritarian One party rule Major role for state enterprises Eclectic approach to free markets Growth without political and economic rights Performance-based legitimacy Town and Village Enterprises growing income inequality – Gini coefficient 0.47 – city dwellers earning 3½ times as rural residents • • • • Internal imbalances (spending vs saving, city vs rural, growth vs environment) External imbalances (trade surpluses) Environmental degradation Rise in public protests 6
  • 5. Need a Sociological Perspective on State, Market, and Society in Transformation ? 7
  • 6. Max Weber’s idea: rational social action based on “capitalist calculation” Ethics, laws, knowledge, values, ideology and cultures and the institutions for development, maintenance, and transmission of them: religion, family, education, and science Protestant ethics evolves into capitalist spirits Land Most people most of time behave more and more as All individuals with economic specific social actors or even personalities entrepreneurs Social order of market economy and individual economic action Capital, money Labour Profit, surplus value, resources allocation and utilitarian rationality Common beliefs with symbols and subjective meanings Organization, technology Reproduction of social structure of economy All kinds of social relations and informal ties of authority, conflict, trust, confidence and solidarity constrain actions: State, social classes, status groups, ethnic groups.
  • 7. Talcott Parsons’ idea: shared normative values integrate the market economy into society (Economic activities) (Reproduction and cultural activities) (Political activiteis) (Social and regulatory activities) 9
  • 8. Juergen Habermas’s idea: money and power “colonize” the life-world of society 10
  • 9. Karl Polanyi’s idea: embeddedness and reembeddedness State intervention Market Economy Social relationship Society 11
  • 10. The political origin of economic transition in China (1) • Political goal: developing a system of market economy constructed and operated by the whole socialist political structure (central and local governments) • = “Socialist Market Economy” (SME): Chinese new official ideology • Objective of rational action: common wealth and profit pursued and created by people led by the Party • Means of economic action: – – – – mobilizing abundant cheap labour supply attracting foreign capital and technology using huge potential domestic demand as a lever Guangdong was one step ahead in China (Vogel) 12
  • 11. The political origin of economic transition in China (2) • The affinity between SME and Chinese tradition: 1. 2. 3. 4. The respect of established authority and ethic order : State gives the green light Personalism and familism: benefit the self, the relatives, the closes, etc. Pragmatism and formalism (face, relation, and affection): useful and exchangeable Materialism and economism: the Chinese cherish “make a fortune” just as the Westerners cherish their freedom (Sun Yatsen) • Incrementalism rather than “big bang”: 1. 2. Temporarily, it solves the problem of political legitimacy by economic performance (GDP growth rate) It solves the “social order” problem of communitary shared value (mechanic solidarity) by market division of labor (organic solidarity) 13
  • 12. Sources of Chinese Industrial Take-off 1. 2. 3. 4. 5. 6. 7. A unique system of rapid capital accumulation and mass investment in fixed assets, whose value is double of the sales of goods in China each year. An unlimited supply of rural cheap labor, in the absence of cost of social protection and job security. An increase in the supply of skilled hands: thanks to its education system and culture, during the last 10 years, the number of university graduates has increased significantly. Low institutional cost of industrial production: little trade unions, little environmental protection, little protection of intellectual property, etc.. Over-20-year continuous investment in large-scale infrastructure and ecosystems of suppliers of industrial components built for 20 years. The globalization of industrial production and standardization of complex technologies: most technical processes have become the "common knowledge" and the strategic positioning of the Chinese industry is to use massively the "common knowledge“ to supply the global value chains held by Western firms. Finally, purchasing power and consumption demands growth on the 14 domestic market.
  • 13. The State as an Ensemble of Entrepreneurs: Micro Level (central govt.) (local govt.) (consumer) (wealth owner) (work unit) (entrepreneur) (employed worker) (unemployed labourer) Source: Manfred Nitsch and Frank Diebel (2008) 15
  • 14. The State as an Ensemble of Entrepreneurs: Macro Level Source: ZHAO Wie (2009) 16
  • 15. Capitalism and China • If capitalism is as what Weber defined, China is definitely yes. But… • “Capitalist (Developmental) State”, rather than State Capitalism – State itself as a collective actor of entrepreneurship to create business, not just state intervention to regulate market mechanism. – State itself as a collective financier and banker to accumulate foreign exchange and invest in business projects, not just as a regulator of financial system. – Strong socialist tradition of economic planning, not just an emerging developmental state. – Permanent use of Keynesian macroeconomic measures to stimulate investment and create long-term expectations of private entrepreneurs, not just use them shortly for crisis. – Market competition and cooperation between State and private firms in doing business, so-called “Guanxi” capitalism, not just crony capitalism and government monopoly of profit appropriation. – The State becomes a capitalist: someone owns property and works for its own profit. 17
  • 16. Economy and China Pragmatism and contingency: the famous saying of Deng Xiaoping is “It makes no difference whether a cat is black or white; as long as it catches mice, it is a good cat”. Private firm Free market capitalism State capitalism Property rights owned by China State firm Socialist market economy Socialist planned economy Transaction coordinated by Market mechanism Government planning 18
  • 17. Chinese Society as a Market Structuring Process Socioeconomic status Percentage of population Source: LI Qiang (2005) 19
  • 18. Lifeworld Pathologies of China (1): Society Embedded in Economy Schooling & education system Social security system Medical and health system Social stratification Legal and juridical system Family institution 20
  • 19. Lifeworld Pathologies of China (2): Impacts on Industrial Upgrading Schooling & education system Social security system Medical and health system Emigration of the rich and elites Workers protests Social stratification Legal and juridical system Lack of technical and industrial competency Family institution Short of labor Inter-firm competition Problem of successors of factories
  • 20. Conclusion: We know better China’s society through its economy State as a pragmatic political calculator zatio n Colo ni Contexts: Chinese traditions, sources of industrialization s dnes edde Emb Society as market structuring process Market economy as form of ideology State as an entrepreneur and a capitalist 22