2
[N]one of the standard models of economic and political theory can explain China. … China still does not have well-specified property rights, town-village enterprises hardly resemble the standard firm of economics, and it remains to this day a communist dictatorship.
Douglass North (2005)
It is merely in the night of our ignorance that all alien shapes take on the same hue.
Perry Anderson (1974)
If, as I argue in this book, it is necessary to reconceptualize the institutional underpinnings of Chinese capitalism around an economic sociology of the CCP, then what purpose is served by historical analysis of China’s political economy? First, the problem of Eurocentrism challenges theorists to deconstruct the potentially biased and context-specific foundations of the scientific knowledge with which we seek to make sense of the contemporary world. Secondly, if we are to take seriously the path-dependency of institutional and social change, then it is instructive to ground new concepts and theories (even if inadequately) on as secure a historical foundation as possible. In this chapter I develop both this critique as well as the constructive response, thereby outlining a rationale for the remaining chapters and also beginning to lay their conceptual basis.
Drawing on a Braudelian (1982) distinction between a free-market and a capitalist economy, I highlight the importance of the connection between the nature of the market economy that developed in imperial Qing China and the emergence of China’s present-day capitalism. I argue that important lineages of China’s political economy have been obscured by the Eurocentrism of mainstream political economy, and that this helps to explain why it remains difficult for Western-trained academic and policymakers to appreciate the highly capitalist yet decidedly non-liberal contemporary role of the CCP. Placing this distinction between a market economy and a capitalist economy in historical and empirical context enables us to see how China’s experience and practice of markets was, and remains, different from the Western historical experience, but this by no means demands the conclusion that China’s market-based economy during the period of the ‘great divergence’ (Pomeranz 2000) was not amenable to capitalism. Rather, it was simply not amenable to European-style capitalism.
Neglect of this distinction has led to deficiencies in the integration of China’s political economy into existing typologies and conceptual frameworks for the study of institutional development and change in capitalist societies. The result is a regrettable lack of nuanced yet comprehensive analyses of the institutional dynamics within this interpenetration of state and market in China. The comparative historiography of China’s and Europe’s development compels us to look beyond the well-established insight of state–market variation in the institutional configurations of capitalist societies.1 Not only may capitalisms vary, but they may also be constructed upon underlying social structures that disrupt existing conceptualizations of the actors, processes, and outcomes within these institutions. Through analysis of China’s distinctive experience of pre-capitalist ‘economic rationality’, we thus begin to approach the socio-institutional underpinnings of China’s contemporary development as a positive question of China’s own developmental trajectory, rather than a negative one of its failure to emulate the Western experience.
The second section briefly examines how modern political economy embodies a Eurocentric relationship of equals between the state and market, and how its underlying ideal-typical rationality has come to constitute the counterfactual benchmark for a linear process of capitalist modernization. This clears the way for a more positive reconstruction of Chinese political economy in the third section, investigating the respective processes of market and state formation in China and Europe. I home in on the role of the financial system and the management of capital flows through the economy in this distinctive historical experience of market development in China. Just as the European experience of state-building was intertwined with the role of finance in its capitalist development, the relationship between political authority and financial capital in China played an important role in the developmental trajectory of its non-capitalist political economy. But in contrast to the European experience, China developed a sophisticated market economy that was underpinned by a centralized political authority that retained dominance over financial capital. China’s construction of a capitalist and globally embedded economy in the post-Mao era continues to evince these historical lineages that have been obscured by political economists’ persistent neglect of China’s long-standing experience of market economy. The fourth section details the implications of this comparative historiography for the study of China’s contemporary political economy, arguing that the longer-run historical contextualization of the role of the CCP is crucial to analysing China’s institutional landscape and economic trajectory. The final section paves the way for this economic sociology of the CCP to be mapped out in Chapter 3.
The Eurocentric rationality of political economy
The classic theory of the emergence of Western capitalism is epitomized in the comparative sociology of Sombart and Weber, who argued that
Economic growth and development in the West over the long term has been due to the institutionalized separation of business and household capital, the widespread adoption of rational book-keeping and accounting techniques; the creation of a formally free labor force; … the development of rational structures of law and administration; of industrial processes and technology; and importantly, of a business orientation that valued the accumulation of capital as an end in itself. (Marshall 1982, 64)
These conclusions led to the corollary development of the theory of the ‘failure’ of capitalism in China as being centred on the weakness of separation between firms and their owners and thus the lack of institutions to define the relationship between capital and owners, a cultural and spiritual environment resistant to capital accumulation, and the crushing presence of the imperial state. As Blue and Brook (1999, 2) have observed, this question of why China ‘failed’ has continued to serve both in East and West as ‘the basic intellectual horizon for scholarly research and practical planning with regard to Chinese society and China’s place in the world’.2 Nowhere has this become more evident than in the discourse surrounding China’s economic reforms, in which the idea of ‘the modern’ is assumed to comprise a set of institutions underpinning a market-based economic system that over the course of its development eluded China.
In this section I critically review the connections between how the writing of history and the formulation of theory that accompanied ‘the great divergence’ embodied a pronounced Eurocentrism, and our conceptual and theoretical difficulties in making adequate sense of the relationship between political authority and financial capital in China’s contemporary political economy. That is to say, our previous errors in attempting to understand historical divergence are proving a serious limitation in our current efforts to come to terms with contemporary convergence. An exhaustive treatment of this subject is beyond the scope of this book, but my intention is to pave the way for the more positive reconstruction of the historical origins of the relationship between political authority and capital that characterizes contemporary China.
Classical political economy, as practised by Smith, Marx, Durkheim, and Weber, was concerned with understanding not only how processes of economic development transformed society, but also with how certain social and political formations affected the development of capitalism as a mode of production. Max Weber was the first in a line of historical sociologists to make a determined effort to view ‘capitalism’ in a worldwide context (Goody 2006). Yet his theorization of the rational state and its relationship to modern capitalism as a uniquely European phenomenon drew upon a comparative framework that treated the West and the ‘non-West’ very differently. Given his ultimate aim of identifying those features of Western civilization and capitalism in particular ‘that were responsible for the emergence, in the West alone, of cultural phenomena he thought of as having universal validity’ (Blue 1999, 95), the ideal-typical characterizations of Western rationality that emerged from his analyses would therefore, when combined with a linear conception of social progress, come to be regarded as the inevitable and sole manifestation of a capitalist rationality. Weber would ultimately view this process of bureaucratic rationalization in Europe with great pessimism, and yet the shadow of Weber’s ideal-typical rationality remains evident throughout attempts to understand the cultures, economies, and politics of the non-West (Wang Hui 2011).
One of the results of this grounding of political economy in the assumed universality of the Western European experience of the allied yet antagonistic relationship between capital and political authority is the conceptualization of the state and market as largely discrete analytic categories. Western developmental economics and political economy became embroiled in the states versus markets debates from the 1970s (Hamilton et al. 2000). It is the Eurocentric legacy of this distinction between state and market in contemporary mainstream political economy at which I take aim here. From its roots in the thought of these classical political economists, who were each sensitive to the socially mediated interplay of the forces of market exchange and bureaucratic hierarchy, the analysis of the relationship between society and the economy became subject to a tendency towards an economistic reductionism, in which social relations and order are functionally derived from the ‘laws’ of economic activity. The tension between the political and the economic was apparent in the treatment of ‘“the economy” … as “nature”: as an exogenous complex of fixed relations of cause and effect that political actors had to take into account so they could use them to their advantage’ (Beckert and Streeck 2008, 10). The gradual yet seemingly inexorable encroachment of the economy and its ‘laws’ upon the polity beginning in the 1980s rendered this conceptual dichotomy between the ideal-types of the freely competitive market and social and political institutions increasingly doubtful. Political economy reacted by incorporating the analysis of the social as a functionally driven product of economic action.3 The rational actor models on which both mainstream economics and orthodox political economy are founded proceed thus from conceptions of rationality independent of any actor’s cultural interpretation of the relevant situation (Beckert and Streeck 2008).
The limitations of a political economy approach founded on an atomistic methodological individualism prompted a turn in attention towards the study of social institutions, and their effect upon economic growth and social development. North and Thomas (1973) argued that the key to effective development was the establishment of sound institutions that equated the private to the social rate of return, setting in place incentives that would deter rational individuals from taking actions that were privately profitable but socially harmful and encourage them to engage in behaviour that was privately costly but socially beneficial. Nevertheless, in many ways the emphasis upon the formality of institutions and their consequent materiality meant that the ‘new institutional economics’ came largely to be premised upon methodological principles similar to the neoclassical theories of political economy whose limitations it had originally sought to ameliorate.
The result was that property rights as an efficiency-enhancing condition of economic change became a fundamental conceptual element of the neoclassical economic theory that underpins modern neo-institutional political economy (Weimer 1997). Property rights were therefore closely tied to the relationship between the state and the market – put bluntly, the most important role of the former is to ensure that property rights are protected within the latter. Further, it was the basis for the distinction drawn by classical political economists between the different forms of income: wages for workers, profits for capitalists, and rents for landlords. As Sugihara (2003, 87) has noted, judged by this yardstick East Asia was always going to fare poorly, and as I explore in greater detail in the next section, these boundaries between merchants, families, and elites as different economic and political groupings had simply never operated in the same way as in Europe.
For a variety of reasons, not least the self-orientalizing tendency of both liberal and Marxist scholarship in East Asia (Blue and Brook 1999), our conceptions of political and economic rationality remain largely constrained within the conceptual horizon that was established during this formative period of contemporary political economy and which manifests in important accounts of China’s reform-era development. We begin to see the implications of positioning the historiography of European economic development as the root theoretical foundation of the concepts and analytical constructs that operationalize contemporary political economy. In the next section I reconstruct this comparative historiography of market-development and state-formation, exploring how Braudel’s distinction between markets and capitalism opens up greater space for a non-Eurocentric view of contemporary Chinese capitalism.
Markets, states, and the variegated origins of capitalism
If we suspend the universalizing assumptions of Eurocentric political economy, then on what basis can we understand the rationalism that was present in China during the late imperial era and of which we find evidence in the political economy of contemporary China? In order to address this question, the following two subsections examine comparative lineages of market-based economic development and state-formation. Three arguments emerge: (1) these two processes constituted a rational and sophisticated economic sociology of market behaviour and economic development; (2) this economic sociology was distinct from that which led to European-style capitalism, but was not necessarily incompatible with it; and (3) accordingly, the construction of a capitalist system in contemporary China – one that is deeply embedded in the competitive dynamics of an integrated global economy – represents potentially the coalescence of logics of politico-economic organization that are as rational as they are qualitatively distinct.
The emergence of markets
There is a wealth of evidence showing that China’s imperial economy from at least the Song dynasty (960–1280 CE) established deep and broad market relations in a range of commodities and a wide variety of credit/debt relationships, along with the first national issuance of banknotes and paper money (Arrighi 2008; Pomeranz 2000; Wong 1997). Economic (along with political) integration is not a novel theme in Chinese economic history, as ‘national markets and interregional financial links between major commercial centers’ were in continual existence and operation for many centuries before the Opium Wars (Rawski 1989, 146). Trade between different provinces took place within a much more unified market structure, and easily eclipsed intra-European trade (Wang 1992; Pomeranz 2000). By the time of the late Ming and early Qing dynasties, China was far less mercantilist than Western Europe was at the same time (Deng 1999).
In China, by the seventeenth century at the latest, a largely unconstrained market existed in land, underpinned by ‘recognized rights of private ownership [that] included those of utilization, inheritance and alienability’ (Rowe 1990, 242). The concept of real property much more closely resembled that of the modern West than that of any other imperial states, and arguably than that of early modern Europe itself (Pomeranz 2000). Likely no more than 3 per cent of total arable land belonged to the state (Huang 1985), and in any event, its hereditary tenants sold and mortgaged it as if their tenure treated much of this as private property in which their tenure was wholly secure (Pomeranz 2000). As a result there were ‘constant, complex, and extremely dynamic’ markets for land and labour in order to facilitate evolving production processes and new social relations in the late Ming and early Qing (Wu 2000 [1985], 17). As Bramall and Nolan point out, this ‘casts serious doubt on the idea that private property in land was a uniquely European phenomenon which formed the basis of wider concepts of private property, which in turn facilitated capitalist investment and innovation, which in short was responsible for “the rise of the West”’ (Bramall and Nolan 2000, xxiii; cf. North and Thomas 1973).
This was not necessarily evidence of capitalism per se. Rather, it was evidence of a sophisticated market economy, in which largescale production was based on simple division of labour and the unified movement of commodity prices was the result of supply and demand across relatively unified yet localized markets (Wu 2000 [1985]). The state actively promoted the unification of national markets and was engaged in the construction of both institutions and the physical infrastructure necessary for this to take place. This delivered significant benefits for the many peasants who bought and sold goods; however, it did not translate into the concentration of wealth amongst particular actors on the basis of market manipulation. It is here that the importance of Braudel’s distinction between a ‘Smithian’ (Arrighi 2008) mode of market development and the Marxian accumulation of capital that prompted the rise of capitalist financial systems in Europe becomes clear. The unification and highly competitive nature of China’s markets were what led Smith himself to praise the Chinese political economy, and what distinguished it from the European configuration of small and politically vulnerable states aligned with large corporate interests, a crucial distinction the significance of which will be highlighted in the next section.
The Chinese financial system played not only a significant role in underpinning the dynamics of this Smithian market economy, but further (and perhaps more importantly) reflected the broader nature of the relationship between people, capital, and the state. Just as was the case in Europe, the initial development of banking in China was the ‘progressive centralization of clearance’ (Usher 1943, 4), a process in which credit was extended within an increasing geographical area for a greater variety of socio-economic activities and for longer time periods. Although there remain only limited analyses and sources of data on the nature of systems of credit and finance in the late-imperial period, we can nonetheless reach several conclusions. First, the system of credit and finance was well developed, with a variety of different institutions fulfilling different roles. Secondly this system was intimately connected to the real economy, servicing the merchant class and the trade of commodities, with no evidence of the financial accumulation that played such a central role in the emergence of European financial systems (Arrighi 2009 [1994]). By the late imperial period, China’s indigenous financial system had come to represent
a complex and sophisticated adaptation to the requirements of an agrarian economy with substantial and interregional trade. … China’s financial system paralleled that of preindustrial Europe in its complexity and sophistication. There were numerous intermediaries, from local moneychangers and pawnshops to large institutions with far-flung networks of branches or correspondents. (Rawski 1989, 125–6)
These institutions for allocating the investment, fixed, and working capital necessary for carrying out commercial business therefore provided the requisite stability for the smooth functioning of markets in the real economy, but not necessarily for the continuing accumulation of capital that was so essential for the development and survival of European political economies that eventually coalesced around the nation-state. The utilization of capital had sociological foundations that were rooted in the historical experience of constructing the Chinese state, which was itself closely related to the structural features of Chinese society and its economy, and thus hewn out of a very different social setting than that of the modern European state.
The structure of social relations that underpinned the interplay of commerce and capital in imperial China was fluid and complex, but not unsystematic (Pomeranz 1997). There was a logic of capital accumulation and reinvestment that operated through a rational and sophisticated relationship between the personal and commercial components not just of a sole family lineage but also within the broader fabric of elite society. Family firms embedded within these financial structures were able to finance a significant part of the commercial agenda that in the West has been attributed to managerial firms and Western corporate forms linked to independent capital markets.4 Considerable evidence thus exists that different forms of Chinese partnership allowed entrepreneurs to organize investment capital and reinvest profits for the long term in ways similar to those made possible by Western joint-stock companies (Zelin 1988, Pomeranz 1997).
These lineage-based firms both hired professional managers but also had interlocking arrangements with each other for the raising of investment capital (Chan 1982). Some of them lasted for over 300 years, such as the Ruifuxiang Company, and several in Tianjin that existed from the late seventeenth century into the twentieth (Kwan 1990). In the absence of ‘any compelling evidence for the supposed historical necessity of making clear separations between business and household activities’ (Gardella 1992, 322), the organizational character of the family in late imperial China was productively and securely able to function as much as an enterprise as a domestic group (Cohen 1991). Through the Ming and the Qing dynasties, this pattern of corporate investment continued to evolve in conjunction with the rise of the qianzhuang, which ‘held the ganglions of the financial lines of the country’ (Tamagna 1942, 47). The qianzhuang were financial firms organized around either a single proprietorship or more commonly through a partnership rooted in members of a family, clan, or close circle of friends. They handled deposits, lent capital, and facilitated remittances and the exchange of money, with unlimited financial liability guaranteed by the resources of the proprietor or partnership. The interlocking partnership structures across the family lineages of the urban elite of both urban commercial firms and these native banks therefore facilitated the raising of long-term capital and financing in innovative ways during this period. Rowe (1990, 252) has described this process of development:
The banking institutions that had developed by the late eighteenth century offered a sophisticated range of credit instruments, and the joint-stock company, with its capacity for growth-oriented refinancing, had appeared even earlier. The technology of mobilizing and managing had also reached an impressively high level. Moreover, China developed systems of agency, brokering, and factoring arguably much more refined than those of the early modern West.
It is important here to stress that this relationship between finance capital and the real market economy within Braudel’s middle ‘Smithian’ stratum of the economy lays the basis for, but does not actually itself constitute, a capitalist dynamic of financial accumulation as a mechanism of pursuing market power. The Chinese case indicates how the emergence of a capitalist economic structure is not the natural and inevitable result of a market economy. Even as Smith’s analysis of the growth of European market economies would still stress the importance of agriculture, assume the finite nature of economic growth, and predict real wages to ultimately fall to subsistence levels, China had long been constructing an economy that was similarly advanced in its market dynamics and vibrancy. The distinction that would produce divergence in the European and Chinese trajectories would be found not in the process of market development, but in the process of state formation.
The emergence of capitalism
Whereas Europe’s experience of economic and political development produced the modern nation-state, China’s did not. As Tilly (1992, 16) sums it up pithily, ‘within their own space, Europeans farmed, manufactured, traded and, especially, fought each other. Almost inadvertently, they thereby created national states.’ In contrast, the distinctive rationalism underpinning the process of market-formation and state-building in imperial China would translate into a different form of political economy from that which developed as a product of economic development and state-making in Europe. If capitalist transformation in Europe was not a naturally endogenous product of the spread of European markets, then we ought to consider the possibility that it was the emergence in Europe of a particular variety of state that was the source of this transformation. This in turn could either be driven by endogenous or exogenous factors. The endogenous explanation centres on the development of a Weberian bureaucratic rational state that, as noted above, remains the conceptual baseline for much analysis of political economy around the world. Hobson (2004, 283–4) deconstructs the mythical tenets of the Western origins of rationality in political economy. The reification of this Western mode of rationality as universal obscures the possibility that the politico-economic configurations contained within and between European states were not the driver of the path of capitalist development in Western Europe but rather were merely the vehicle – and but one of potentially several – for the mobilization of capital in order to secure the interests of the dominant political forces within Western European society. If such a nation-state was not inevitable, then there must have been some other factor that precipitated its emergence. It is this exogenous explanation that we are concerned with. In this formulation, the Western European nation-state was the effect rather than the cause of the capitalist imperative that arose from the political circumstances and fortunes of the various sociocultural groupings – church, state, and nation – that were vying for supremacy at the time.
Capitalism emerged in Western Europe as a result of the existential conflict that unfolded between these different sociocultural groupings. Interstate competition in early modern Europe became ‘literally murderous’ (Vries 2002, 76). Financing past, present, and future wars was by far the greatest expenditure of European states (Bonney 1999), a phenomenon that Sombart (1913) argued was the foundation for Europe’s wealth. In contrast, there never existed an incentive for the imperial Chinese state to embark upon this form of commercialized accumulation of capital. This was not because China lacked sociocultural or scientific features conducive to capitalist development. Rather, it possessed deep structural conditions for the ongoing development of a Smithian mode of market exchange (Arrighi et al. 2003, 265). The city in imperial China was also located at the nexus of two overlapping hierarchies: as economic centres embedded in a national market, and also as political centres embedded within the imperial regime (Skinner 1977, 275–352). Just as in Europe, there existed all the potential elements for what Skinner refers to as ‘macroregions’ to form into competitive warring states, by concentrating capital within urban centres and mobilizing resources for waging war and preparation thereto, precipitating the development of attendant social and political institutions that would come to form the modern bureaucratic state. Both Europe and China as continental landmasses each contained the necessary endogenous ingredients for the development of capitalism. However, it was an exogenous factor – existential competition – that spurred European national societies as embryonic states to in turn give birth to capitalism. The absence of such interstate competition for mobile capital therefore goes a long way towards explaining why capitalism did not ‘spread like an epidemic’ (Arrighi et al. 2003, 280) in East Asia as it did in the European world.5 Looking at the other side of the coin, Pomeranz (2000, 207) is inclined instead to label Europe a ‘fortunate freak’ whose capital-intensive, energy-intensive, and land-consuming path of development was a product of projecting the competitive state-making process out into the world – generating a confluence of resource and energy flows, and both the domestic and colonial institutions to take advantage of them.
Again, it is crucial to examine the way in which this process of forming states was linked to the financial underpinnings of economic growth, which would manifest in the various different forms of the relationship between the state and capital. By the sixteenth century China’s financial system had developed considerable efficiency in facilitating a long-distance grain trade across the empire (Wong 1999). The guildhalls that arose during the early Qing period were active promoters of a rapidly expanding national market and thus regulated production in order to eliminate competition between their members. Of these, the huiguan were region-specific organizations that provided association and networks amongst merchants from a shared hometown or province, whilst the gongsuo were industry-oriented and devoted to fostering connections between those involved in the trade of a particular commodity (Fang et al. 2000). In these ways they resembled the medieval guilds of Europe, but with one crucial distinction. They remained always subordinate to the imperial government, for the reason that the cities in which they were based, and which formed the locus of the long-distance trade that expanded rapidly in the eighteenth century, were always first and foremost centres of commerce rather than of politics. European guilds became intimately connected to the political fortunes of the urban centres in which they were embedded: ongoing warfare secured not just property rights writ large, which were also highly secure in imperial China, but ‘property in privileges’, which extended through the contracting out of tax collection through tax farming ventures, the establishment of highly venal offices, a broad range of state-granted monopolies, and confirmation of guild privileges (Pomeranz 2000, 196). This was an instructive example of capitalist growth emerging not from property rights and free markets, but rather from the effective accumulation and mobilization of resources for market domination and monopoly.
This was in direct contrast to the Chinese situation, with its widespread guilds and regulatory frameworks for merchant activity designed to regulate markets, rather than to raise revenue (Mann 1987; 1992). China was simply more unified and coherent than Europe could ever hope to be. It was not so beholden to the corporate groups and elites, with their own bases of power and authority either urban or rural, that featured so strongly in the European experience. There was an absence in China of those commercial dynasties that gradually accumulated a stock of capital independent of other loci of power, and which gradually became sufficiently powerful social forces to promote capitalist expansion (Braudel 1977; Chaudhuri 1990: Feuerwerker 1984). Further, the state’s commitment to social order was shared by elites, a form of state-making that did not encounter many of the challenges faced by Europe (Wong 1997). The economic sociology of the process by which firms in imperial China raised capital for largescale commercial activities has implications for how we conceive the relationship between individual firms’ behaviour, the broader political economy in which they were embedded, and the institutional foundations for the imperial state.
Land, labour, and capital were treated differently. The former were no less secure in China than in Europe. But the capital of merchant firms remained insecure, attached as it was to the individual. Whereas the concept of private property in land was not restricted either through scale or on the basis of its owner, this was never the case with trading capital, and the merchant and his working stock remained indivisible (Chaudhuri 1985). Other factors of production – land and labour – were socially divisible, as they were openly available on the open market to anyone who possessed sufficient purchasing power. Yet the working capital necessary for trade and industry remained closely tied to mercantile groups (Chaudhuri 1985). This is not to say that merchants were therefore vulnerable and suffered more expropriations than was the case elsewhere (Pomeranz 2000). But they operated within tight constraints that arose out of the contentedness of the state to rely upon fiscal, rather than financial, sources of spending power. Monetary issues were not of central importance in imperial China, since the majority of state revenues were derived from the land tax, rather than through debt or commercial activities (Peng 1994). Consequently, capital was always ‘the junior partner, at best, and closely guarded’ (Vries 2002, 87), and Chinese society possessed no particular social grouping comparable with the ‘capitalists’ or the bourgeoisie of Europe.
This comparative historiography of China’s economic development points to one overarching conclusion. The organization of the factors of production in China was no less rationally effective than those in Europe, but they were organized in different ways and for a different purpose. Whereas the symbiotic relationship between merchant capital and the state in Europe came to be premised on the need to accumulate capital in the hands of the state, thus enabling the waging of war, the relationship between merchant capital and the state in China was premised on the desire to construct a unified national market. Both qualitative innovation in financial organization and the quantitative scale of merchant loans were absent, in the absence of existential threats and thus the financial imperatives that confronted European states between the sixteenth and eighteenth centuries. Competition was greater, prices more responsive, and productivity greater in China than in Europe. However, given the rootedness of both production and trade in landed property rather than working capital, and the corresponding reliance of the imperial state upon direct taxation rather than the raising of capital, the power of merchants remained subordinated to the state. And this subordination has significant implications for how we think about the political relationship between the CCP and financial capital in contemporary China.
Historical lineages of contemporary Chinese capitalism
This economic sociology of a non-capitalist yet market-oriented imperial state is not only historically significant in its own right, but also serves as a ‘bridge rather than a barrier’ (Gardella 1992, 334) to the modern era of Chinese political economy. Hamilton and Chang (2003, 176) have argued that significant parallels between the imperial-era and modern Chinese economy can only be explained as ‘having emerged from similar … shared understandings of social organization and from similar … structural conditions confronted by economically active participants, such as relations of power and authority’. The characteristics outlined above of China’s pre-1949 experience of market economy, as Brandt et al. (2012, 5) acknowledge, ‘continue to exert a powerful influence’ on China’s contemporary political economic development. Continuity over change in the realm of economic organization is the prevailing scholarly consensus (Bramall 2009). As Strauss (2006, 895) has observed, although the early People’s Republic of China (PRC) was forced to confront myriad problems inherited from the Republican era under which it drew a sharp ideological line, it was a revolution that ‘quite literally completed the work of the old regime, with “a central authority with powers stricter, wider, and more absolute”’.6 The basic institutional arrangement of the PRC’s SOEs was laid under the auspices of the National Resources Commission during the period of Guomindang control (Kirby 1990). As early as 1940, Mao Zedong (1967, 658) identified continuities that would mark the transition to any future communist state, proclaiming that ‘the big banks, big industries, and large commercial establishments’ would belong to such a state. Several years later, he would quote the 1924 manifesto of the first Guomindang congress, to the effect that such enterprises ‘shall be operated and administered by the state, so that private capital cannot dominate the livelihood of the people’ (Mao 1967, 958).
Before proceeding further, two brief digressions are necessary. First, I do not claim that China’s contemporary socialism is essentially just the most recent incarnation of the country’s age-old tradition of absolutist state power (see Blecher 2003), but argue for the need to adopt a more nuanced approach to the rise of the CCP and the patterns of political authority at the centre of which it has come to exist. That is to say, neither the cultural-philosophical foundations of Confucianism that underpinned imperial rule from 221 BCE (Fairbank and Goldman 2006), nor a transplanted system of Western political thought giving rise to an endogenous organizational dynamic of CCP rule, should be seen as exclusively responsible for the structuring of contemporary Chinese politics.7
Secondly, if the emergence of capitalism is symbiotically connected to the emergence of a state in economic competition with other states, then a corollary hypothesis is that a likely driver of capitalist development in reform-era China is that of its having entered into a set of competitive relationships with other major economies of the world. Exploring this theory in depth is beyond the scope of this book, but suffice it to note that there is a direct connection between the weakness of the nineteenth-century Qing response to foreign incursion and the PRC’s deep drive for internationally competitive developmentalism, whether it be under the aegis of a socialist or capitalist model (Brandt et al. 2012). Contemporary desires for reclamation of national pride and the absolution of its historical humiliation thus have deeply economic roots (Schell and Delury 2013). The contrast with the absence of competitive transnational pressures facing China during the period of its greatest centrality to the world economy, from the fifteenth century to the eighteenth century, is instructive. But to assert that China has become an internationally competitive capitalist economy is not to say that it was to adopt the same kind of capitalism as arose out of Western Europe and had been developing along its own historical trajectory. Even as it was to become capitalist, it was to do this according to a very different institutional logic, and one that is embedded deeply within and which displays strong continuity with its own historical experience of market-based economic activity.
Conclusion
In this chapter I have argued for a need to reconceptualize our study of China’s contemporary political economy on the basis of a deeper appreciation of the historical and cultural context out of which it has developed. I identify some of the problematic consequences of a persistent Eurocentrism in the frameworks of political economy that are dominant in our study of contemporary Chinese capitalism, and point to how a positive reconstruction of China’s historical experience of market development assists us in better understanding the trajectory of its capitalism today. In arguing against Eurocentrism, I am not claiming that ‘there are … no universal social patterns and no universally valid principles by which all societies are held together’ (Hamilton and Zheng 1992, 16). I hope instead to prompt political economists to move one rung up Sartori’s (1970) ladder of abstraction, and begin to piece together conceptual architectures that decontainerize Chinese economic and political behaviour from the state and the market.
The above reconstruction of the historical relationship in China between political authority and financial capital generates a basis for probing how the structures and logics of market-based economic exchange that characterized imperial China, having underpinned the emergence of a large and stable imperial state, would come to underpin capitalist forms of economic exchange in post-1978 and particularly post-1989 China. At its heart is a unified central political structure that monopolized influence upon the state’s capacity to collect and utilize financial capital. The state would constitute the organizational apparatus for interacting and controlling the market, but the real source of power resided not within the abstract constitutional rights of an institutionalized bureaucracy, but in the deep-seated legitimacy and acceptance of a national structure that itself commanded authority over both the state and the market in equal measure.
The contemporary economic role of the CCP – in Zheng’s (2010) words, the ‘organizational emperor’ – thus emerges in a subtly different light. The networked relationships between the state, the market, and the CCP extend from the highest echelons of central Party rule through to the local level at which Party committees are established and embedded within organizations across state, society, and market. The resulting analytic relationships are difficult to unpack owing to their complexity and degree of penetration combined with the difficulty of obtaining documentary evidence of its core decision-making processes. This produces a tendency within Western scholarship to treat Party bodies as somehow irregular and exogenous to the state bureaucracy. Rather, they ‘must be recognized as part of the core institutions of policy-making and supervision’ in China’s present political economy (Heilmann 2005, 4). Yet even as the interpenetration of the CCP with the Chinese state is universally recognized, the socioculturally embedded nature of its foundations and its ‘sinews of governance’ (Yang 2004) has been downplayed as largely epiphenomenal from a Western politico-economic perspective.
Notes
1A caveat: my intention is not to attempt to enter into the rich and voluminous empirical debate on the nature and causes of state-formation in general. My point of departure within this literature is the prominent fiscal resource mobilization thesis, in which the causes of the great divergence are traced to the unique dynamics of interstate conflict that were present in Western Europe but absent in China (Hoffman 2015; Tilly 1992). Rather, it is to leverage recent advances within comparative economic history to enhance our understanding of the current trajectory of Chinese capitalist development, without assuming that the relationship between political authority and financial power should be expected necessarily to resemble, even in broadest form, that which emerged in the Anglo-American conception of liberal capitalism.
2This was a symptom of a commitment to modernity, rather than a reflection of the desirability of capitalist development. For a good example of how Marxist scholarship within the PRC internalized this frame of reference, see Fang (2000 [1985]).
3Exemplifying this approach, Weingast and Wittman (2008, 3) state that ‘in our view, political economy is the methodology of economics applied to the analysis of political behavior and institutions’.
4Although family firms were also core features of early European capitalism, it was their transmutation into capital structures legally independent of other elite social formations that is the important aspect of their distinctly capitalist nature.
5Snooks (1996, 323) describes it such that ‘ultimately, China’s misfortune was a lack of serious competition’. The economic dynamism and innovative capacity of the Song dynasty was related to the fact that it was much smaller than the Ming or Qing empires, and only one state amongst several. Accordingly it was compelled to wage numerous wars, taxation was higher than in later eras, and a greater proportion of it was spent by the state on industry. China during this period therefore resembled Europe more than was the case under Ming or Qing. See Vries (2002, 90).
6Quoting de Tocqueville’s (1978) observations on the French Revolution.
7A similar argument is made by Arif Dirlik (1989) with respect to the dialectical interplay of ideology and organization in the formation of the CCP’s formation in 1921, following the Russian Revolution of 1917 and the May Fourth Movement of 1919.