Capitalism without Democracy: The Private Sector in Contemporary China
Kellee S. Tsai
Over the past three decades, China has undergone a historic transformation. Once illegal, its private business sector now comprises 30 million businesses employing more than 200 million people and accounting for half of China's Gross Domestic Product. Yet despite the optimistic predictions of political observers and global business leaders, the triumph of capitalism has not led to substantial democratic reforms.
In Capitalism without Democracy, Kellee S. Tsai focuses on the activities and aspirations of the private entrepreneurs who are driving China's economic growth. The famous images from 1989 of China's new capitalists supporting the students in Tiananmen Square are, Tsai finds, outdated and misleading. Chinese entrepreneurs are not agitating for democracy. Most are working eighteen-hour days to stay in business, while others are saving for their one child's education or planning to leave the country. Many are Communist Party members. "Remarkably," Tsai writes, "most entrepreneurs feel that the system generally works for them."
Tsai regards the quotidian activities of Chinese entrepreneurs as subtler and possibly more effective than voting, lobbying, and protesting in the streets. Indeed, major reforms in China's formal institutions have enhanced the private sector's legitimacy and security in the absence of mobilization by business owners. In discreet collaboration with local officials, entrepreneurs have created a range of adaptive informal institutions, which in turn, have fundamentally altered China's political and regulatory landscape. Based on years of research, hundreds of field interviews, and a sweeping nationwide survey of private entrepreneurs funded by the National Science Foundation, Capitalism without Democracy explodes the conventional wisdom about the relationship between economic liberalism and political freedom.
nonbanking financial institutions, urban commercial banks are considered joint-stock commercial banks. The former shareholders of UCCs would be allowed a 50% to 60% share of the UCBs, while the local government would hold 30% of the shares, and individuals and state units could invest in the remaining 10% to 20% of the shares. The conversion of UCCs into UCBs was first carried out on a pilot basis in the five cities of Beijing, Shanghai, Shenzhen, Shijiazhuang, and Tianjin, and then it was
findings, I start from the premise that institutional existence and change is fundamentally relational. In other words, institutions derive their causal relevance through reflexive human interactions—or absence thereof. The methodological value of this relational approach is that examining the contextual logic underlying human interactions yields insight into causal processes that would not otherwise be apparent.31 Intrinsic to this approach is the expectation that even though actors behave in a
to Tianjin from 1976 to 1978, the number of private firms increased significantly (Yudkin 1986, 22).11 During the same period, Ezra Vogel (1989, 313–337) observed a wide range of entrepreneurial activity by local officials, merchants trading with Hong Kong, and petty entrepreneurs in Guangdong. In the course of my fieldwork, I found that individual entrepreneurs from Wenzhou—a southern coastal municipality in Zhejiang Province—entered 11. Cited in Young 1995, 14. 52 Capitalism without
entrepreneurial intentions and capabilities, however, to demonstrate the limits of the popular belief that economic development will lead “a capitalist class” (or even some subset thereof ) to push for political democracy. As part of this analytic endeavor, I will elaborate on each of the coping strategies to illustrate how the range of activities in which private entrepreneurs engage has varying levels of direct political impact. Having “direct political impact” refers 2. There are, of course,
explain why entrepreneurs in the Wenzhou model are more focused on the commercial aspects of their businesses, have fewer disputes with local governmental entities, and, compared to business owners in other types of localities, are more likely to be loyally acceptant. At the other extreme, private entrepreneurs in the state-dominated model are nearly twice as likely as those in the Wenzhou model to report having disputes with local government agencies and officials. While 27.9 percent of