![Sample our Economics, Finance,Business & Industry journals, sign in here to start your access, latest two full volumes FREE to you for 14 days]({"type":"image" , "src" : "/sda/5931/TOC-Subject-Sample-2021-Economics-Finance-Business-Industry.jpg"})
Abstract
China is an intellectually overwhelming paradox within development thinking. On the one hand, it is regarded as an economic powerhouse pushing forward decades of sustained growth, which even during major global crises, such as the Corona-epidemic and the 2008 Financial Crisis, bounced back with significant resilience. On the other hand, it appears burdened with all of the ‘wrong’ institutions: informal, insecure, and autocratic. This collection of papers posits that the paradox is no contradiction when understood through an alternative, theoretical lens: the function of institutions precedes form when trying to understand institutional performance. Thus, whether institutions are formal or informal, public or private, democratic or autocratic, is of secondary importance to the manner in which they function over time and space. To examine this hypothesis, known as the ‘credibility thesis’, the collection examines China’s institutions that govern: 1) capital; 2) technology; 3) land, and; 4) labor; in effect, state-owned banks, collective firms, corporate law and securities, patents and intellectual property rights, environmental bans, and the civil registration or hukou system. In so doing, it not only falsifies the widely prevalent assumption that institutional form determines performance, but concurrently, validates the applicability of the credibility thesis over widely varying sectors and assets.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 Micelli et al., “The Dynamic Effects of Land,” 370–389.
2 Alchian and Demsetz, “The Property Rights Paradigm,” 16–27.
3 Papaioannou et al., “Democratisation and Growth,” 1520–1551.
4 In the nineteenth and early twentieth centuries, Chinese foreign relations with most major world powers evolved into a sort of semi-colonialism as Britain, France, Germany, Russia, Japan, and (to a lesser extent) the US coerced trade and territorial concessions in a series of so-called “unequal treaties”. Concessions in China consisted of large tracts of granted areas, governed and occupied by foreign powers.
5 Although China still lags behind the high-income countries; according to the lending classifications of the World Bank (2017), China was labelled a “low income country” in 1987, and was considered an “upper middle income” in 2016.
6 Chang, Institutional Change and Economic Development; Aron, “Growth and Institutions,” 99–135; Dixon, “Function Before Form,” 579–600; Agrawal et al., “Governing Mitigation in Agriculture,” 270–326.
7 Ho, “The Credibility Thesis,” 13–27; Ho, Unmaking China’s Development.
8 Koroso et al., “Land Institutions’ Credibility,” 553–564; Clarke, “Form and Function of China’s,” 902–912.
9 Oranje et al., “Rapid Urbanisation to Non-Metropolitan,” 102487; McClymont and Sheppard, “Credibility Without Legitimacy?” 102520; Zhang, “The Credibility of Slums,” 876–890.
10 Fan et al., “Institutional Credibility Measurement,” 212–225; Zhao and Rokpelnis, “Local Perceptions of Grassland Degradation,” 1206–1223.
11 Fold et al., “Grounding Institutions Through Informal Practice,” 922–931.
12 Gomes and Hermans, “Institutional Function and Urbanization in Bangladesh,” 932–941; Mollinga “Secure Rights and Non-credibility,” 1310–1331.
13 Nor-Hisham and Ho, “A Conditional Trinity as ‘No-Go’,” 1177–1205.
14 Miyamura, “Rethinking Labour Market Institutions,” 1262–1284; Marois, Thomas and Güngen, “Credibility and Class in the Evolution,” 1285–1309.
15 Acemoglu et al., “Democracy Does Cause Growth,” 1–32.
16 Short, “Ownership, Control, Financial Structure,” 203–249; ShleifercVishny, “A Survey of Corporate Governance,” 737–783.
17 World Bank, Finance for Growth.
18 World Bank, Global Financial Development Report 2013.
19 Lybecker, “The Economic Case for Strong Protection”.
20 Branstetter et al., “Do Stronger Intellectual Property Rights,” 321–349; Chang, “Intellectual Property Rights and Economic,” 287–309; Lee and Edwin, “Intellectual Property Protection,” 181–186.
21 Chin and Grossman, “Intellectual Property Rights,” 1–33.
22 Falvey et al., “The Role of Intellectual Property”.
23 Micelli et al., “The Dynamic Effects of Land,” 370–389.
24 For instance, the percentage of state-owned land is close to 90 percent in Canada, and 28 percent in the United States (Neimanis, 2011; Johnson and Rebala 2016).
25 Ellickson, “The Costs of Complex Land Titles”.
26 Coase, “The Problem of Social Cost,” 1–44; Alchian and Demsetz, “The Property Rights Paradigm,” 16–27.
27 DeLasaux et al., “Forest and Rangeland Owners Value,” 184–191; Campos et al., “Contingent Valuation of Woodland-Owner,” 240–252; Smith, “Resolving the Tragedy,” 439–468; From a scholarly point of view, housing and other built structures are often studied in connection to land. For this reason, they have here been categorized under land although, arguably, they can also be regarded as a form of capital.
28 Note that such flexible logic is not only apparent in the case of labour market institutions. Malesky and London (2014: 406) also observed it, for instance, in the thinking on the role of authoritarianism in China’s development. In their words: “[F]ascinating is how often the same attributes employed to describe success are used to predict the eminent collapse of the system (e.g. relationship lending becomes crony capitalism)”.
29 OECD. The OECD Jobs Study.
30 As the report states: “Employment protection legislation is designed to discourage dismissals by raising the cost to employers of releasing workers. But it can also make employers more reluctant to hire new workers. Countries, mainly in Europe, which have particularly stringent legislation generally have a high rate of long-term unemployment…” (OECD, 1994: 34).
31 Heckman and Pages, “The Cost of Job Security Regulation,” 7773.
32 In a similar vein, Mussa (2002: 9), former chief economist of the IMF noted: “If Argentina had a more flexible economic system, especially in its labor markets, its economy would have been more able to adapt to the rigors of the convertibility plan, unemployment would have been lower, growth would have been stronger, fiscal deficits would have been smaller, and interest rates would have been lower”.
33 Hale, “Formal Constitutions in Informal Politics,” 581–617.
34 Glaeser et al., “Do Institutions Cause Growth?” 271–303; Barro, “Democracy and Growth,” 1–27; Helliwell, “Empirical Linkages,” 225–248.
35 Marois and Güngen, “Credibility and Class,” 1285–1309; Fries and Taci, “Cost Efficiency of Banks in Transition,” 55–81.
36 Kim et al., “Appropriate Intellectual Property Protection” 358–375; Furukawa, “The Protection of Intellectual Property,” 3644–3670; Schneider, “International Trade, Economic Growth,” 529–547.
37 Chen, “Institutional Credibility and Informal Institutions,” 102519; Ho and Spoor, “Whose Land?” 580–587; Kim, “Appropriate Intellectual Property Protection,” 358–375.
38 Miyamura, “Rethinking Labour Market Institutions,” 1262–1284; Santos, “Labor Flexibility, Legal Reform,” 43–106; Besley and Burgess, “Can Labor Regulation Hinder,” 91–134.
39 The problem of time in pinning down specific features of Chinese development (regardless whether these relate to state-led growth, gradualism or experimentalism) has also been observed by Naughton (2008: 126): “[A]lmost every characteristic of the [Chinese] transition process through 1992 has been shown inapplicable after 1993”.
40 Portes and Sassen-Koob, “Making It Underground,” 30–61.
41 Freeman, “Labour Market Institutions Without Blinders,” 129–145.
42 Santos, “Labor Flexibility, Legal Reform,” 43–106.
43 Chang, Institutional Change and Economic Development.
44 Aron, “Growth and Institutions,” 99–135.
45 Dixon, “Function Before Form,” 579–600.
46 Agrawal et al., “Governing Mitigation in Agriculture”.
47 Ho, “The Credibility Thesis”.
48 The notion of credibility has been more specifically defined as “the collective expression of the functionality of institutions, or, more specifically, the reflection of actors’ cumulative perceptions of endogenously emerged institutions as a common arrangement” (Ho, 2016: 1125).
49 Veblen, The Theory of the Leisure Class; Veblen, The Instinct of Workmanship. Commons, Institutional Economics; Commons, Legal Foundations of Capitalism; Clark, “Recent Developments in Economics,” 213–306.
50 Ostrom, Governing the Commons; Bromley, Making the Commons Work. Oakerson, “Analyzing the Commons,” 41–59; Hodgson, The Evolution of Institutional Economics.
51 Ho, “An Endogenous Theory of Property Rights,” 1121–1144.
52 Hodgson, “What Are Institutions?” 1–25.
53 Giddens, The Constitution of Society.
54 North, “Institutions,” 97–112.
55 A succinct definition can be of value for different reasons: 1) it keeps analysis clear, as it forces the analyst to specify what rules the institution is composed of; 2) it traverses disciplinary boundaries, as any social discipline – whether that is political science, anthropology, economics, sociology, law, or geography – can study rules; 3) it allows for flexibility as widely varying institutions such as the Muslim Brotherhood, Thai monarchy, or village forest rights may be examined as a “set of rules”.
56 In other contexts, one does not necessarily need to abide by the traffic lights, can walk on both sides of the pavement, is not obliged to look prior to crossing provided that this is done slowly, and can walk on the motorway (even on both sides). Markedly, these rules are known and respected by other traffic users, who adjust their behaviour in anticipation. Moreover, institutions and property rights are concepts that are simultaneously and interchangeably used, adding to conceptual plethora. From this collection’s perspective, property rights – regardless whether one looks at formal ownership or customary rights – are a set of rules, and can thus be regarded as an institution, albeit an institution is not automatically a property right.
57 Freeman and Carchedi, Marx and Non-Equilibrium Economics; Fisher, Disequilibrium Foundations of Equilibrium Economics; Myrdal, Economic Theory and Underdeveloped Regions.
58 In effect, function was used to account for the balance or equilibrium of institutions (Parsons, 1951: 324). Or, as Johnson (1993: 117) noted it was used in explaining “the stability and ongoingness of systems of interaction”.
59 To better account for change, Merton proposed a distinction between function and non-function (dysfunction) and intended (manifest) and unintended (latent) functions (Merton, 1949: 61). However, what he (and Parsons) did not consider is that the notion that “social change might not derive from an anomalous, socially disruptive dysfunction, whether intentionally or unintentionally, but from the very nature of society and economy itself. Thus, change, conflict, and instability are the fundamental forces of human interaction rather than being an aberration” (Ho, 2017: 150).
60 Pei, “Township-Village Enterprises”.
61 Pei, “Collective Land Ownership”; Pei, “Township-Village Enterprises”; Weitzman and Xu, “Chinese Township-Village Enterprises,” 121–145.
62 Ho, Unmaking China’s Development.
63 Zhang, “The Credibility of Slums,” 876–890; Arvanitidis and Papagiannitsis, “Urban Open Spaces as a Commons,” 102480; Zeković et al., “The Credibility of Illegal,” 102548; Liu and Zhang, “Cities Without Slums?” 102652.
64 Streets et al. “Biomass Burning in Asia,” 10–20.
65 Chan and Zhang, “The Hukou System and Rural,” 18–55; Alexander and Chan, “Does China Have an Apartheid?” 609–629.
66 Miyamura, “Rethinking Labour Market Institutions,” 1262–1284.
67 Zitelman, “State Capitalism?”
68 Fan et al., “Institutional Credibility Measurement,” 213.
69 Marois and Güngen, “Credibility and Class,” 1285–1309.
70 Miyamura, “Rethinking Labour Market Institutions,” 1262–1284.
71 Ho, “An Endogenous Theory of,” 1121–1144.
72 Hou and Hou, “Evolution of Economic Institutions,” 363–379.
73 Twelve years earlier, in North, “Economic performance through time” exactly the same hypothesis was posed, and in the same journal.
74 Acemoglu and Robinson, “De Facto Political Power,” 326.
75 Fawcett, “The Iraq War,” 325–343.
76 UNDP, The Millennium Development Goals.
77 Malesky and London (2014: 406) ascertained that, amongst other factors, the “maintenance of an authoritarian regime during dramatic economic change” as a factor of successful development might be open for debate in the Chinese and Vietnamese cases. In their words: “When we push deeper into the underpinnings of any of these components, disagreements even among knowledgeable experts quickly emerge”.
78 Lipsey and Kelvin, “The General Theory,” 11–32.
79 Becker and Richards, Writing for Social Scientists.
80 Rodrik, “Second-Best Institutions,” 1–12.
81 Rushdie, “The Empire Writes Back,” 8.
Additional information
Notes on contributors
Peter Ho
Peter Ho is Professor at Zhejiang University and the founding editor of the Elements on Global Development Studies published by Cambridge University Press (see: www.recoland.eu). He published numerous articles and books, including with Oxford University Press, Cambridge University Press, and Wiley-Blackwell. Ho achieved the ERC Consolidator Grant, EAEPE Kapp Prize, China Rural Development Award, and title of National Expert of China. He is chair of ICARDC (www.icardc.org) and board member of several SSCI-rated journals. He reviews for the Cheung Kong scholarships, National Global Talents Program, US-NSF, and ESRC.