Capitalism without democracy: the private sector in contemporary China

Capitalism without Democracy: The Private Sector in Contemporary China, by Kellee S. Tsai. Ithaca: Cornell University Press, 2007. xviii + 268 pp. US55. 00/ £27. 95 (hardcover), US21. 00/£l 0. 50 (paperback). The rapid growth of China's private sector and the subsequent emergence of private entrepreneurs as an important social and economic force pose two intriguing puzzles: how the Chinese private sector could achieve sustained high growth rates despite unfriendly - or even discriminatory - government policies, and why Chinese private entrepreneurs have not become a force for democratic change. Kellee Tsai' s excellent new book provides an original and persuasive explanation. Tsai's central theoretical argument rests on the concept of informal institutions. Despite unfriendly official policies toward the private sector, political and economic in China are actually quite flexible. Such flexibility creates the space for the emergence of informal institutions. In the case of the growth of the private sector, according to Tsai, private entrepreneurs constrained by discriminatory official policies pursue various coping strategies and devise novel means of survival. In turn, through repetition and diffusion (p. 15), their actions influence local - and ultimately national official behavior and policy. Eventually, adaptive behavior by private entrepreneurs and the ruling elites creates its own political reality and institutional arrangements. Tsai traces the evolution of the Chinese government's policy toward the private sector in the last three decades and demonstrates convincingly the cumulative effects of the interaction between private entrepreneurs and the Chinese state through a process of mutual adaptation. The effectiveness of adaptive informal also explains the puzzle of the political passivity, if not co-optation, of Chinese private entrepreneurs. Since organizing collective action and confronting a repressive regime carry huge costs and risks, Chinese private entrepreneurs understandably prefer other alternatives. Here the advantages of adaptive informal become self-evident. For private entrepreneurs, adopting various coping strategies (mostly relational) under China's relatively flexible formal institutional arrangements can solve most of their practical problems, thus obviating the need for political action. Furthermore, Tsai argues, Chinese private entrepreneurs are, in fact, a very diverse group with regard to social background, political status, business success, identities and values. Such diversity inhibits collective action; it also means that they are not a social class and should not be treated, analytically, as such. The book is divided into two parts. In Chapters 1 and 2, Tsai develops her theoretical framework of informal institutions by focusing mostly on the puzzles of China's undemocratic capitalists and apparent authoritarian durability. By assigning a decisive role to capitalists in democratic transition (and implicitly attributing the lack thereof in China to the political passivity of its private entrepreneurs), Tsai may have overlooked other key variables in democratic transitions, especially economic performance, division within the elites and the mobilization of the counter-elites. Regime stability in China since 1989 coincides with several unanticipated developments: relative elite cohesion following the purge of the liberals from the top ranks of the Communist Party, sustained high economic growth, and the co-optation of the intelligentsia (and successful private entrepreneurs). The political passivity of private entrepreneurs is only one piece of the puzzle. The second part of the book - from Chapters 3 to 6 - provides a first-rate analysis of China's private sector. Chapter 3 examines the tortuous history of the development of the private sector and the uneasy relationship between private entrepreneurs and the state. …