[MUSIC] Today I want to present a political economy model to guide what we do in this class. This model looks at the distribution of political power within the system and the role of the market versus regulations, administrators, and the planned economy. Now China remains a very political economy. So to understand it, we must include both political and economic aspects in our model. A second point I would add though is that China really is a moving target. If we go back even to the 1978, when the reforms really began, things have changed very quickly and so to teach this kind of course, I really need to adapt my notes and my ideas towards that. For example, in the 1980s the private sector was very small. But then beginning in the middle of 1990s, we really get the emergence of the private sector becoming a key component of the economy, and so you could ask today, really is China now a market economy? Now one element of any political system is how much power is in the hands of the citizens versus how much power is in the hands of the state. Now here in this model, we have a continuum running from the power of the state here at a maximum level, all the way down to where you would have the maximum power for society. Locus of Power really means the location of power. And so, at the top level here, at this end of the continuum, we would see total power in the hands of the state in the government officials, bureaucrats, police administrators, for example. And at the other end, we really would have total control by society. And Totalitarianism, the term that I use here really carries this idea of massive state power. For those of you who may know George Orwell's 1984 in it there's this idea that Big Brother is always watching you. So that's sort of the idea of totalitarianism. On the other hand, if we get society, if the society is more powerful, we could see society as a watchdog. We could see courts limiting government abuse. We would ask whether people conform autonomous organizations, vote for their leaders. And then they can monitor the leaders. And the press also can monitor the behavior of those leaders. Now most societies have some balance between these two. And so they may be sort of in this section over here. Now, and that balance, sort of figuring where that balance is is an important part of comparative politics. Now in most political systems, there's also a spatial component, a central local component where the central government and the local governments may negotiate over which level of government has which powers. Which level of government controls how much of the GDP? Who gets the taxes, and what kind of taxes? Who gets the taxes from the sales of natural resources? Which level of government controls education? And you may know in your own countries, if you think about this that there are some powers that are clearly in the hands of the central government, and there are some powers that are clearly in the hands of the local government. Now in China before 1994, the local government controlled most of the funds more of the funds, much more of the funds than the central government. In fact, we know that maybe around, by the end of the 1980s the central government only controlled about 8% of the total investment in China which is a very, very small percentage. Now, we move to the second dimension. Right, and the second dimension is how resources are allocated in the economy. And are they allocated by the plan or are they allocated by a market mechanism? Now, we do assume, that the more the market allocates the resources or the goods in the system, the power of the state will decline. So there is a sense if you move along here to a certain extent, the power of the state will also decline. So the question becomes, do officials do their preferences or do consumer's preferences, determine the quantity, the quality, the price of goods, the flow of capital, the movement of labor, all of these questions. And again we get a continuum running from a fully planned economy to a free market economy with no regulations, and that would be over here. And that, in fact, is a highly dangerous situation where there would be no constraints, no limitation, no oversight on the qualities of food, alcohol, and the goods that are being produced. Which, there's also would be a question of which, does the plan or the market mechanism control the flow of resources, people, goods across national boundaries. So what we get, and what I want you to think about, is really a two by two table with four outcomes based on the intersection of these two aspects, the Locus of Power and the allocation of goods. Now in the Mao era we had a very powerful state, which could mobilize society, was rarely affected by society's demands, very little voluntary political participation. People just didn't get involved in politics, unless they were forced into politics, expect maybe to join the Communist Party, or to get involved in political campaigns that the party itself was organizing. And the economy was basically planned by the bureaucrats. So what we get then, in the Reform period. Right? Beginning in the late 1970s is a movement along this continuum. Right? We get villagers who are given the right to decide what crops they want to grow. The state's no longer telling them, you have to grow wheat or you have to grow corn or whatever, they have a lot more freedom of choice, so again there and it's based on their own, what they want to consume and prices began to pay a bigger role in the 1980s. And by 1992, China declared the establishment of a socialist market economy. So though you may be quite surprised today you would find that almost 95% of the goods in China, manufactured goods in China are allocated at market prices which are determined by supply and demand. Now there are some commodities such as oil for cars, electricity, water, capital. You can think of some of them yourself. But these are not determined by the market. But, there's a kind of market, that kind of black market nature to it so in some ways, they even can, people can still get around the price controls that the state may want to impose. But what's really important, one really important point is that what doesn't happen is the society does not move or China does not move from the totalitarian model up here to the lower level down here. As you get the movement along the market economy, greater in role of the market economy, society does not necessarily get empowered, right? And so you don't move down into what I call sort of civil society or a democratization process. Instead China moves across to the upper right-hand quadrant. Here what I call or Nick Kristof a journalist for the New York Times used to call Market Leninism. So here, in this quadrant here the party and the state are still powerful. They still have a great deal of authority in the final allocation of goods in the system. And China in some ways, has very special conditions, right? Even though you get the growth of the market, and as I said, 95% of the goods now are allocated by the market and there has been a significant growth in the private sector, you still get a large amount of interference by central and local governments that has really stopped the strengthening of society. You don't get NGOs, you don't get a lot of popular organizations. You don't get powerful consumer associations and non-governmental organizations. Okay, now under this concept of Market Leninism, the CCP keeps China under its control and can hold China up into this upper right-hand quadrant. Administrators can manipulate the market, private businesses and governments can collude, they can work together. The state-owned enterprises are run by members of the Central Committee, one of the top party organizations. And they want promotions to government or party posts so they'll listen to the officials rather than necessarily just listen to consumers. And what we then have is in a market economy which is highly influenced by the Chinese Communist Party. Now as we move from totalitarianism to Market Leninism, it's really important to first set the base as to what totalitarian society was all about. And then we can see the extent to which China has moved away from that model, right? So five characteristics of a totalitarian system. First would be what we call a Totalist ideology. A total ideology that explains the past, the present and the future, very much like Marxism-Leninism does that. Second is a single party usually led by one man. So for example, the Soviet Union was led by Stalin, the Nazi party was led by Hitler, right and there was only this one party. Third, a centrally planned economy, as I showed you in that model, all right. Fourth is a terroristic police where the terror of the police could just interfere as if whenever it wanted, just break into people's homes and take them away at will. And the fifth is a communications monopoly that the state really controlled communications within people, among people, and across national boundaries. Now, the real question is as we think about the shifts within China, what components remain today? Right and you can think about that. Now, first of all, ideology. That is a Totalist ideology, while Marxism-Leninism is still the official ideology, but it's really not a motivating force for the Communist Party. And it's certainly not a motivating force for society, and it's not some prediction of where China is going to go to some Communist utopia. Which, probably back in the Mao era was much stronger. Third, a second is a single party, right? But we've seen it's still a single party system. But it's not necessarily led by one man. Today it seems to be again led by one man. But over time, after in the 90s and the 2000s, there was much more of a collective leadership. Third component, the planned economy, essentially planned economy, now what we find is there are five year plans. I think we're into the 13th, or getting ready for the 14th plan. But it's really indicative of what we call an indicative plan, which says if you invest in this sector, you're more likely to get loans. Rather than the state coming down, and sending directives straight to the enterprises, and telling them what to do. In terms of a terroristic police, if you are a citizen of China, and you don't get involved in challenging the state, you're okay. The police won't bother you, they won't arrest you. Under Maoism, or Totalitarianism, the ordinary citizen was really a target. And fifth, the communications monopoly. Now this is where I would say the real war is going on. Here we still, we talk about the great firewall. Here, the Communist Party is still fighting very, very hard to keep control over the flow of information among people within the society and across the borders of China.
