The Political Logic of Economic Reform in China (review)

232 China Review International: Vol. 2, No. 1, Spring 1995 Susan L. Shirk. ThePolitical Logic ofEconomic Reform in China. Berkeley: University ofCalifornia Press, 1993. 399 pp. Hardcover $48.00. Paperback $15.00. China booms, Russia busts. The stark contrast has been noted before. More than a decade ofreform in China brought busding markets, rapid growdi, and increased standards ofliving for many Chinese people, while reform efforts in the USSR saw only political collapse, economic depression, and increasing mortality rates. How have Chinese leaders been able to introduce market reforms through communist political institutions when attempts elsewhere have failed? What did Deng Xiaoping do right? Why didn't Gorbachev do die same? What determines the form and content ofreform policies and the extent to which they are successfully implemented in communist systems? In attempting to answer these questions, Susan Shirk undertakes an institutional analysis of China's economic reform policies. She maintains that policy makers in communist systems, like policy makers everywhere, are pursuing power within the context of given institutional incentives. Shirk sets forth the fundamental elements of China's political system in terms that are clear and general: authority relations , leadership incentives, bargaining arena, enfranchised participants, and decision rules. She argues that more than ideology, policy preference, or personality, it is the formal and informal institutions of China's political system that help to explain the pace, sequencing, and content ofChina's economic reform policies. The institutional characteristics of Chinese politics thus provide the framework for an analysis of selected economic reform policies: fiscal decentralization, industrial reform takeoff, and enterprise financial reform. The careful explication of the unfolding reforms reveals economic policies that follow political rather than economic logic. Economic reform in China has proceeded but has been gradual, ad hoc, particularistic, and often inefficient because Deng Xiaoping needed and was able to create vested interests in reform and support for himself among strategic members of the political elite (the "selectorate"). The political institutions established by die CCP, in particular the system of"reciprocal accountability" and "delegation by consensus," have prevented the adoption or at least the successful implementation ofa more universalistic and comprehensive reform program. They proved flexible enough, however, to allow for meaningful change in the economic structure without reform ofthe basic political institutions. Shirk concludes that die Chinese Communist Party has been able to bring about significant, ifseriously© 1995 by University flawed, economic reform because the institutions of the Chinese communist sysofHawai 'i Presstern are highly personalistic and flexible and because die party continued to have die authority to appoint and dismiss its agents in die bureaucracy. The relative Reviews 233 flexibility and audiority ofthe Chinese communist system explains why Deng was successful and suggests why Gorbachev could not have done what Deng did. This work is an admirable effort to apply institutional economics to the study of Chinese politics. The result is an excellent example ofa path-dependent approach to the study ofa communist system in transformation. Reform policies undertaken in the PRC since the late 1970s are placed widiin die framework of the historical and institutional constraints (and opportunities) inherited from the past. Political leaders make choices but only within the given political institutional space. It is not that institutions do not change, but rather that even in communist systems they have a certain stickiness that constrains radical policy shifts. A central element in Shirk's analysis is the notion of an elite "selectorate" made up of several hundred officials, including members ofthe central committee , revolutionary elders, and top military leaders. High party leaders are chosen by and accountable to die selectorate, which in turn is appointed by die top CCP leaders. This creates a relationship of "reciprocal accountability" similar to what has been called the "circular flow ofpower" in the study of Soviet politics. Shirk claims a crucial role for the Central Committee (CC) of the CCP in this flow of power, although she hedges a bit on this issue. "It appears that die Central Committee is in the process ofbecoming the key group in the selectorate in China" (p. 81). During periods ofleadership succession it "may become the bargaining arena" (p. 91). And, finally, "it is the key institution in the selectorate...