Published on August 31, 2007
Globalization and the post-socialist transition: A Comparison of Russia and China : Globalization and the post-socialist transition: A Comparison of Russia and China Peter Rutland The Russian and Chinese cases compared: The Russian and Chinese cases compared For most of the 1990s, Russia and China seemed to be headed down very different paths. Russia was democratizing but failing economically. China was not democratizing but was succeeding economically. But now they have both converged on a 'regulated market' consensus: different paths, but a common goal. The impact of globalization: The impact of globalization Does globalization promote convergence on a single model? Is the world 'flat' ? No: Market institutions are adapted to the country-specific environment. Countries occupy different niches in the international system. Globalization myths: Globalization myths It is worth dispelling a couple of myths: Globalization did not cause the collapse of state socialism. The two processes unfolded together. Globalization did not prevent states from making choices about development strategy. The different paths of Russia and China show that leadership choices mattered. The reform path in Russia and China: The reform path in Russia and China The general picture is that of a sharp contrast: 'you cannot cross a chasm in two jumps' (Russia) vs. 'feeling the stones as you cross the river' (China) Contrasting reform paths: Contrasting reform paths Appearance vs. reality: Appearance vs. reality But in reality Russia was less radical than it might appear. Despite its privatization program the ownership structure is just as opaque and hybrid as that in China. Privatization led to the emergence of private monopolies: by 2001 the 23 largest firms accounted for 30% of GDP, and these firms were controlled by 37 individuals. China was more radical than Russia in some key aspects, such as farm reform, and openness to foreign investment. ($207 bn vs $17 bn) How to explain these different trajectories ?: How to explain these different trajectories ? There were some similarities in their initial conditions: Both Russia and China are large autonomous countries with strong state traditions that in the 20th century had rejected the global capitalist system. Their size and independence gives them the capacity to be rule-makers rather than rule-takers. But both saw themselves as backward and needing to catch up with the developed West. 1) Initial conditions: 1) Initial conditions Differences i) Russia was industrialized, China was not. ii) Russia has natural resources, China does not. ii) The Soviet Union was ethnically diverse – clearly this was a major factor explaining the state breakdown in 1991. 2) Leadership choices: 2) Leadership choices The key issue was not pace or sequencing of reform. It was the need to maintain political power and state capacity. This means i) preserving institutions of political power. ii) maintaining public support. iii) having in place a mechanism for one leader to be replaced by another. 3) The learning capacity of the respective elites. : 3) The learning capacity of the respective elites. Chinese leaders clearly studied and learned from China’s own political history, and from the collapse of the Soviet Union. There is no evidence that Soviet leaders studied or learned from the experience of others. Gorbachev and Yeltsin were influenced by Western ideas, but did not study relevant experience. Political convergence: Political convergence In both countries the democratic opening peaked in the late 1980s. The degree of political pluralism is quite low, politics is seen as a 'winner take all' game. Civil society is active but subject to state control. Corruption is the #1 political problem in both countries. In both countries the tax-gathering capacity of the central state shrank and then recovered in the course of the reforms. Winners and losers: Winners and losers In China, unlike Russia there were more winners than losers. China was 'growing out of the plan,' while Russia 'falling' out of the plan. In both countries social and regional inequality increased. In China the main political challenge from inequality came at the bottom – pool of migrant labor; over-taxed peasants. In Russia it came from the top – the rise of the oligarchs. According to Forbes there are 33 dollar billionaires in Russia, but 'only' eight in China. The main features of the “Regulated Market” model: The main features of the 'Regulated Market' model The leaders are committed to preserving the integrity of state sovereignty and national identity. The leaders are focused on economic growth as a major goal. The market mechanism is the most effective tool for economic growth. The market has its limits, which must be policed by the state. Liberal democracy is inappropriate or unnecessary, and open public contestation between rival members of the ruling political elite is to be kept to a minimum. The new middle class that the economic boom has produced serves as a social basis for the regulated market regimes. Future prospects: Future prospects 'The market’s irresistible force is meeting the party’s immovable object. At some point, one of them must surely give.' (Martin Wolf) On the contrary, the experience of the past 20 years shows that prevailing Western assumptions about the combination of political and economic institutions have proved to be incorrect. There is no reason to assume that the future will not be a continuation of the present.