a Weberian world of political capitalism rather than a world governed by the conditions of laissez-faire competition. As former socialist and post-communist managers, they know the rules of the game in a system in which economics and politics are interconnected. (Eyal, Szelényi, and Townsley 2000, 172)
With regard to institutional change, on the other hand, the creation of new paths is essential, as explained by Streeck:
Since institutions always require a modicum of good faith on the part of their constituents, the high social legitimacy under capitalism of creative cleverness in relation to social obligations must give rise to a typical conflict between rule makers and rule takers in which the latter permanently test the vigilance of the former. The result is a particular direction in the evolution of capitalist institutions, in the course of which these are continuously redesigned to anticipate and adapt to a systemic bad faith of interest-seeking rule takers…. The typical rule taker that capitalist institutions must reckon with as the normal case is a rule bender: He reads rules entrepreneurially, untiringly looking for ways of twisting them in his favor. (Streeck 2010b, 14–15)
Here, an understanding of path dependency and path shaping underlines the relevance of evolutionary mechanisms of variation and selection, as well as the partial preservation of institutions. From an institutionalist point of view, the evident relevance of the past’s ongoing effects on the present has long since played a role in China research (see McMillan and Naughton 1996). Nevertheless, any purported tendency toward stability in path-dependent processes ought to be called into question (Beyer 2006).
In line with this, a concept for understanding historical institutional change, which may make a valuable contribution to existing China research, is presented below.
GRADUAL INSTITUTIONAL CHANGE
More recent typologies of gradual institutional change (see Mahoney and Thelen 2010; Streeck and Thelen 2005) are helpful in facilitating an understanding of the astonishing changes that have taken place in China since the 1970s under the continued existence of party rule. Recently, these typologies have also been applied to China research (see Tsai 2006, 2007; X. Huang 2011; Young 2011).
Here, in order to factor in the transitional, adaptable, indeed, hard-fought historical character of institutions, rather than take a formalistic approach, institutions are seen as social regimes or Herrschaftsverbände (organizations of rule) à la Max Weber (Streeck and Thelen 2005). Specifically, social power structures and class conflicts are examined—past structures and struggles that led to the formation of institutions and present constellations that change the face of the institutions under the influence of the past (Mahoney and Thelen 2010, 7–8).
To avoid historical determinism, it is important to take into consideration the political processes behind the formation of institutions as well as the significance of social conflicts and compromises in relation to the transition to a new institutional form. Institutions adapt as a result of changes in the political coalitions on which they are founded. As a rule, such changes are incremental and cumulative; sometimes, however, they can be abrupt and intermittent. The addition of new elements can bring about significant change. Generally speaking, institutional change is associated with radical historical upheaval (war, revolutions, and severe crisis in society). There is also evidence, however, of institutional change that is based on continuous incremental change but that brings about transformational results nonetheless. Thus, far-reaching change can come from small endogenous changes, not from a one-off exogenous shock (see also Lawrence and Suddaby 2006).
When exploring social change in a historical context, it is important to move beyond the scope of static institutional reproduction to examine the ramifications for and feedback loops of institutions. Throughout their development, institutions may very well call themselves into question, thus embodying quite the opposite of path-dependent reproduction. While institutional reproduction refers to phenomena where the routine processes and organizational forms within institutions prevail even in the context of historical caesura—in the PRC, on the surface, this would appear to be the Communist Party—consequences for institutions that point to evolutionary change are evident time and again. And it is this very change that the CCP is subject to. Even if the main actors in the institutions pursue very specific, goal-oriented intentions over a long period of time, the character of the actors within the institutions, as well as between the institutions and their environment, can still be subject to change. This results in discrepancies between the original goals of an institution and its function in reality.
The question arises as to how global liberalization trends observed since the 1970s mask even supposedly stable institutional ensembles in nonliberal forms of capitalism. Against this background, Streeck and Thelen (2005) conceptualize several ideal-typical modes or mechanisms of change that attempt to interpret the gradual change undergone by central institutions in developed political economies. These are used in my study as heuristic tools.
The term displacement refers to the dissolution of existing institutions that can be regarded as incoherent and the replacement of those institutions by new ones, for instance, when their regulatory capacity has been undermined. This term also denotes the gradual incorporation of foreign elements into the institutional system of a political economy, for example, adapting Western social security insurance schemes for use in China. As a result, institutions that were once subordinate can become significantly more important. This fact is evident in the intrastate conflicts surrounding the advancement of certain ministries. The same also applies to external influences (for instance, the role played by Western corporate practices in China, as I attempt to demonstrate below).
For Streeck and Thelen, the term institutional layering describes processes that result in the—albeit often informal—formation of institutions, both alongside and in interaction with existing institutions. These processes also trigger change within the existing institutions. Unlike displacement, no entirely new institutions or rules are introduced here. Groups of actors with too little power to eradicate existing institutions will induce change in institutions from the sidelines, so to speak. As described in Chapter 2, in China, this role was adopted by quasiprivate enterprises (township and village enterprises or TVEs) that put pressure on the entire corporate sector to restructure. New components, or additional layers, are added to the existing system of institutions.
The term conversion, in contrast, denotes processes where the actors in an existing institution (the staff in a ministry, for instance) make an adjustment, and, from that point on, this institution serves a new purpose even if the habitual rules officially continue to exist for the time being. “Different from layering and drift, here institutions are not so much amended or allowed to decay as they are redirected to new goals, functions, or purposes” (Streeck and Thelen 2005, 26). Similarly, changes in the constellations of social actors can affect the purpose of an institution fundamentally. Here, the necessary pressure to adapt is created by involving new social groups—in the PRC, this happened, among other things, in the course of integrating entrepreneurs into the party and state apparatus, as I shall endeavor to demonstrate in the present work.
The phenomenon of drift is the erosion or dissolution of institutions, processes that are induced by what are often tentative deviations from generally accepted rules. Applied to the Federal Republic of Germany, we could interpret the relaxing of the collective bargaining system as drift—given that the institutions that set the tone continue to exist but protect fewer and fewer employees. Bearing this in mind, we should probably ask ourselves whether the gradual erosion of the strict system of registration for residents (hukou) in China might also be an example of this mechanism of institutional change.
Finally, the term exhaustion refers to the possibility of exhausting institutions to the point of collapse. In Chapter 2, I will examine whether the collapse of traditional Maoist political
