The Great Transformation: The Great Transformation: Double Movement in ChinaDouble Movement in China
Shaoguang WangShaoguang WangDepartment of Government & Public AdministrationDepartment of Government & Public Administration
The Chinese University of Hong KongThe Chinese University of Hong Kong
School of Public Policy & ManagementSchool of Public Policy & ManagementTsinghua UniversityTsinghua University
Karl Polanyi: Double MovementKarl Polanyi: Double Movement
““The expansion of market forces would The expansion of market forces would sooner or later be met by a sooner or later be met by a countermovement aiming at conservation countermovement aiming at conservation of man and nature as well as productive of man and nature as well as productive organization, and using protective organization, and using protective legislation and other instruments of legislation and other instruments of intervention as its methods” intervention as its methods”
Karl Polanyi, Karl Polanyi, The Great TransformationThe Great Transformation, , pp. 130-134pp. 130-134
Main ArgumentMain Argument
China has undergone a “great China has undergone a “great transformation” which consists of a “double transformation” which consists of a “double movement” since 1978movement” since 1978 The politically induced transformation to the The politically induced transformation to the
market systemmarket system The countermovement and self-protection from The countermovement and self-protection from
societysociety
OutlineOutline
1.1. Double movement: Three periodsDouble movement: Three periods
2.2. The emergence of social policiesThe emergence of social policies
3.3. Two key explanatory factorsTwo key explanatory factors
Double Movement in ChinaDouble Movement in China
Three Periods Three Periods
1949-1984: Moral economy, no need for 1949-1984: Moral economy, no need for direct state provision of social policiesdirect state provision of social policies
1985-1998: Efficiency (growth) as priority, 1985-1998: Efficiency (growth) as priority, no attention to social policiesno attention to social policies
1999-present: The emergence of social 1999-present: The emergence of social policiespolicies
Moral Economy, 1949-1984Moral Economy, 1949-1984 The planned economy consciously subordinated the economy to a set The planned economy consciously subordinated the economy to a set
of social values.of social values. The securing of human livelihood was submerged in and determined by a The securing of human livelihood was submerged in and determined by a
nexus of non-economic institutions (e.g. work-units, people’s communes) nexus of non-economic institutions (e.g. work-units, people’s communes) and institutionalized norms (e.g. equality and solidarity).and institutionalized norms (e.g. equality and solidarity).
Distribution (not redistribution) was the main forms of resource Distribution (not redistribution) was the main forms of resource allocation and social integrationallocation and social integration
Such a distributive system would not be able to proceed without an Such a distributive system would not be able to proceed without an established center (the state) from which distribution took placeestablished center (the state) from which distribution took place
The provisioning of humans—the securing of their livelihood—was The provisioning of humans—the securing of their livelihood—was located in, or integrated through, urban work-units and rural located in, or integrated through, urban work-units and rural communes, which were as much social as economic institutionscommunes, which were as much social as economic institutions
The logic of the economy was embedded in society through two The logic of the economy was embedded in society through two mechanismsmechanisms
Soft-budget constraintSoft-budget constraint Iron rice bowlIron rice bowl
The market played no vital role in human social lifeThe market played no vital role in human social life
Distribution under the Moral (Planned) EconomyDistribution under the Moral (Planned) Economy
Central Budget
Local Budget
Unit Unit Unit
Soft budget constraints
Soft budget constraints
Iron rice bowl
Paradigm Shift in Ideology: 1984-1999Paradigm Shift in Ideology: 1984-1999 Rather than equity and security, Chinese policy-Rather than equity and security, Chinese policy-
makers placed their top priority on rapid aggregate makers placed their top priority on rapid aggregate economic growth. economic growth.
The obsession with fastest possible GDP growth The obsession with fastest possible GDP growth rates made them ready to tolerate a certain degree rates made them ready to tolerate a certain degree of inequity and to sacrifice some basic human of inequity and to sacrifice some basic human needs, including health care. needs, including health care.
It was their belief that, as long as the “pie” It was their belief that, as long as the “pie” continued to grow bigger, all other problems continued to grow bigger, all other problems would eventually be solved.would eventually be solved.
How Did the Economy Become Disembedded?How Did the Economy Become Disembedded?
The transition from the embedded economy to market society marked The transition from the embedded economy to market society marked a radical watershed in China’s historya radical watershed in China’s history
The development of The development of marketsmarkets: 1979-1983: 1979-1983 Markets began to emerge but they were marginal, often heavily Markets began to emerge but they were marginal, often heavily
administered.administered. There was still the dominance of non-market institutions and relationsThere was still the dominance of non-market institutions and relations
The development of The development of market systemmarket system: 1984-1992: 1984-1992 A system of interrelated markets (commodity, labor, financial, etc.)A system of interrelated markets (commodity, labor, financial, etc.) Competition and the law of supply and demand did exist, but was not Competition and the law of supply and demand did exist, but was not
universal or omnipotentuniversal or omnipotent The development of The development of market societymarket society: 1993-1999: 1993-1999
No end other than economic ones were pursuedNo end other than economic ones were pursued The market threatened to become the dominant mechanism integrating the The market threatened to become the dominant mechanism integrating the
entirety of society.entirety of society. The magnitude of the market’s reach can be measured by the extent of The magnitude of the market’s reach can be measured by the extent of
commodification, by the range of goods subject to commercial traffic commodification, by the range of goods subject to commercial traffic (healthcare, education, environment, etc.).(healthcare, education, environment, etc.).
State Retreat from HealthcareState Retreat from HealthcareStructure of Total Health Expenditure
0
10
20
30
40
50
60
70
80
90
100
Out-of-Pocket
Social
Government
State Retreat from EducationState Retreat from EducationBudgetary Allocationas % of Total Expenditure on Education
50%
52%
54%
56%
58%
60%
62%
64%
66%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
The Breakup of the Moral (Planned) EconomyThe Breakup of the Moral (Planned) Economy
Central Budget
Local Budget
Unit Unit Unit
Hard budget constraints
Contract
Eating in separate kitchens
Disembedded EconomyDisembedded Economy In a market society, the livelihood of human being is market dependentIn a market society, the livelihood of human being is market dependent As markets became universal and hegemonic, the welfare of individuals As markets became universal and hegemonic, the welfare of individuals
came to depend entirely on the cash nexuscame to depend entirely on the cash nexus Consequently, workers and farmers were forced to get by with reduced Consequently, workers and farmers were forced to get by with reduced
entitlement to assistance and securityentitlement to assistance and security Growing inequalitiesGrowing inequalities
IncomeIncome WealthWealth HealthcareHealthcare EducationEducation
Rural-urbanRural-urban
RegionalRegional
Within ruralWithin rural
Within urbanWithin urban
Consequences of the Disembedded Economy, Consequences of the Disembedded Economy, 1985-19981985-1998
Gini Indices of Income Inequality
0
5
10
15
20
25
30
35
40
45
50
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Rural Urban
National w/o COL adjustment National with COL adjustment
Selected Studies of InequalitiesSelected Studies of Inequalities
The Emergence of Social The Emergence of Social Policies, 1999-PresentPolicies, 1999-Present
The Reembedding of the Market since 1999The Reembedding of the Market since 1999
Market liberalism made demands on Market liberalism made demands on ordinary people that were simply not ordinary people that were simply not sustainablesustainable
As such dissatisfactions intensified, social As such dissatisfactions intensified, social order became more problematic and the order became more problematic and the danger increased that political leaders danger increased that political leaders sought to divert discontent by somehow sought to divert discontent by somehow reembedding the economy reembedding the economy
A countermovementA countermovement
Decommodification & Decommodification & Redistribution Redistribution
““De-commodification occurs when a service De-commodification occurs when a service is rendered as a matter of right, and when a is rendered as a matter of right, and when a person can maintain a livelihood without person can maintain a livelihood without reliance on the market” (Esping-Anderson, reliance on the market” (Esping-Anderson, pp. 21-22)pp. 21-22)
Redistribution entails contributions to the Redistribution entails contributions to the center (e.g. taxes) and payments out of it center (e.g. taxes) and payments out of it again (e.g. social assistance and social again (e.g. social assistance and social security)security)
How does Redistribution Work?How does Redistribution Work?
The State
Taxation Social assistance& social insurance
New Social PoliciesNew Social Policies ,, 1999-20071999-2007
YearYear New Social PoliciesNew Social Policies1999-1999- Go-West programGo-West program
2002-2002- Urban minimum income guarantee programUrban minimum income guarantee program
2003-2003- Rural fee-tax reform; reestablishing rural Cooperative Medical Systems (CMS) Rural fee-tax reform; reestablishing rural Cooperative Medical Systems (CMS)
2004-2004- Lowering agricultural taxes; introduction of 3 types of rural subsidiesLowering agricultural taxes; introduction of 3 types of rural subsidies
2005-2005- Partially abolishing agricultural taxesPartially abolishing agricultural taxes
2006-2006- Abolishing all agricultural taxes; introduction of comprehensive rural subsidies; Abolishing all agricultural taxes; introduction of comprehensive rural subsidies; free compulsory education in western and central rural areas; public housing for free compulsory education in western and central rural areas; public housing for urban poorurban poor
2007-2007- Free compulsory education in all rural areas; basic health insurance for all urban Free compulsory education in all rural areas; basic health insurance for all urban residents; CMS for over 80% of rural population; promoting rural minimum residents; CMS for over 80% of rural population; promoting rural minimum income guarantee program, promoting public housing for urban poorincome guarantee program, promoting public housing for urban poor
To Reduce InequalitiesTo Reduce Inequalities
To reduce regional income inequality To reduce regional income inequality To reduce urban-rural income inequalityTo reduce urban-rural income inequality To reduce human insecurityTo reduce human insecurity
Minimum incomeMinimum income Work-related injuryWork-related injury HealthcareHealthcare UnemploymentUnemployment Old-age pensionOld-age pension
To reduce regional income inequalityTo reduce regional income inequalityIntergovernmental Transfers (billion yuan)
0
200
400
600
800
1000
1200
1400
1600
1800
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
To reduce regional income inequalityTo reduce regional income inequality
During the period of 1994-2005, 10% of the During the period of 1994-2005, 10% of the central fiscal transfers went to eastern central fiscal transfers went to eastern provinces, 44% to central provinces, and provinces, 44% to central provinces, and 46% to western provinces46% to western provinces
Central fiscal transfers have helped reduce Central fiscal transfers have helped reduce both vertical and horizontal fiscal both vertical and horizontal fiscal imbalance and thereby regional inequalitiesimbalance and thereby regional inequalities
Convergence of Provincial Growth RatesConvergence of Provincial Growth Rates
Gini Coefficients of Provincial Per Gini Coefficients of Provincial Per Capita GDP (1978 constant price)Capita GDP (1978 constant price)
To reduce rural-urban gaps: Taking lessTo reduce rural-urban gaps: Taking less
Agricultural Taxes (billion yuan)
0
10
20
30
40
50
60
70
80
90
100
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
To reduce urban-rural gaps: Giving moreTo reduce urban-rural gaps: Giving more
Central Transfers to Support Rural Fee-to-Tax Reform(billion yuan)
0
10
20
30
40
50
60
70
80
90
2000 2001 2002 2003 2004 2005 2006
To reduce rural-urban gaps: Giving moreTo reduce rural-urban gaps: Giving moreCentral Budget for Agriculture, Rural Areas and Farmers
(billion yuan)
0
50
100
150
200
250
300
350
400
450
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Urban-Rural Income GapUrban-Rural Income Gap
0
0.5
1
1.5
2
2.5
3
3.5Rural income as 1 Leveling off
Per Capita Expenditure on Healthcare and EducationPer Capita Expenditure on Healthcare and Education
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Per capi t a heal th expense per capi t a educat i on expense
Per capi t a i ncome
To reduce human insecurity: To reduce human insecurity: Urban Minimum Income ProgramUrban Minimum Income Program
0
5
10
15
20
25
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
0
5
10
15
20
25
# of persons covered (million) Total expenditure (billion yuan)
To reduce human insecurity: To reduce human insecurity: Rural Minimum IncomeRural Minimum Income
0
5
10
15
20
25
30
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
# of persons receiving social assistance
# of persons covered by rural minimum income guarantee program
To reduce human insecurity: Increased government and social health spending
1998 2000 2002 2004Total 377.7 458.7 579 759Gov't 58.72 70.95 90.85 129.36Social 100.6 117.19 153.94 222.54OOP 218.33 270.52 334.21 407.14% OOP 58% 59% 58% 54%growth
Gov't 21% 28% 42%Social 16% 31% 45%OOP 24% 24% 22%
State Re-engaged in HealthcareState Re-engaged in HealthcareStructure of Total Health Expenditure
0
10
20
30
40
50
60
70
80
90
100
Out-of-Pocket
Social
Government
To reduce human insecurity: To reduce human insecurity: Coverage of Urban Basic Healthcare InsuranceCoverage of Urban Basic Healthcare Insurance
0102030405060708090
100110120130140150160
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Millio
n
0
5
10
15
20
25
30
Perc
en
tag
e
No. of urban residents insured % of urban residents insured
To reduce human insecurity: To reduce human insecurity: Health Insurance Coverage of Active Employees & RetireesHealth Insurance Coverage of Active Employees & Retirees
Coverage of Active Employees & Retirees
0
10
20
30
40
50
60
70
80
90
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
% of employees covered % of retirees covered
Share of employees in state & collective sectors
To reduce human insecurity: To reduce human insecurity: Coverage of Rural Cooperative Health Insurance Coverage of Rural Cooperative Health Insurance
0
10
20
30
40
50
60
70
80
90
100
% of rural population covered
Counties with Coverage of Rural Coverage of Rural Cooperative Health InsuranceCooperative Health Insurance
To reduce human insecurity:To reduce human insecurity:Coverage of Unemployment InsuranceCoverage of Unemployment Insurance
0
20
40
60
80
100
120
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
(Millio
ns)
0%
20%
40%
60%
80%
100%
120%
# of employees covered % of formal sector employees covered
To reduce human insecurity: To reduce human insecurity: Urban Basic Pension Program #Urban Basic Pension Program #
0
20
40
60
80
100
120
140
160
180
200
# of active employees # of retirees
To reduce human insecurity:To reduce human insecurity:Urban Basic Pension Program %Urban Basic Pension Program %
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% of retirees covered % of urban employees covered
To reduce human insecurity: To reduce human insecurity: Coverage of Work Injury InsuranceCoverage of Work Injury Insurance
Work Injury Insurance
0%
5%
10%
15%
20%
25%
30%
35%
40%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
%
% of Urban Employed Population
To reduce human insecurity: To reduce human insecurity: Budgetary Expenditure on Social Welfare/Security, 1978-2005Budgetary Expenditure on Social Welfare/Security, 1978-2005
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
Social w elfare & social security/Total government expenditure
Social w elfare & social security/GDP
Two Key Explanatory VariablesTwo Key Explanatory Variables
Ability: Recuperating State Extractive CapacityAbility: Recuperating State Extractive Capacity Willingness: Changing Model of Agenda-Willingness: Changing Model of Agenda-
Setting in Policy-MakingSetting in Policy-Making
Recuperating State Extractive Capacity: Recuperating State Extractive Capacity: Gross Fiscal Revenue, 1978-2005Gross Fiscal Revenue, 1978-2005
Gross Fiscal Revenue, 1978-2005 (0.1 billion yuan)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
Budgetary Income Extrabudgetary Income Social Security
Recuperating State Extractive Capacity: Recuperating State Extractive Capacity: Gross Revenue & Expenditure/GDP, 1978-2005Gross Revenue & Expenditure/GDP, 1978-2005
Gross Fiscal Revenue & Expenditure/GDP, 1978-2005
10%
15%
20%
25%
30%
35%
40%
45%Gross Fiscal Revenue/GDP Gross Fiscal Expenditure/GDP
Changing Model of Agenda-Setting in Policy-Making: Changing Model of Agenda-Setting in Policy-Making: Six Model of Agenda-SettingSix Model of Agenda-Setting
Initiator of AgendaInitiator of Agenda
Decision-Decision-MakersMakers
AdvisersAdvisers CitizensCitizens
Degree of Popular Participation
Low I. I.
Closed DoorClosed Door
III. III.
Inside AccessInside Access
V. V.
Outside Outside AccessAccess
High II. II. MobilizationMobilization
IV. IV.
Reach-outReach-out
VI. VI.
Popular Popular PressurePressure
“王绍光, 中国公共政策议程设置的模式”, 《中国社会科学》 2006 年第 5 期
The Popular Pressure Model of Agenda-SettingThe Popular Pressure Model of Agenda-Setting
Where do pressures come from?Where do pressures come from? Why do pressures have impact on agenda-setting?Why do pressures have impact on agenda-setting?
Stakeholders have become more assertive (e.g. regional Stakeholders have become more assertive (e.g. regional policy)policy)
Involvement of NGOs (e.g. environmental policy)Involvement of NGOs (e.g. environmental policy) Changing role of mass media (e.g. work safety, Changing role of mass media (e.g. work safety,
education, healthcare)education, healthcare) Rise of the internetRise of the internet
The Rise of the InternetThe Rise of the Internet
0
1000
2000
3000
4000
5000
6000
7000
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
13000
14000
15000
PC connected to the InternetInternet users
Policy Re-orientationPolicy Re-orientation
From “efficiency first” to “Human-being first” to From “efficiency first” to “Human-being first” to “harmonious society”“harmonious society”
Those issues on which people have called for Those issues on which people have called for changes (such as environmental crisis, regional changes (such as environmental crisis, regional disparities, rural problems, landless farmers, urban disparities, rural problems, landless farmers, urban poverty, unemployment, growing inequality, poverty, unemployment, growing inequality, rising costs of education and health, coalmine rising costs of education and health, coalmine safety, skyrocketing housing prices, and the like) safety, skyrocketing housing prices, and the like) have been put on the government’s agenda.have been put on the government’s agenda.
Summary ISummary I Now the government has fiscal capacity and Now the government has fiscal capacity and
political will to introduce social policies, political will to introduce social policies, although neither is sufficiently strong. although neither is sufficiently strong.
There is still big room for improvement on There is still big room for improvement on both fronts.both fronts.
Nevertheless, the emergence of social Nevertheless, the emergence of social policies marks a historical turning-point.policies marks a historical turning-point.
Summary IISummary II
The case of China seems to bear testimony to Karl The case of China seems to bear testimony to Karl Pplanyi’s insight on the dynamics of modern society: Pplanyi’s insight on the dynamics of modern society:
““The idea of a self-adjusting market implied a stark utopia. The idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time Such an institution could not exist for any length of time without annihilating the human and natural substance of without annihilating the human and natural substance of society; it would have physically destroyed man and society; it would have physically destroyed man and transformed his surrounding into a wilderness.”transformed his surrounding into a wilderness.”
Karl Polanyi, Karl Polanyi, The Great TransformationThe Great Transformation, p. 3, p. 3