Capitalism, Globalization and Rule of Law : an Alternative Trajectory of Legal Change in China
| Author | Carol A.G. Jones |
| Published date | 01 June 1994 |
| Date | 01 June 1994 |
| DOI | http://doi.org/10.1177/096466399400300201 |
| Subject Matter | Articles |
CAPITALISM, GLOBALIZATION
AND
RULE OF LAW : AN
ALTERNATIVE TRAJECTORY OF
LEGAL CHANGE IN CHINA
CAROL A. G. JONES
University of Hong Kong
INTRODUCTION
,
,
N
MY
first Christmas in Hong Kong I received a personally signed
~
Christmas card from a shop where, many months earlier, I had bought a
pair of curtains. I was surprised: surely in a vast, anonymous city of 6
million people, this was unusual. Could it be that in Hong Kong, for so many the
epitome of modern capitalism, an attempt was being made to transform me from
a stranger in the market place into a personal client?
China and East Asia defy a number of our assumptions about capitalism,
especially about its relationship to rationality, universalistic values and ’rule of
law’. Many of the post-Communist states of Europe have taken this association
as their baseline for drafting a new legal infrastructure for capitalist development.
Yet in China, that other Communist state in transition, large-scale economic
growth is taking place with few, if any, of the legal institutions we normally
associate with the market economy.
It is China and the modern capitalist economies of East Asia (the ’Four Little
Dragons’ of Singapore, Taiwan, Hong Kong and South Korea) which now force
us to consider whether it is possible to have a successful market economy
without ’rule of law’. They also challenge the idea that what we are witnessing in
the latter half of the twentieth century is the global spread of ’rule of law’ and
SOCIAL &
LEGAL STUDIES (SAGE, London, Thousand Oaks and New Delhi),
Vol. 3 (1994), 195-221
196
associated democratic institutions. This paper will examine how, in China and
East Asia, culture mediates the reception of legal norms such as ’rule of law’ and
challenges the supposed relationship between the growth of capitalism and
formal rational law.
THEORETICAL BACKGROUND
There are three main theories concerning ’rule of law’ and the development of
capitalism in modern society: (1) modernization theory, which assumes that
Western-type law and legal institutions play a vital role in developing capitalism;
(2) Weber’s theory of the relationship between capitalism and ’rule of law’; and
(3) globalization theory, which argues that the global market will lead to the
penetration and displacement of local legal cultures by Western legal institutions.
Developments in East Asia, and especially in China, offer us a chance to test
these theories. The ’Four Little Dragons’ have enjoyed remarkable economic
success in the absence of
many
of the legal institutions we typically associate with
capitalism, and in the 1990s it is predicted that they will be joined by a fifth ’Little
Dragon’, southern China, which is currently undergoing dramatic economic
growth under the ’open door’ policy. The International Monetary Fund (IMF)
estimates that China’s GDP is nearly $1.7 trillion, the largest behind the USA and
Japan: a combined economy of China, Hong Kong and Taiwan will outstrip the
USA
in the next decade.’
I
How
do we explain the success of capitalism in societies dominated by ’rule of
relationships’ rather than ’rule of law’? One explanation is that, unlike the
Western capitalism described by Weber, these newly industrialized countries
(Nics) represent a distinctive form of capitalism (South China Morning Post, 21
1
May 1993). If this capitalism does deviate from Weber’s model, what role, if any,
does ’rule of law’ play in its development?
CHINESE CAPITALISM
’
_
Talk of a distinctive form of Chinese capitalism comes with a certain amount of
ideological packaging. It is partly a reaction to what Hall (1992:275) has called
the discourse of ’The West and the Rest’. This ’Orientalist’ discourse portrays
non-Western countries as mysterious, superstitious, traditional and under-
developed, compared to the modern, rational, developed societies of the West
(Hall, 1992; Said, 1979). In the twentieth century ’The Rest’ have turned this
conceptualization of their difference into a barrier against the influx of ’Western’
ideas about ’rule of law’ and human rights. Pressure on the East to adopt such
ideas is seen as a defensive strategy by a West worried about economic
competition from developing nations. The neo-authoritarian elites of East Asia
argue that this ’rule of law’ and human-rights discourse is alien to Chinese
culture. As further evidence that there is a better ’home-grown’ way of doing
things, they contrast the flagging economies of the West with an immensely
197
successful Chinese capitalism built on the understanding that civil and political
rights are inimical to economic prosperity.
There are several distinguishing features of this Chinese capitalism: (1) a strong
preference for family business; (2) a common sinic cultural heritage; (3)
adherence to Confucian values (obedience, loyalty and collectivist ethics); and
(4) an emphasis upon relational rather than transactional values - ’rule of
relationships’ rather than ’rule of law’ (Redding, 1990; Wong, 1988; Chen and
Hamilton 1991).
Two
specific features of this capitalism concern us here. The first is the cultural
preference for something called guanxi (’rule of relationships’), and the second is
the family nature of Chinese business. Guanxi is a kind of gift economy. Without
guanxi, ’It’s often the case that you can’t even get to first base in China’
(Seligman, 1989 : 50). It operates both within and outside the official economy
and involves the cultivation of personal networks of mutual dependence and
trust (Yang, 1986:1; Smart, 1993). With regard to the second main characteristic
of Chinese capitalism, familism, in the majority of Chinese firms the family owns
and controls the firm and relatives occupy key positions in the business. In 1988,
companies controlled by just four families accounted for over 36 percent of the
total market capitalization in Hong Kong (Gaylord and Armitage, 1993 : 28). Of
the stocks held in Singapore in 1987, 61.7 percent were held by companies that
were
100 percent family-owned (Tong Chee Kiong,1991:195). There is evidence
that the family firm is also emerging as the dominant form of private enterprise in
mainland China. Nee and Su cite the Lin family in Lonhai county in Fujian
province who, having signed a responsibility contract with the township
government, regarded the business as their own ’and hired family members in all
of the management positions
the officials of the
...
township government
likewise regarded the business as belonging to the Lin family’ (Nee and Su,
1993:22). Tricker (1984) has characterized such firms as paternalistic, profit-
oriented, centralized and flexible. Tight centralized control is maintained even in
large firms, despite competition from multinational companies with more-
rational management methods (Tong Chee Kiong, 1991 : 197). Chinese family
firms produce a high level of trust and loyalty, making it easier to obtain
consensus and increasing their adaptability:
They can make quick decisions during rapidly changing circumstances, and
maintain greater secrecy by committing less to written records. As a result, they are
well-suited to survive and flourish in situations where a high level of risk is
involved. (Wong, 1986: 318)
As Wong has pointed out, when the spectacular success of Hong Kong occurs in
the company of Singapore, Taiwan and South Korea, ’it is reasonable for
observers to look for a common denominator among them’ (Wong, 1986: 307).
One possibility for this common factor is their shared cultural emphasis on
family and business networks as opposed to legal institutions (Chen and
Hamilton, 1991:6), the very things Weber regarded as a barrier to capitalism
(Weber, 1951: 229-32; Wong, 1986). However, certain aspects of the Confucian
ethic actually seem to promote economic growth, creating ’dedicated, motivated,
198
responsible and educated individuals and the enhanced sense of commitment,
organizational identity, and loyalty to various institutions’ (Kahn, 1979:122).
The emphasis upon collectivist values, which put the firm and the society’s
interests before those of the individual, contrasts with theories of Western
capitalism that associate it with the unfettered pursuit of self-interest and an
emphasis upon individualism and individual rights.
MODERNIZATION THEORY
Theories of the East still ask how
far it has ’caught up’ with this West, that is how
far it has developed a modern market economy, a rational administrative system,
formal rational law, notions of citizenship and so on. Weberians especially have
tended to dichotomize between the universalistic West and the particularistic
East, associating the growth of capitalism with Western universalistic values and
portraying Eastern particularism as an obstacle to the growth of the capitalist
market economy. However, both kinds of values exist in all societies: the
interesting question is in which proportions. In China and East Asia, particular-
ism seems to be in the ascendent (in the form of guanxi and familism), defying
theories that associate capitalism and law with ’Western’ universalistic values.
Adopting this approach, the law and development movement of the 1950s and
1960s assumed that the American model of law provided a good paradigm for
developing nations. It was a system of impersonal rules, universally applied,
holding in check the possibility of arbitrary state action, and associated with a
benign state, the development of freedom, justice, democracy and formal
equality. A society governed by ’rule of law’ not only provided economic
...
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