An Agency Theory of State-Society Relations in Mainland

8/7/2019 An Agency Theory of State-Society Relations in Mainland

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An Agency Theory of State-Society

Relations in Mainland China andTaiwan

Jih-wen Lin & Szu-chien Hsu


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Introduction

Organic Law of the Village Committee of the

Peoples Republic of China

Taiwans democratization - KMT (localelections)

Is it possible for PRC to apply the experience

of Taiwan?


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The two regimes are situated in different

state-society relations.

Up to what degree does the centralgovernment is willing to elevate the level of

electoral competition?

Information capacity as the key factor that

determines the degree of trust between them.


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Cont..

To substantiate this claim, we develop a

principal-agent model in which the

completeness of information is kept as a

variable.

This model will demonstrate that the central

governments information capacity

determines the extent to which it is willing to

empower the local agents.


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Agency Theory of Central-Local

Relations


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The principal and the agent maintain a goodterm with each other only if the principal isinformative and the contract is profitable.

An informative regime creates common goodsby delegating powers to the local agent forprofitable productions, which in turnstrengthen the regimes legitimacy

An uninformed regime, in contrast, is trappedin a vicious cycle.


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KMT in Taiwan

Japans occupation of the island for fifty yearstotally changed its landscape, first intoagricultural complement and then into a militarybase for Japans maritime

By the end of WWII, the colonial government hadcreated on the island a state apparatus that waspenetrating, effective, and resourceful.

The colonial government had built an intensivenetwork of communication and transportation,which greatly enhanced the states infrastructurepower


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Cont

The size of the main island of Taiwan is only36,000 km square.

The government can reach most corners on the

island within a day Mass media such as newspaper and broadcasting

were far-reaching but under tight state control

The police force served as the Emperors loyal

agent The Nationalist government inherited from the

Japanese in 1945 was powerful state machinewell buttressed by infrastructure.


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Cont

The governing capacity of a state can bemeasured by its infrastructure power.

With a given infrastructure, the states governing

capacity is further enhanced by the efficiency ofthe information transmitters, such as thebureaucrats and the educational workers at itsnerve endings.

Thus, the KMT laid its foundation in Taiwan as apowerful state supported by a well-developedinfrastructure.


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However there is a cultural gap between the

newly arrived mainlanders and the ethnic

Taiwanese.

Taiwanese in general found it intolerable that

bureaucrats from the motherland were far

more corrupted and inefficient than the

Japanese colonizers.

The February 28th Incident of 1947


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However, the KMT quickly rebuilt its access to the localconstituents because of help that came directly fromthe Japanese legacies and the most important, throughpartial local elections.

It is through the local election wherein the KMT wasable to generate a tournament among local elite,through which the sates monitoring cost could bereduced.

The KMT received from the Japanese colonialgovernment a peculiar electoral system the singlenontransferable vote under multi-member district(SNTV-MMD)


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Such a system gave the KMT severaladvantage that greatly enhanced itsconfidence in dealing with the local elite

Disunity and competition among the local elite inthe same electoral district

Competitions drive local factions to expose darkside of each other & competition for party

endorsement Challenges the skill of political parties to nominate

optimally and to divide the vote evenly


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Equipped with superior organizational and

financial resources, the KMT surpasses its

competitors on these test and have been able

to maintain a satisfactory electoral fortune

most of the time.


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Democratic Opening Process


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The democratic process of Taiwan underwentthrough a gradual process.

The KMT settled in Taiwan as an immigrant

regime that lacks a firm grassroots base, butexternal pressures and existing institutionalconditions soon lead it to discover theadvantages of local elections.

Each electoral result was able to help KMT inmanaging its survival strategies


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Three Major Phases of Transformation

of State-Society Relations

During the reign of Chiang Kai-shek Elections were held only for local councils.

Alliance across electoral districts or with national elitewere strictly forbidden

1960s during Chiang Ching Kuo Taiwan encountered severe diplomatic crisis

KMT was compelled to restore its legitimacy frominside by opening the supplementary seats at the

national legislatures for elections and recruiting moreethnic Taiwanese into the ruling machine

Fation replacement


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Economic privileges for the local factions

Monopoly, Unchecked loan, Tax evasion

I

n return, the KMT needs the local factions togarner vote in elections and to endorse party bills

in the legislatures.


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The Principal-Agent Model and Taiwan

The higher the principals stake in thecontract, the more likely for him to pay theagent a good ransom.

The KMT adopted some disloyalty act throughits some strategies

The KMTs indigenization policy creates a

paradoxical consequence wherein the moreTaiwanized the central elite are, the hazier theline between the principal and the agent


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The CCP in the PRC: Out of the Vicious Cycle?

The Chinese history has been characterized bya pendulum between unification anddisintegration.

China is 266 times larger than Taiwan

The initial stage for the CCP had far lessinfrastructure resources to utilize

Less transportation and communicationnetwork than Taiwan as well as governmentemployees and college teachers


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Vicious Cycle

Centralization

Stagnation

Decentralization

Chaos


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The agency problem caused not only a

dilemma of centralization-decentralization

between the central and local governments,

but also the tension of mobilization-

demobilization between the state and people.

The CCP relies on political mobilization ,

however this approach suffers from the samekind of information problem


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PRCs Attempts in Changing its

Principal-Agent Relations

The Tax Assignment System (fenshuizhi)

From tax contract system to tax assignmentsystem

Contract system the central government relied on thelocal governments to collect taxes and bargain with thelatter regarding how the collected revenue should beshared.

Tax assignment system - fixed revenue sources

- State Administration of Taxes

- fixed categories of fiscal

expenditures


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Ownership Reform of Rural Enterprise

Temporary Regulation on Peasants ShareholdingCooperative Enterprise(1992) to disintegrate the

monolithic power base of the local government bydividing the ownership of the local collectiveenterprises into shares.

The reform did not benefit the peasants, rather

created a paradox wherein it is the local cadresand enterprise managers that were able to takeadvantage of the reform.


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The cadres may not have committed what is

perceived as corruption, but they make ue of

unparalled information they control to benefit

themselves, distort the reform objectives of thestate, and transfer the cost to the whole society.


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Village Elections

Can help mediate conflicting interests brought by

economic reform, strengthen peasant support for

the government, and facilitate the

implementation of state policies (Wang1998, 309-

10)


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Three Basic Conditions

1. The electoral procedures should be followed,fraud avoided, and villager participationencouraged.

2. The villagers and the cadres should haveseparate interests, and the villagers can usevote to displace the disqualified cadres.

3. villagers, especially when becomingparticipatory and assertive, should still beunder control.


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The CCP did experience problem with regard

to the performance of its agents or the local

cadres

The CCPs final hope are the masses but they

need to reconsider the definition of local

agent which will also become the final trial of

China's democratization


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Conclusion

The CCP and the KMT are both unusual

regimes

China is too large to be governed by a few

revolutionary vanguards.

Taiwan has an identity gap between the immigrant

regime and the local society

Both regimes relied on local agents topenetrate into the local society and, when

facing threats, resorted to political terrorism


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Cont

Indigenization and electoral opening workedtogether to deepen Taiwans democratization,until the national elite are turned into

delegates of the local elite. Hence, the crucial factor that contributed to

Taiwans democratization (and also itsproblems) is the redefining of central-localrelations, which is rooted in her peculiarhistorical setting.


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Cont

It is very unlikely for China to move theelectoral procedure in the upper level whichrequires more competition.

Another solution is to completely redefine themeaning of center and local, such as through afederalist institution.

The larger the nation or the less developed itsinfrastructure, the lower the informationcapacity of the state.

Documents

An Agency Theory of State-Society Relations in Mainland