Why has the Chinese authoritarian regime under the Chinese Communist Party (CCP) endured and thrived during the past 40 years while undergoing market transition, robust economic growth and radical social transformation? To state this more theoretically, how do we explain the Chinese party-state's “authoritarian resilience”? Based on strong empirical evidence, combining in-depth qualitative case studies with quantitative data validation, Changdong Zhang's new book Governing and Ruling: The Political Logic of Taxation in China provides a serious answer to this question from the perspective of fiscal sociology.
Adopting an institutionalist approach, Zhang points out that taxation, a largely neglected but nevertheless fundamental state institution, deserves to be scrutinized as a causal variable that explains China's social and political change and, more specifically, the CCP's governing resilience. By identifying three major governance problems (social control, cooperation and agent discipline) that an authoritarian regime usually faces, Zhang argues that “taxation may play an important role in sustaining authoritarian rule by addressing the three governance problems” (p. 5). Against the background of China's tax-state transition implemented alongside reform and opening up, Zhang further points out that these three governance challenges are essentially embodied in two taxation-related dilemmas: the growth dilemma and the representation dilemma. The growth dilemma means an authoritarian regime must efficiently extract resources from society without harming long-term economic development. It is mainly concerned with the problems of cooperation and agent discipline. The representation dilemma refers to an authoritarian regime's challenge in taxing the people while achieving their compliance, and mainly relates to the problems of social control and state-agent discipline. Therefore, Zhang contends that the secret for the Chinese authoritarian regime to remain in power and bolster resilience may lie in the taxation mechanisms that help effectively resolve the two dilemmas.
What taxation mechanisms are there and how exactly do they function in reality to resolve, or at least alleviate, the two dilemmas and consequently contribute to regime resilience? Zhang identifies three taxation mechanisms operating to alleviate the taxation dilemmas: de facto fiscal federalism, the half-tax state, and the under-institutionalized taxation system. Adopting a methodology of cross-regional comparison and quantitative verification, Zhang's book (from chapters three to six) mainly elaborates the operation of these three taxation mechanisms respectively.
First, the mechanism of de facto fiscal federalism functions to resolve the growth dilemma by effectively tackling the cooperation and agent discipline problems. This mechanism motivates local governments to compete with each other in attracting investments from private entrepreneurs for local economic growth while constraining local state agents’ predatory behaviour. Specifically, Zhang finds that, under this mechanism, private enterprises with high asset mobility are empowered and can obtain stronger bargaining power, and this in turn incentivizes local governments to refrain from predatory behaviour, co-opt those private entrepreneurs and enhance local governance quality for a better business environment.
Second, the under-institutionalized taxation system works to alleviate both the growth dilemma and representation dilemma. By informally and intentionally allowing widespread tax evasion in practice, this mechanism, on the one hand, functions to boosts business development and economic growth; on the other hand, the common practice of tax evasion also puts private entrepreneurs at the mercy of the local authoritarian state, which means they dare not challenge the local state by seeking representation in the local people's congress but instead engage in clientelist relations with local state agents. This mechanism therefore helps settle both the social control and the cooperation problems through the authoritarian state's “forbearance and rule by fear” (p. 181), although it exacerbates the agent discipline problem.
Third, the mechanism of a half-tax state operates to resolve the representation dilemma by easing the social control problem. This is because a half-tax state, which relies on indirect taxes and non-tax revenues, can successfully decrease both the state's cost of extracting income from society and the people's perception of tax burden. This mechanism therefore stifles people's sense of citizenship rights as taxpayers and leaves the state in a stronger and more autonomous position relative to society.
Drawing on solid empirical evidence from varied localities of China, Zhang offers an elaborate institutional explanation for authoritarian resilience through revealing the covert mechanisms of taxation politics in China. He also contributes to the wider field of fiscal sociology by delineating an inspiring theoretical framework illuminating how taxation systems impact social and political transition under an authoritarian regime. Despite its unique scholarly value to peers and students in related academic fields, the book is organized in a rather complicated framework underpinned by a number of theoretical concepts. Therefore, it might not be readily comprehensible to average readers who lack proper background knowledge. In my view, this book can certainly deepen our understanding on both the Chinese governing logic today and wider political authoritarianism from a comparative angle.
