A win–win path for institutional change

Abstract

Institutional change is a response to socioeconomic pressures caused by resource scarcity, population growth, cultural change, and economic inefficiency. Historical evidence shows that the unequitable resource redistribution among groups caused by institutional change can indirectly reduce income, particularly when it leads to civil conflicts. A more equitable and effective approach to institutional change would seek win-win solutions. To examine this possibility, I review historical examples of institutional change in China to show how gradual institutional change that lets all stakeholders share the economic benefits is the most successful path. Therefore, innovation to replace or modify old institutions and equitably increase economic growth will be a key approach. This win-win approach requires persuasion, compromise, demonstration projects, competition, and embracing institutional diversity. Increased economic benefits come from economic innovation and encouragement of stakeholders to participate in institutional change, but require nurturing of new social groups that will drive the change process.

Seeking the gravediggers of capitalism in China

“…It is certainly true that some older institutions that are unwilling to adapt to the new social context may suffer, particularly when they will not cooperate with the new institutions and are bypassed, but this is not inevitable. Particularly when a win–win approach can be found that provides some benefits to the old institutions, there is less resistance to change; a compelling example is how computer technology has been incorporated in every area of life because it provides benefits that enhance both old and new institutions rather than destroying the old institutions (Cao, 2017). As time passes, new economics may displace old ones, but gradually enough that employees of the old industries may be able to find work in the new industries, or find ways to adapt their practices to incorporate the benefits of the new industries.…”

“…Such socioeconomic change creates disequilibrium in a system, and those who can profit from this imbalance can promote changes that lead to an entirely new institutional environment (North, 1971). From 1046 to 221 BC, iron tools promoted an agricultural revolution that facilitated labor and provided some free time after completing the daily work (Cao, 2017). The increasing populations permitted by increased agricultural productivity expanded this practice, and rulers permitted these changes because they could not prevent them or encouraged the changes because they benefited from through increased ''land rent'' paid by ''tenant farmers'' in exchange for the right to work the land.…”

An equilibrium path for institutional change in China

“…Just as plants produce new roots, shoots, and leaves from previously existing tissues, new institutions evolve from the old ones. However, some old institutions survive the growth of the new ones if they can avoid conflict and find ways to coexist with the new institutions (Cao, 2016). During the initial phases of China's reforms, the Communist legacy formed the source of the new growth of institutions.…”

“…China's State Department began developing policies specifically for the benefit of the government. As result, government revenues had increased to 13 times their 1990 level by 2011, versus an increase of only 4.6 times for the private sector (Cao, 2016). The federalism that has accompanied China's market reforms greatly facilitated economic growth, but also created an opportunity and incentives for local authorities to abuse their powers.…”

Driving forest succession in karst areas of Chongqing municipality over the past decade

“…Under such conditions, shallow karst soil layers and its inherent water infiltration processes restrict plant growth (Xiao and Hu, 2017). Droughts and floods frequently take place when conditions such as shallow soil layer, poor soil water-holding capacity, and limited vegetation cover co-occur (Feng et al 2015;Cao 2016). Once removed, it may be difficult for vegetation to recover, leading to ecosystem dysfunction.…”