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Capitalism from Below: Markets and Institutional Change in China

Author

Listed:
  • Nee, Victor

    (Cornell University)

  • Opper, Sonja

    (Lund University)

Abstract

More than 630 million Chinese have escaped poverty since the 1980s, reducing the fraction remaining from 82 to 10 percent of the population. This astonishing decline in poverty, the largest in history, coincided with the rapid growth of a private enterprise economy. Yet private enterprise in China emerged in spite of impediments set up by the Chinese government. How did private enterprise overcome these initial obstacles to become the engine of China’s economic miracle? Where did capitalism come from? Studying over 700 manufacturing firms in the Yangzi region, Victor Nee and Sonja Opper argue that China’s private enterprise economy bubbled up from below. Through trial and error, entrepreneurs devised institutional innovations that enabled them to decouple from the established economic order to start up and grow small, private manufacturing firms. Barriers to entry motivated them to build their own networks of suppliers and distributors, and to develop competitive advantage in self-organized industrial clusters. Close-knit groups of like-minded people participated in the emergence of private enterprise by offering financing and establishing reliable business norms. This rapidly growing private enterprise economy diffused throughout the coastal regions of China and, passing through a series of tipping points, eroded the market share of state-owned firms. Only after this fledgling economy emerged as a dynamic engine of economic growth, wealth creation, and manufacturing jobs did the political elite legitimize it as a way to jump-start China’s market society. Today, this private enterprise economy is one of the greatest success stories in the history of capitalism.

Suggested Citation

  • Nee, Victor & Opper, Sonja, 2012. "Capitalism from Below: Markets and Institutional Change in China," Economics Books, Harvard University Press, number 9780674050204, December.
  • Handle: RePEc:hup:pbooks:9780674050204
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    Cited by:

    1. repec:bla:stratm:v:38:y:2017:i:2:p:203-231 is not listed on IDEAS
    2. Andersson, Fredrik N.G. & Edgerton, David L. & Opper, Sonja, 2013. "A Matter of Time: Revisiting Growth Convergence in China," World Development, Elsevier, vol. 45(C), pages 239-251.
    3. Andersson, Fredrik N.G. & Burzynska, Katarzyna & Opper, Sonja, 2014. "Lending for Growth? A Granger Causality Analysis of China's Finance-Growth Nexus," Knut Wicksell Working Paper Series 2014/6, Lund University, Knut Wicksell Centre for Financial Studies.
    4. Wilson, Ross, 2016. "Does Governance Cause Growth? Evidence from China," World Development, Elsevier, vol. 79(C), pages 138-151.
    5. repec:gam:jsusta:v:8:y:2016:i:3:p:244:d:65176 is not listed on IDEAS
    6. Taube, Markus, 2014. "Grundzüge der wirtschaftlichen Entwicklung und ihre ordnungspolitischen Leitbilder in der VR China seit 1949," Working Papers on East Asian Studies 96/2014, University of Duisburg-Essen, Institute of East Asian Studies IN-EAST.
    7. Holm, Håkan J. & Nee, Victor & Opper, Sonja, 2016. "Strategic Decisions: Behavioral Differences Between CEOs and Others," Working Papers 2016:35, Lund University, Department of Economics.
    8. Chen, Yu-Fu & Funke, Michael & Tao, Kunyu, 2015. "Financial market reform – A new driver for China’s economic growth?," BOFIT Discussion Papers 5/2015, Bank of Finland, Institute for Economies in Transition.
    9. Howell, Anthony, 2016. "Firm R&D, innovation and easing financial constraints in China: Does corporate tax reform matter?," Research Policy, Elsevier, vol. 45(10), pages 1996-2007.
    10. Wilson, Ross, 2015. "Does Governance Cause Growth? Evidence from China," Working Papers 2015:14, Lund University, Department of Economics.
    11. Piergiuseppe Fortunato, 2015. "Democratic Government and Development: A Survey," Asian Development Review, MIT Press, vol. 32(2), pages 153-177, September.
    12. Liu, Yipeng & Almor, Tamar, 2016. "How culture influences the way entrepreneurs deal with uncertainty in inter-organizational relationships: The case of returnee versus local entrepreneurs in China," International Business Review, Elsevier, vol. 25(1), pages 4-14.
    13. Enying Zheng & Simon Deakin, 2016. "State and Knowledge Production: Industrial Relations Scholarship under Chinese Capitalism," Working Papers wp480, Centre for Business Research, University of Cambridge.
    14. Michael Fabinyi & Neng Liu, 2016. "The Social Context of the Chinese Food System: An Ethnographic Study of the Beijing Seafood Market," Sustainability, MDPI, Open Access Journal, vol. 8(3), pages 1-17, March.
    15. Holm, Håkan J. & Opper, Sonja & Nee, Victor, 2013. "Entrepeneurs under Uncertainty: an Economic Experiment in China," Knut Wicksell Working Paper Series 2013/1, Lund University, Knut Wicksell Centre for Financial Studies.
    16. Usman Khalid, 2016. "Catch-up in Institutional Quality: An Empirical Assessment," Discussion Papers 2016-04, University of Nottingham, CREDIT.
    17. Zhou, Wubiao, 2017. "Institutional environment, public-private hybrid forms, and entrepreneurial reinvestment in a transition economy," Journal of Business Venturing, Elsevier, vol. 32(2), pages 197-214.
    18. Korsnes, Marius, 2016. "Ambition and ambiguity: Expectations and imaginaries developing offshore wind in China," Technological Forecasting and Social Change, Elsevier, vol. 107(C), pages 50-58.
    19. Barbara Krug & Alexander Libman, 2015. "Commitment to local autonomy in non-democracies: Russia and China compared," Constitutional Political Economy, Springer, vol. 26(2), pages 221-245, June.
    20. repec:eee:ecosys:v:41:y:2017:i:3:p:456-469 is not listed on IDEAS
    21. Nee, Victor & Opper, Sonja & Holm, Hakan J., 2014. "Social Exchange and Generalized Trust in China," Working Papers 2014:30, Lund University, Department of Economics.
    22. Kyae Lim Kwon & Robert J. Hanlon, 2016. "A comparative review for understanding elite interest and climate change policy in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 18(4), pages 1177-1193, August.
    23. Holm, Håkan J. & Opper, Sonja & Nee, Victor, 2012. "Entrepreneurs under Uncertainty: An Economic Experiment," Working Papers 2012:4, Lund University, Department of Economics.
    24. Fredrik N. G. Andersson & Katarzyna Burzynska & Sonja Opper, 2016. "Lending for growth? A Granger causality analysis of China’s finance–growth nexus," Empirical Economics, Springer, vol. 51(3), pages 897-920, November.

    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • H0 - Public Economics - - General

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