ABSTRACT
The very definitive features of institutions-permanence and path dependence (David 1985, 1986; Arthur 1989)—make institutional change contingent upon the emergence of alternative institutionalization processes. Apart from executing changes to a pre-existing, durable pattern, the changed, new order also needs to be sustained.1 Without this new process of institutionalization, the newfound changes would require continuous interventions to sustain them and can become unstable, including a possible relapse to a variant of the previous situation.2 In other words, actions alone will not suffice to sustain the changes originally resulting from the actions. Then what more is required? What constitutes the institutionalization process
that serves to sustain change? Making changes last has been a major preoccupation amongst observers of the Chinese rural tax reforms unfolding since the late 1990s. The reform targeted the heavy extractions imposed on the rural populations and demanded a substantial reduction in the range and level of fees and taxes. Many were skeptical of its chances of success. One popular theme of discourse maintained that the heavy tax burden was historically and institutionally embedded, that previous attempts to relieve peasants’ burden, dating back to dynastic times, had all failed, and that this latest intervention was, consequently, unlikely to make any genuine, and lasting, impact (Qin 1997, 2000).3 Ironically, the reform had in fact had considerable successes, including the “disappearance” of the Agriculture Tax nationwide in 2006.4 Such reform achievements worked to aggravate, rather than ameliorate, the worry over sustainability. The bigger the difference the reform initiatives produced initially, it seemed, the larger was the probability that these actions could cause counteracting responses from within the status quo, to the effect that the initial impacts could be neutralized and outweighed, further actions for change made difficult, and the reform made to grind to a halt and eventually backtrack.5 Such a scenario fits perfectly with pathdependence arguments: actions and initiatives-in the form of “reforms”— are insufficient to change the course of deep-rooted, institutionally entrenched behavioral patterns. But why is it so? What makes existing practices so resilient and attempted
reforms to change them so difficult to sustain? If, according to the theoretical
literature, institutional change requires the institutionalization of the new changes for it to be complete, then what makes this institutionalization process possible? In the case of the Chinese rural tax reform, there was the perception that the objective of the reform-a reduction of peasants’ burdenwould undercut the interests of local officials (Wedeman 1997; Bernstein and Lu 2003; Yep 2004).6 These interests would need to be compensated, so follows the argument, if the reform was to succeed, and peasants’ burden not to rebound. The central government had, to further this aim, formulated two measures, namely local administrative restructuring and downsizing, and the provision of fiscal subsidies through central transfer payments. The intended objective of downsizing was explicitly to reduce total local government expenditures and thus the need for excessive extractions from peasants, with central fiscal subsidy as an incentive or facilitation device.7
