Further, the level of state influence on the financial and banking sector becomes a central determinant of the depth of state penetration in the economy.
THE ECONOMY AND THE STATE
On the basis of the historical finding that companies and markets cannot provide continued self-regulation, that a market road to a market economy is not feasible (Polanyi 2001), and a strong state was an essential historical precondition for such a transformation and its stabilization, a central proposition of my work is that the party-state in China is not withdrawing from the tendency toward marketization, but instead is contributing to the constitution of a new form of capitalism. In this sense, the party-state must itself be understood as a central component of the new Chinese capitalism. Because the interactions between economic and political actors embody complex processes, which (not only in research on China) are discussed in very different ways, the fourth dimension of capitalist social orders will be introduced at greater length at this point. First, I will outline the basics of modern statehood, second, forms of state intervention and regulation, and, third, actions of political actors where they directly perform entrepreneurial functions. Here, I advocate going beyond abrupt juxtapositions of market and state and instead examining how economy and state are structurally linked and, to some extent, develop historically in a mutually constituting manner.
(1) The mutual dependency between state and economy can be taken as a central feature of capitalist societies. Economy and politics establish a nexus characterized by structural interdependencies (see Block 1994; Brand 2006; Hirsch 2005; Mann 1998; Offe 2006; V. Schmidt 2009). The state sanctions contractual relations, directs and/or coordinates infrastructure measures, and provides business enterprises with an educated labor force. Unlike nonhierarchical forms of regulation and decision making, the state, for its part, frequently “possesses the means for ultimately decisive intervention” (Mayntz 1996, 159, my translation), whether in the form of legal ratification or the final decision in cases of nonagreement. This is because only the state commands a monopoly on power that enables the creation and maintenance of the institutional fundaments that allow capitalist socialization in the first place. For this a functioning state requires (at least relative) independence from the social classes, associations, and so on, even if, in practice, state power is mediated by both societal institutions and discourse. Because state institutions represent an arena for social conflict, attempts are constantly made to instrumentalize them.
Certainly, it is not only the enterprises that are dependent on state institutions; conversely the existence of individual states depends on the successful activity of enterprises on its territory (and beyond). Political apparatuses are structurally dependent on successful accumulation within their territory, because this secures the basis of tax assessment. For this reason “the general and top political avoidance imperative is to forgo or prevent anything that could endanger economic prosperity. Positively formulated, the state must establish, maintain, or recreate a ‘healthy investment climate’ in order to prevent enterprises from making use of their ‘negative rights of ownership’—the right not to invest” (Schimank 2009, 259, my translation).
Overall, then, it is not so much a case of examining the whether but rather the how of state intervention. For this I can draw from Polanyi, who, analogously to his concept of the three “fictitious commodities”—labor power, land, and money (Polanyi 2001), identified three problems of coordination that could not be solved by markets alone, but first required the assistance of state structures. First, in the course of creating a system of industrial relations, social security, educational institutions, and migration control policies, the supply of and demand for labor as well as the conflict between capital and labor are regulated. Second, private control of capital and land remains subject to the state guaranteed freedom of contract, property laws, rights of use, and other regulations. Third, even money, or at least the quantity of money, is regulated to a certain degree by central banks and other regulatory authorities. Polanyi’s approach can be embellished with further coordination problems: for example, knowledge, a further fictitious commodity is coordinated to a large extent by nonmarket institutions such as universities or research institutes. Finally, to ensure continued market competition, coordination efforts such as antitrust and cartel laws are implemented (Block 2005).
(2) To be able to determine the importance of distinct political systems for the formation of different types of capitalism, different mechanisms and strategies of state intervention and coordination must be taken into account. These have increased since the late nineteenth century and include, for instance, market-creating, market-regulating, and market-restricting measures. More recent studies distinguish between market-mediated ex post coordination, hierarchically prescribed ex ante coordination, heterarchic coordination regulated by processes of self-organization mediated by networks, negotiation, and deliberation, as well as cooperation built on solidarity. State rulers do not usually limit themselves to the command hierarchy but, rather, combine forms of governance in a specific way (see Jessop 2007, 207–24, Brand 2006; V. Schmidt 2009). At the same time, we must take different territorial and administrative levels into account. To examine the local state and territorial levels below the central government, I draw on relevant literature from social-science-based geography (see N. Brenner 2004; N. Brenner and Heeg 1999; Harvey 1989).
For their economic policies, modern states have recourse to direct and indirect methods of influencing the national economy. Thus, in line with Keynesian demand policy, the state can take action to achieve economic effects by implementing (anticyclical) fiscal and monetary policy measures (Aoki, Murdock, and Okuno-Fujiwara 2005). Here, the state does not intervene in companies’ investment decisions and does not plan in the strict sense, but, rather, plays a regulatory role. Indicative planning, on the other hand, goes further. The state negotiates with investors over basic principles of growth and recommends desirable behavior for the private enterprises, without, however, significantly interfering in ownership structures. By contrast, imperative planning is legally binding; the state prescribes certain modes of mandatory behavior and, when necessary, intervenes in investment decisions.
Historically, the structural interdependencies between economy and state emerge in different ways, thus constituting different forms of capitalism. From the 1930s, political authorities played a particularly important role in the various versions of state dirigism; the Keynesian intervention state in the West, the developmental state in the East and also the South. In this context, the concept of state-controlled capitalism or state capitalism was used (for early works, see Castoriadis 1988; Harris 1978; Pollock 1975; Szelényi 1982). In the more recent comparative capitalism research, Vivien Schmidt attempts to use the concept of state capitalism to distinguish countries such as France from coordinated market economies such as Germany (V. Schmidt 2000). For the analysis of East European and Central Asian transition economies, among others, the category of “political capitalism” in Weber’s sense (Eyal, Szelényi, and Townsley 2000) or state capitalism as one of its variants is used (see also Schneider 2008; D. Lane and Myant 2007). Large emerging economies are, as already mentioned, also described as state-controlled or state-permeated forms of capitalism (Nölke et al. 2015).
Because, in terms of economic policy measures, a comparison of China with other East Asian countries suggests itself, I will critically draw on concepts of the developmental state. For the success of a developmental state, a particularly important question is whether the nation-state produces sufficient social coherence to create a close partnership between the local political and the corporate elites (see Gerschenkron 1966). For this it needs first to be equipped with an effective bureaucracy that obeys the rules, and within the state apparatus there must be evidence of bureaucratic rationality, that is, an appropriate distribution of power between ministries and/or between ministerial planning staffs (Evans 1995). Second, sufficient capacity to discipline the private corporate sectors is necessary. As Chibber explains, using India as an example, these corporate sectors do not automatically assume the role of a “national” bourgeoisie prioritizing the development of the nation over commercial considerations (Chibber 2003).
(3) Further, the state itself can act as an entrepreneur. With respect to the economic policies of modern states, state intervention