Utopia and local state corporatism

Gilbert and Sullivan made their names by mocking the absurdities of British life in the late 19th century. Some of these absurdities have persisted into the present day, which lends a surprising sense of currency to certain parts of G&S plays. In this post, I discuss one connection between the G&S play Utopia and modern China. The thread that ties Utopia and China together is the notion of corporations.

 

Utopia, Ltd.

Arguably the worst play that came out of the partnership of G&S was Utopia, Limited; or The Flowers of Progress (paraphrasing Greg Anderson: “Some people ask me why there is a second act to Utopia, since at the end of the first act it seems like all the conflicts are resolved, to which I reply, why is there a first act to Utopia?”), but for my purpose here artistic merit isn’t important. The plot of Utopia is pretty convoluted, but basically it concerns a Hawai’i-like kingdom deciding to adopt British customs whole hog. As part of adopting British customs, everything on the island becomes its own corporation — the government, individual people, etc. — and float shares on the stock market. (A side note: William Rehnquist was apparently a big fan of G&S. I wonder what Judge Rehnquist would’ve thought of his court’s decision in the Citizens United decision, which found that corporations are people and so have the same free speech rights as real human people.)

 

Chinese local state corporatism

In 1992, Jean Oi (a political scientist) wrote a famous paper about an interesting pattern of state-led development in the then decade-old Chinese economic reform era. China has a long history of state-led development that goes back way before the communists took power, but historically most of this state-led development was organized by top leaders in the central state. (This pattern of central-state-led development is pretty common, and is the case in the Civilization / Alpha Centauri video game series. In some of the games, you can choose between centrally planned and free market economics.) Oi observed a phenomenon in the early reform era in which development was led by lower levels of government, not the central government.

In this pattern, local officials would decide on a business for their municipality to specialize in, and then organize local citizens to run that business — produce goods, find customers, distribute goods, etc. Oi named this phenomenon “local state corporatism” because local governments were acting like profit-seeking companies. In Oi’s words: “Local officials act as the equivalent of a board of directors and sometimes more directly as the chief executive officers. At the helm of this corporate-like organization is the Communist Party secretary.” Actual patterns of local government behavior have evolved over time, but it remains the case that local governments in China are often heavily involved in organizing economic activities in ways that would be unusual in the US.

 

Wall Street Journal story

OK, so in local state corporatism, government acts like a company, and in Utopia, government legally becomes a company. The parallels between Utopia and Chinese local state corporatism are interesting. But it gets better!

The Wall Street Journal‘s end-year retrospective on Chinese economic reforms included the following sentence: “The two most indebted parts of the Chinese economy are companies and regional governments, and both could benefit from a fresh channel to raise cash via the stock market.” This probably refers to potential stock market listings of companies that are owned (fully or partially) by local governments. If the companies can raise money through the stock market, then they don’t have to take on as many loans. Also, maybe regional governments can sell parts of their stakes in the companies to help pay off debts. However, the above direct quotation reads naturally as indicating that regional governments want to sell shares in themselves on the stock market. If that second reading were to come to pass, then we will have gotten to Utopia in a very literal sense: Governments become corporations with shares traded on the stock market.

(As much as I would like this to happen for the entertainment value, what this really means is that a minor error slipped by the WSJ copy editor.)

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