Redistributive power, rent-seeking ability, marketability, and life chance: A power generation theory of the mechanism of social stratification in transition-era China

Based on Szelenyi's institutional perspective on social inequality, this study develops a "power generation theory" to explain the mechanism of social stratification in contemporary China. This theoretical construction is an attempt to integrate the analysis of socialist domination put forward by Dahrendorf and Djilas, the new institutionalist economic analysis of property rights, and Sorensen's conceptualization of rent into an integrated institutionalist framework. This new theory attempts to unravel how and why the coexisting privileges of redistributive power, rent seeking ability, and marketability constitute the dynamic basis of social stratification in the institutional setting of the "socialist market economy with Chinese characteristics".; The author argues that under unreformed Chinese totalitarian socialism, the basic institutional arrangement was characterized by the administrative principal-agent structure of the management of state-monopolized public productive assets, and the administrative erosion of the property rights of human capital. These institutional arrangements determined that human capital could only combine with productive assets by "non-market trade", and that surplus could only exist as state rent, rather than profit. Under such a condition, state public power was exerted not only as rent power to claim residuals, but also as redistributive power to allocate the extracted rent. Redistributors favored themselves and their political loyalists in their redistribution of rent, which resulted in inequalities under the social stratification system. However, the state rent power could not be converted by the administrative elites into their rent seeking ability for direct economic interests, because the state rent was efficiently prevented from being dissipated by a highly centralized fiscal system and other institutional arrangements, with the addition of the constraint of ascetic ideology.; The principal-agent model has been altered as a result of marketization and the decentralization and profit-sharing reform, and has now been granted the property of contract, however its administrative characteristics have been retained. This kind of principal-agent relationship with properties of both political administration and market contract, together with the market institute that is embedded within the socialist bureaucracy, constitutes the institutional basis of the social stratification in market transition. These institutional arrangements determine that (1) public power continually exerts an influence on the distribution of state rent as redistributive power, (2) public power generates rent seeking ability by which the administrative and managerial elites can gain direct benefits from power-rent exchanges, and (3) marketability also has an effect on people's life chance insofar as the market mechanism counts, given that barriers have been set by government authorities. Thus, these three coexisting dimensions of privilege determine people's life chance in China, and constitute the dynamic basis of social stratification.; The hypotheses on the existence of income and housing inequality that were based on this theoretical framework were well supported by survey data with a sample size of 846 that were collected in Wuhan in 2003. The research findings suggest that the proposed "power generation theory" offers a better explanation than the previously dominant "power transition theory" and "power persistence theory" for why different kinds of power elites are all able to enjoy life chance advantages, be they bureaucrats, technocrats, or managers of public firms.