Delay Or Breakthrough: The Effect Of Interest Group's Lobbying On Reform

In our economic transition progress, a kind of reform which is beneficial to improving productive efficiency has failed to be put in force in time even if there is a quite steady society; while once the situation of economy and politics has taken a bad turn, which is considered as a turning point, that delayed reform could always be carried out. In this essay, the answer to the question why the reform is put off at steady time but has a breakthrough at critical time will be tried to be given from the angle of public choice and interest groups theory.The selection of reform policy is the outcome of the course when community members carry through public choice, and is an equivalent in the game of interest groups. The last balanced policy is the option of those interest groups, local governments and central decision-makers who are considering their own interest goals. In order to ensure interests, powerful vested-interest groups usually make use of their privilege in economic and political resources to influence local governments'political decision-making by means of lobbying. As a result, those reforms which harm their interests are rejected, and the reform beneficial to the whole society is delayed. The reform which is delayed predicates that with permission of the central government possessing the power of decision-making, interests of vested-interest groups will be achieved, while interests of small and weak groups will be suppressed.For lack of efficiency, the former system obstructed economic development and social welfare advancement. Moreover, because of delay, the reform for a new efficient system has not yet been put into practice.The consequences of system rigidity are economic deterioration, increased societal contradictions and societal turbulence. Keeping the regime stability is the basic restriction on central decision-makers whose action goal transfers from the maximum of economic interests to the maximum of public welfare. The central decision-makers would make use of their decision-making power in the economy and politics to compel a system reform. Faced with the vigorous measure from central decision-makers, local governments are likely to change their actions and will gradually withdraw their sustenance for powerful interests groups. At the same time, cost on lobbying of interests groups to obtain policy greatly increases and the income reduces comparatively。Since the former balance of"cost-income"is broken, the desire of powerful interests groups to lobby begins to change. With joint effect of several participants'transformation in goals and behaviors, the former inefficient balance is broken. As a result, an efficient system beneficial to societal production is established.Based on the theory given above, this essay sets up a game model involving interest groups, local governments, and central decision-makers. In this model, interest groups lobbying local governments bring out a delayed reform. Suffering from the crisis, the transformation of interest groups, local governments, and central decision-makers in their goals and action strategy will bring about a breakthrough to the reform..It has been a proven frame of theory by a series of reforms from various stages and fields. The reform in medical system of China is a typical case. In this essay, the process of medical system reform will be analyzed by means of this frame of theory as well as a game model. From the beginning of our medical system reform in 1985, though it has taken off the heavy financial burdens on the central government, problems originated from the reform have given rise to an increased number of societal conflicts. A reform then was required but it has been delayed by reason of harming the interests of vested-interest groups. In recent years, the hardship in national economic development has emerged, and domestic crises derived from societal conflicts have been much more severe under the influence of international financial crisis. Hence, with the strong motive force from the central government, a breakthrough in reform is eventually coming.