COSMOPOLITAN CAPITALISM: LOCAL STATE-SOCIETY RELATIONS IN CHINA AND INDIA* Last revised: September 26, 2014. Kellee S. Tsai [email protected] Johns Hopkins University Hong Kong University of Science & Technology *Paper presented at the Colloquium on the Economies and Societies of India and China (CESIC), New School for Social Research, New York, October 17, 2014. An earlier version of the paper was presented at a workshop organized by the National University of Singapore’s Asia Research Institute and the Harvard-Yenching Institute. The author gratefully acknowledges constructive feedback from Joel Andreas, Erin Chung, Prasenjit Duara, Devesh Kapur, and Elizabeth Perry. 1 “I made all my contacts with local government officials when they were visiting MIT. I was a graduate student at the time, and served as their translator. They never would have spoken to me in Shanghai, but things were different when we were all at MIT.” - CEO of an IT consulting firm, Shanghai, May 2014 “Paperwork is frowned upon. Instead, this $40 billion economy runs on Post-it notes.” - Jason Miklian, “Rough Cut,” Foreign Policy, January 2, 2013 “In Yiwu, the local government has plenty of funds to support technological upgrading of private businesses. While private entrepreneurs in other parts of Wenzhou tend to migrate, Yiwu attracts traders from around the world.” - Private entrepreneur, Yiwu, Wenzhou, April 2014 Introduction “State-society relations” typically refers to the relationship between a Weberian nation-state and the citizens residing within its administratively defined and coercively enforced territorial borders. This paper departs from conventional usages of both state and society by focusing on the local state, on the one hand, and a less territorialized conception of society, on the other. The rationale for this dual definitional stretch—both downwards (local state) and outwards (transnational society)—has an empirical basis. First, the local government represents the day-to- day point of contact with “the state” for most people. Government regulations, fees for service, and public goods are generally administered through local state channels even if they are mandated nationally. The local state represents the first point of accountability for most citizens, and non-citizens for that matter. Second, limiting the scope of “society” to populations currently residing within national borders unnecessarily excludes temporary migrants and diasporic communities who continue to identify with a locality. Their inclusion in a more expansive notion of society is justified by the possibility of return migration, remittances from abroad, and the formation of transnational native place networks. Transnational migrants represent potential human, financial, and social resources for local, as well as national development. 2 Theoretically, the paper extends Albert Hirshman’s classic categorical troika of “exit, voice, and loyalty (EVL)” to the literature on new transnationalism.1 EVL serves as a deceptively parsimonious heuristic for understanding the non-exclusive relationship among the three types of strategies for dealing with one’s immediate environment. Migration (exit) may not be permanent, but even when it is, remaining abroad does not preclude deep-rooted identity (local and/or national loyalty), or meaningful impact on homeland affairs (voice). For these reasons, the reflexive association of society with domestic groups is incomplete, as is the assumption that exit is motivated by national/state-level deficiencies. Empirically, the paper demonstrates the logic of this dual definitional stretch of state-society relations by examining different expressions of “cosmopolitan capitalism” in three paired localities in China and India: 1) Wenzhou, Zhejiang/Surat, Gujarat, 2) Zhongguancun, Beijing/Bangalore, and 3) Guangdong/Kerala. The first pair of localities (Wenzhou and Surat) are the home bases of transnational networks of merchants who have developed highly reliable forms of cross-border informal finance, and in specialized industries, have gained a market share disproportionate to their populations. The second pair (Zhongguancun and Bangalore) are the Silicon Valleys of China and India, respectively. Both have developed global reputations in the IT sector in a remarkably short period of time, and have also been held up by their national governments as exemplars for return migration. The third pair of cases (Guangdong and Kerala) are long-standing exporters of labor, whose localities have been shaped—albeit quite differently—by remittances and diasporic investment. Each sub-national paired case illustrates why the conventional state-society framework should be expanded to capture the nuances of (local) state and (transnational) society relations. The paper proceeds as follows. The first section reviews existing literature that has identified the limits of the conventional definition of state-society relations by disaggregating the state, on the one hand, and de-territorializing the range of 1 Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organization, and States (New York: Cambridge University Press, 1970). 3 actors that constitute society, on the other. These insights are valuable for understanding the dynamics of transnational migration, as seen when juxtaposed with Hirshman’s EVL framework for explaining human behavior. The second part compares three pairs of localities in China and India to demonstrate the empirical relevance of a more fluid approach to analyzing state-society relations. The third section concludes. Challenges to the State-Society Dichotomy Lowering the State Since the statist revival among political scientists in the 1980s,2 multiple critiques of the Weberian conception of the state have emerged. Qualifications to the notion of the state (as a “set of institutions possessing monopoly over the legitimate use of force within territorial boundaries”) have grown primarily, but not exclusively from studies of developing, post-colonial, and newly established countries. In the latter contexts, the state is more likely to fall short of key components of Weber’s definition. States may be “weak” because the political system is not well institutionalized compared to the authority of local social forces.3 States do not necessarily monopolize the use of violence or enforcement of national security.4 And the territorial boundaries of the state may be unsettled.5 Yet many internationally recognized nation-states are characterized by these definitional deficiencies. While one could object that deficits in one or two parts of the Weberian definition does not undermine its validity for all the other states that are adequately described by it, another line of critique concerns the narrowness of focusing on the 2 The emblematic volume for the statist revival remains Peter Evans, Dietrich Reuschemeyer, and Theda Skocpol, eds., Bringing the State Back In (New York: Cambridge University Press, 1985). 3 Joel S. Migdal, Strong Societies and Weak States: State-Society Relations and State Capabilities in the Third World (Princeton: Princeton University Press, 1988). 4 Robert Mandel, Armies without States: The Privatization of Security (Boulder, CO: Lynne Reinner, 2002); Vadim Volkov, Violent Entrepreneurs: The Use of Force in the Making of Russian Capitalism (Ithaca, NY: Cornell University Press, 2002). 5 Hendrik Spruyt, Ending Empire: Contested Sovereignty and Territorial Partition (Ithaca, NY: Cornell University Press, 2005); Crawford Young, The African Colonial State in Comparative Perspective (New Haven, CT: Yale University Press, 1994). 4 central state apparatus. Well before the resurgence in state-centric theorizing, various studies pointed to the critical role of local states in sub-national governance.6 Charles Tiebout, for example, highlighted the relationship between local provision of public goods and citizens who could “vote with their feet” by moving to other localities.7 Others detailed the importance of local leadership in mediating among diverse interests and urban redevelopment.8 In the 1990s, the study of China’s reform era political economy drew attention to the impact of fiscal decentralization in incentivizing the local state to promote economic development. Jean Oi’s study of rural industrialization introduced the concept of “local state corporatism,” whereby local states were depicted as being organizationally similar to business corporations.9 Economically motivated local states in China competed with one another in various industries in a manner dubbed “market-preserving federalism;”10 and engaged in “competitive liberalization” to attract foreign direct investment (FDI).11 Distinguishing between the central state writ large and sub-national governments is an initial step in acknowledging the potential agency of local states. Further distinctions can be made among local states in different regions. In large decentralized countries, localities pursue varying political and economic strategies; and indeed, some local states are more predatory than developmental. In Russia, governmental performance varies provincially.12 In Italy, the effectiveness of 6 Jeffrey M. Sellers, “State-Society Relations Beyond the Weberian State,” in Mark Bevir, ed., Handbook of Governance (London: Sage Publications, 2010), 130-131. 7 Charles Tiebout, “A Pure Theory of Local Expenditures” Journal of Political Economy 64 (1956): 416- 424. 8 Robert Dahl, Who Governs? (Yale University Press, 1961); Clarence N. Stone, Regime