POLITICAL, ECONOMIC AND SOCIAL

RATIONALE OF WELFARE AND

SOCIAL SECURITY
A COMPARATIVE ANALYSIS OF
MALAYSIA AND CHINA(1)
Yi Feng

Claremont Graduate University

Ismene Gizelis
University of Missouri-St Louis
Jieli Li
Ohio University

Abstract
Despite common beliefs regarding the damaging side effects of
income redistribution, equity and efficiency can coexist. Institutional
stability depends on the consensus established between the government and
the population. A relatively egalitarian distribution of resources is
conducive to political stability and economic development. By contrast,
long-term economic development can be undermined by skewed wealth
distribution. Equity and efficiency may be compatible under a growthoriented government, but not so under a government that focuses on its
short-term survival strategies. A welfare system becomes efficient if the
short-term political goals do not undermine the long-run goals of economic
development. The cases of China and Malaysia are further compared and
analyzed in this theoretical framework.

Introduction
It has become apparent in recent years that fast-track economic
reform in China has generated an immediate urgency to create a safetyvalve mechanism to cope with public stress or frustration resulting from
massive unemployment, rapidly aging population, and widening gap

International Journal of Economic Development,

1(4), 1999: pp. 369-397.

370

Political, Economic

between the rich and poor in social stratification. The attempts made to
establish a social security system aim at ensuring social order and stability
in China.
China is now in such a critical transition that the social
organizational structure upon which the traditional social protection
system has been based is falling apart, whereas a new social organizational
structure has yet to take place to meet the needs for a new social security
system. As Dreze and Sen (1991) point out, the Chinese governments
success during the pre-reform period in enhancing the quality of life was
associated with inefficiencies and constraints in the economy and a sever
neglect of the market. In the reform period, there is evidence that there
has been some set-back in the sharp decline of mortality rates and related
features of the quality of life and that this may be connected with some
withdrawal from public provisioning (Dreze and Sen, 1991: p. 30). As the
market plays an increasingly important role at the cost of central control
and as traditional social protection breaks down, a new integrative
mechanism is required for continued success of its economic reform.
Socio-economic theories consider the welfare state a response to
both industrialization and democratization (Wilensky, 1975; Flora, 1981;
Pierson, 1991). Both processes alter fundamental social structures and
create the necessity for a mechanism to integrate the society. The primary
role of the welfare state is to build the necessary social cohesion for
sustained economic development. To secure the participation of all socioeconomic classes in the productive process, the government needs to
integrate the population. To that extent, the two functions of the welfare
state resource redistribution and social cohesion are complimentary
rather than antithetical.
Before we explore Chinas efforts to establish a modern welfare
state, we should understand why and how welfare programs intervene in
the redistribution of resources and whether they can result in desired policy
outcomes. In that regard, this paper deals with a broader issue than other
papers in this collection. What we are concerned about are not only social
security policies but also various kinds of welfare transfer. The second
section of this essay discusses the political and social rationale for social
security and welfare systems. The third section examines the consequences
of wealth redistribution on economic growth. The fourth section analyses
the difference between welfare programs that have short-run political
consequences and those that have long-run effects on economic growth.
The fifth section summarizes the Malaysian experience with social welfare

Political, Economic

371

reforms and their implications for China. The sixth section focuses on the
emergence of a new social security and welfare system in China.

The Raison dtre of the Welfare State: An Overview

Social security and welfare transfers are only some of the many
mechanisms for redistributing resources. The welfare state as an
institutional framework is at the core of the interaction between economic
growth and economic equity, which reflects social justice as well (Baldassari
and Piga, 1996: pp. 257-258).(2) Normatively, the system per se of social
security can be considered a public good. The market would not provide the
appropriate level of social security for public consumption because of the
problems involving overlapping generation incentives. In this connection, it
is also assumed that the market will fail to achieve socially optional income
distribution (Dilnot, 1989: p. 5). Governments can adopt a variety of actions
to reduce poverty and disparity. In this perspective, a government is seen
as the provider of a public good to correct market failures. In this essay, we
focus on the incentive of the government to provide this public good as a
means of promoting a cause upon which its tenure of office is pivoted.
The welfare state as an institutional framework was initially
established to build up consensus within the population by way of
redistributing resources. It remains a formidable task to define the term
welfare state, although welfare programs have been in existence since the
nineteenth century. A variety of elaborate programs by government and
non-profit organizations fall under this category. In its narrowest
definition, the phrase welfare state denotes specific policies and services
provided by the state, which usually exclude educational and military
expenditures as well as public investments.(3) In a broader sense, welfare
state refers to either a specific type of polity, a form of the state or a
certain type of society (Pierson, 1991: p. 7). Despite the popular view that
welfare payments mainly assist the poor, these payments are only a small
portion of government transfers. Thus, in many cases the term social
security spending is preferred to welfare state so that the role of social
security in maintaining a minimum income level can be delineated (Pampel
and Williamson, 1988: p. 16).(4)
The core of the western welfare state has been political and social
security, as well as equality. In the modern welfare state, social security
has been associated with the expansion of social rights and comprehensive
social citizenship. Both elements are associated with social inclusion and
policies. The social welfare state distributes either direct funds or services

372

Political, Economic

in-kind to secure the working class from such contingencies as involuntary

unemployment, sickness and injuries, maternal leaves, and old age
retirement.
The basic assumption of this study is that governments use welfare
state programs to integrate segments of the population into social
citizenship. Thus, under the present theoretical framework, the most
critical function of the welfare state would be to protect the political system
against disruptive changes. Political instability is often the outcome of an
unequal distribution of economic and political power within the society. As
welfare institutions intervene and alter the original allocation of resources
in the society, governments are able to mitigate social grievances and to
promote political stability, interfering with the efficient but often socially
unacceptable distribution of income in the market (Scully, 1991: p. 200).
We can distinguish three primary goals of welfare programs:
redistribution, efficiency and social cohesion in the society. Redistribution
targets the promotion of equality or social justice. It is presumed that the
state intervenes in the process of redistributing resources. Ironically, the
quest for social security originates in the liberal arguments for individual
freedom and limited action by the state. However, it is only the state that
can provide social security and welfare programs, as the state is equipped
with institutional mechanisms in modern society to deal with the demands
for entitlements. States have the ultimate authority and power to ensure
redistribution.(5)
The problems for the welfare expenditures arise from the supplyside. For instance, who is going to bear the costs? At what point do these
costs produce net benefit to the society? Does the welfare state lead to
moral hazard and free riding? In answering all these questions, what
remains critical, however, is that the welfare state must be based upon a
socially defined conception of what amount of welfare is optimal based upon
social consensus (Offe, 1994:pp. 87-90).
Finally, the goal of efficiency becomes pertinent, because of market
imperfections (e.g., adverse selection and externalities), while social unity
(i.e., consensus building) is one of the primary objectives of the welfare
state for social integration. This aspect of the welfare state remains
secondary in the literature, although it deserves further exploration as a
source of positive externalities of government intervention.
Even though inefficiencies may arise from the price discrimination
process (redistribution includes different prices to different segments of the

Political, Economic

373

population and may create disincentives), there is no substantive trade-off

between redistribution and the other goals of the welfare state (Goodin and
Le Grand, 1987). The debate of equity (redistribution of resources to reduce
inequalities of wealth) vs. efficiency (maximum production given available
resources) remains an important issue for economic theory, since Kuznets
(1955) and Kaldor (1956) reintroduced the topic in the mid-1950s.(6) For
any modern industrialized state, the relationship of economic efficiency and
social equity touches upon the nature of political and economic institutions.
Institutional political stability depends on the consensus established
between the government and the population (North and Weingast, 1989;
North, 1990). A relatively egalitarian distribution of resources is conducive
to political stability and economic development. By contrast, income
inequality can be erosive to the stability of the political regime. Sustained
economic development can be undermined by a severely unequal
distribution of income. For instance, Malaysias New Economic Policy
(NEP) is an informative illustration of using welfare transfers to reduce
income inequality among the three ethnic groups and to maintain regime
stability in the long run.
The relationship between equity and efficiency enhances the
argument that resource redistribution and political consensus building are
compatible as well. The objective of redistributing resources is to avoid
political violence caused by economic inequality. In this context social
cohesion implies a core of values, perceptions and beliefs shared by a
critical mass of the population. These values permeate various ethnic,
social, religious or demographic groups that may divide the society. By
enhancing political stability, welfare spending indirectly affects the level of
economic growth.(7)

The Economic Significance of Income Inequality

Economists choose to base their models on the political mechanisms
of income distribution and economic growth, assuming democratic processes
in which the median voter determines the tax rate. Intuitively, when the
decisive voter is poor relative to the average voter, he faces a relatively low
opportunity cost of redistribution through tax prices. Consequently, if the
mean income is above the median income, a majority of voters can win a
redistribution of income from the rich to the poor. As shown by various
economists, inequality tends to be positively associated with the level of
taxation and redistribution (Romer, 1975; Roberts, 1977; Meltzer, 1981).

374

Political, Economic

Using this rationality as their conceptual foundation, Alesina and

Rodrik (1994), Persson and Tabellini (1994) and Perotti (1993) all analyze
the effects of income distribution on growth through the channel of a public
tax-collecting sector, which is perceived to have some consequences for
growth in terms of either public investment in production services or simply
through redistribution.(8) The key assumption for all of these models is the
median voter theorem, in which the median-voter determines a tax rate
and a balanced budget, and thus affects economic growth through the
public sectors inputs in the marketplace. In this process, the political
mechanism and the economic structure are integrated.
Alesina and Rodrik (1994) predict that the greater the inequality of
wealth and income, the higher the rate of taxation and lower the rate of
growth. The key feature of their model is that individuals differ in their
factor endowments of capital and labor. Growth is driven by the expansion
of the capital stock, with the aggregate production function as linearly
homogeneous in capital, and by productive government services financed by
a tax on capital. As government services are productive, a small tax on
capital leads to the provision of the public good for the benefit of all.
However, different individual endowments of capital and labor imply that
individuals have different ideal rates of taxation. An individual whose
income completely derives from capital returns prefers a tax rate on capital
that maximizes the economys growth rate. Other agents prefer a higher
tax, with a subsequent lower growth rate for the economy. The lower an
agents relative capital income, the higher his ideal tax rate and the lower
his ideal growth rate. When the median voter theorem is applied, the
theoretical implication is that the worse the median voter is endowed with
capital, the higher the tax rate and the lower the growth rate. As the model
specifies that the redistribution of income is monotonically and negatively
related to growth, income inequality is predicted to have an adverse impact
on the subsequent growth rate.
Persson and Tabellini (1994) also predict that higher inequality is
associated with lower growth. The inverse relationship between income
inequality and growth in their model is more immediate than in that of
Alesina and Rodrik (1994). The individual born poorer or richer than
average has, respectively, less or more capital than the average person.
Thus, individual preferences for redistribution can be ranked by their
idiosyncratic endowment. The equilibrium political variable here is
redistribution represented in the value preferred by the median voter born
with the median endowment. A better endowed median voter is in favor of
relatively less redistribution. As redistribution monotonically depresses
growth, income inequality, as represented by a poorly endowed median

Political, Economic

375

voter, will lead to relatively high income redistribution, in turn causing a

decrease in growth rates.
Perotti (1993) distinguishes between the role played by the median
voter in a poor country from that in a rich country. In a poor country,
growth is engendered by the upper income class investment in human
capital. The two requisite conditions for growth in a poor country are that
the upper income class is initially rich enough, and that the middle income
class is close enough to the upper income class not to have an incentive to
tax the rich heavily, understanding that such taxation would prevent the
rich from investing in human capital. A rich country faces just the opposite
problem, as continued growth in such a nation depends on the low income
class investing in human capital. Accordingly, the two conditions for growth
in developed countries are that the low income class is not initially too poor
and that the middle income class is close enough to the low income class so
that sufficient income redistribution would help the low income class invest
in its human capital. Indeed, the median voter in a rich country trades off
more redistribution than presently desired for a higher per capita income in
the future, possible only if the low income class can invest today.
In addition to the above connection between growth and income
distribution through fiscal policies such as taxation, the linkage between
the two has also been established through various sociopolitical instability
(SPI) models. Some scholars argue that income inequality causes political
instability when the poor expropriate the wealth of the rich through
informal and illegal means. This will result in further deterioration of
property rights protection and a rise in non-productive activities to obtain
income (for instance, through illegal means such as burglary and armed
robbery) (Zak, 1997; Alesina, 1996; Gupta, 1990; Venieris, 1986).
When development does not benefit the low-income classes, their
frustration grows and their opportunity cost of engaging in non-productive
means to make a living becomes smaller. Therefore, as the distribution of
wealth widens, sociopolitical instability increases. Sociopolitical instability
caused by income inequality adversely affects growth for three reasons, as
summed up by Zak (1997). First, SPI may reduce growth in terms of income
redistribution policies implemented to alleviate sociopolitical instability;
second, the government may try to coerce the opposition, resulting in the
diversion of resources from productive sectors; third, SPI may lead to the
downfall of the current government, adding to political uncertainty. The
empirical results of Alesina and Perotti (1994) demonstrate that income

376

Political, Economic

inequality causes sociopolitical instability, leading to a reduction in

investment.
A third approach to income distribution and growth, as summarized
by Perotti (1996), focuses on income distribution and investment, assuming
that agents borrow to improve their future position. Galor and Zeira (1993)
assume that investment in education will enhance future growth. If the
constraints on borrowing are small, people can borrow in the present to
invest in future gains through education. But if it is difficult to borrow for
education, those without financial resources must forego education, trapped
in poverty for generations. Therefore, given sufficiently large budget
constraints on education investment, income distribution will matter a
great deal in promoting or inhibiting growth, as leaving a large portion of
society uneducated results in a shortage of the human capital necessary for
continued growth. Furthermore, Galor and Zhang (1993) extend the study
of education and income distribution to that of fertility. Given the
distribution of income, a higher fertility rate decreases the average
resources for each childs education; with budget constraints, investment in
human capital will be further reduced. Relatively unequal income
distribution, combined with high fertility rates, thus leads to low
investment in education.
A fourth approach endogenizes the fertility decision, which is subject
to effects from both income and substitution. The income effect refers to the
fact that when income increases, the demand for children increases as well,
thus resulting in an increase in fertility; the substitution effect implies that
when income increases, the opportunity cost for having more children
increases, thus leading to a dampening effect on fertility. For the extremely
low-income classes, the income effect dominates the substitution effect, as
the opportunity cost foregone as the consequence of having children is low.
Thus a small increase in human capital leads to a general increase in
children. For high-income classes, the substitution effect dominates the
income effect, as the opportunity cost of having additional children is
relatively large. In this context, children are inferior goods for highincome classes, implying that a human capital increase will lead to fewer
children. Redistribution from the rich to the poor will likely increase the
opportunity cost of having children for the low-income group, when
appropriately large redistributed wealth translates into investment in
human capital. Therefore, income redistribution may induce those who
cannot afford education to invest in human capital; the increase in human
capital in the society will then lead to economic growth.(9) It should be
noted that even though the argument based upon the income-fertility nexus
appears to have the same implication as those based upon the income-tax

Political, Economic

377

or income-SPI nexus (that is, equal income distribution leads to growth),

the latter two cases treat income distribution as the initial condition, while
the former treats it as the equilibrium state. In other words, income
redistribution as a means of reducing income inequality is negatively
associated with growth in the income-tax and income-SPI models, but it is
positively associated with growth in the income-fertility model.

Political and Economic Goals of Social Security and

Welfare
With some exceptions, equity and efficiency are compatible under a
government that is growth-oriented, but not so under a government that
identifies its short-term survival as the highest priority.(10) The former
government is driven by a long-run development goal that requires shared
economic growth among a wide range of social groups. The latter
government utilizes social security and welfare to satisfy social and
political groups vital for its survival. While the former government ensures
relatively equal distribution of wealth, the latter government may increase
or decrease wealth inequality, dependent upon who the most important
social groups are. When political and economic goals are consistent, equity
and efficiency can reinforce each other in the long-run.
Welfare states that are sustainable and consistent in their political
and economic goals can both reduce income inequality and enhance the
long-term stability of the political system. In the short-term, welfare
programs reduce political instability, thus helping the government
maintain office. Dependent upon whether the government is growthoriented or survival-oriented (in a short-term sense), redistribution will not
necessarily reduce income inequality, even though it does reduce political
violence. Governments may choose to subsidize social and political groups
essential for their survival, driven by their short-term interest in remaining
in power. In this case, inequality may actually increase among various
social groups.
It is well established that political stability and economic growth are
interconnected (Barro, 1991; Alesina, 1992; Chen, 1996; Feng, 1997).
However, few researchers connect income distribution with political
stability. Mullers (1985) article deals with regime type, income inequality
and political violence. He concludes that there is a positive relationship
between political instability and income inequality. His results confirm that
a country cannot emphasize economic growth, while ignoring the macroeconomic effects of income inequality. Moreover, intermediary regimes are

378

Political, Economic

prone to political violence compared to those that have either low or high
levels of political violence (Muller, 1985: p. 60).
The critical question is whether income inequality causes political
violence. If income inequality does not have any significant effect on the
level of political violence, then no country should consider income inequality
a political issue.(11) The relationships between political violence, income
distribution and welfare expenditures are critical since they determine the
extent to which income inequality causes political violence. There is no
indication that extreme inequality is the necessary and sufficient condition
for political violence. What is critical is how people perceive and measure
their living standards with their conceptions of how life should be.
Economic transformation changes peoples conception about living,
thus increasing the likelihood of political violence. Similarly, economic
growth itself is not sufficient to inhibit civil violence if a large number of
people believe that their living standards are on the decline (Davies, 1962;
Briton, 1938; Chong, 1991: pp. 236-237). A rapidly developing country like
China or Malaysia faces a great challenge in balancing its political goal of
stability and economic goal of sustainable growth. Social security and
welfare programs can play an important role to achieve this balance.
A variety of activities from protests and strikes to rioting and
revolutions determine the degree of political violence and the
survivability of a political system. For any government, controlling political
instability remains a practical goal. Aside from the eradication of the
causes of political instability, it is commonplace among all types of political
systems to mobilize the population around institutions that are acceptable
to either a significant majority or essential segments of the population.
Welfare institutions have been created as a response to the likelihood of
political violence (Germany) or as an effort to unite the whole population in
the common effort of warfare (England). Thus, welfare programs constitute
an effort by states to build social cohesion and reduce the possibility of
political violence.
If we accept the argument that welfare programs reflect an attempt
to create social cohesion, along with redistributing resources, then we can
explore how the state uses its programs to promote sustained economic
growth. Political goals of income distribution and political stability are
strongly related to the level of economic development for a growth-oriented
government. As the literature indicates, each variable is a critical part of a
larger puzzle regarding the choices that a government can make.

Political, Economic

379

Thus, when redistribution targets certain groups that can improve

the quality of investment, it should affect economic growth positively.
Obviously, institutions in the welfare state should adjust themselves to the
existing economic and social structures so as to improve efficiency. The
evolution of institutions in developed countries indicates that the process of
initially empowering the middle class started early in the process of
economic development (Ames, 1977; North, 1989; Miller, 1989; Downing,
1988). Redistribution that supports the middle class or segments of the
middle class is also beneficial to support the political regime. Political
stability may imply that the government needs to strike bargains with
groups that are essential to maintaining the political coalition. In the short
term, welfare transfers can be used as a means to obstruct political
opposition and avert political instability, even though it may accentuate an
unequal distribution of income.
In this scenario, governments redistribute resources to these
coalitions that are essential for their political survival. By doing so,
however, the governments may accentuate the existing levels of income
inequality. As is analyzed earlier, the population is more prone to revolt or
express dissatisfaction during an economic transition. Thus, the impact of
income inequality on political instability can be stronger for the middle
range economies that are industrializing. On the one hand, they need to
build welfare programs to prevent significant threats to political instability.
On the other, they have to assure relatively equal wealth distribution from
the point of view of a long-run development strategy.

The Case of Malaysia

What happened in Malaysia could be a lesson for China in its
transitional economy. Until 1969, when the worst ethnically related civil
violence occurred, Malaysia had been relatively stable and peaceful. The
ethnic violence that erupted in Malaysia was related to the dissatisfaction
of the local Malays with their lower economic status as compared to that of
the ethnic Chinese and even the Indians. The critical socioeconomic
element in Malaysia is the disparity between political and economic status,
which stems from not only the ethnic division, but also the division between
rural and urban populations. This unique characteristic of Malaysian
politics led to welfare programs that extensively targeted income
redistribution as a way to mitigate political violence and to increase longrun economic growth.

380

Political, Economic

Malaysia remains an interesting case for the dual goals of political

stability and economic growth. Its population primarily consists of Malays
(55 percent), Chinese (35 percent), and Indian (10 percent).(12) Among the
three ethnic groups, Malays tend to live in the rural area. Chinese are
mostly urban residents with incomes twice as large as the Malays. Indians
follow in between the Chinese and the Malays, many of them working as
rubber tappers. Although the Chinese are by far the wealthiest group,
politically the Malays have control. The political stability of Malaysia
depends on the balance among the three ethnic groups and particularly
between the Chinese and the Malays (Root, 1996: pp. 70-71).
It should be noted that historically, peasant revolutions were far
more intense and broader in scope than strikes or riots in cities. In
developing countries, the working class is very small. Hence it is the rural
population whose revolt threatens the government. For developing
countries that are in a transitional phase of their socio-economic
development, unequal distribution of resources between the rural and the
urban populations can increase the extent to which the political system is
threatened. Such a perspective has broad and important implications for
countries like Malaysia and China.
The extremely slow process of income distribution led to racial
conflicts on May 13, 1969 and the preexisting formula for peaceful cohabitation of the three ethnic groups collapsed. Riots started in Kuala
Lumpur when Malays demanded the expulsion of non-Malays.(13) The
Malay political leaders (including the current Prime Minister Mahatir)
argued that economic and political equity among the three ethnic groups
was necessary for harmony to be re-established. In other words, Malays
demanded to become active economic actors as well (Root, 1996: pp. 71-72).
Following that period, the Malaysian government reorganized the
economic and political foundations of the country, which aimed at
eradicating ethnic tensions. The Malay government implemented the New
Economic Policy (NEP), a plan that operated from 1971 through 1990 with
a dual goal: the eradication of poverty among all Malays and a reduction in
the economic disparities among the ethnic groups.
Based on the solid foundations of solidarity between the private and
public sectors, NEP was a rather successful program. An overview of the
NEP program shows that it benefited the rural and poor segments of the
population (Malay in its majority). There are three primary channels of
redistribution that the Malaysian government followed: education, health

Political, Economic

381

and welfare transfers. The combined federal expenditures per capita on

education, health and pensions were highest in rural regions where the
Malays live, and lowest in the area of Selangor where most of the Chinese
reside (Meerman, 1979: p. 7). Overall, NEPs policies were effective in
redistributing resources and improving the quality of human capital, which
had significant ramifications for economic growth and development
(Hammer, 1995: pp. 540-541).
In a dynamic sense, the unequal distribution of income between the
rural and urban sectors leads to a continuous movement of the population
towards the urban areas. This trend has both political and economic
implications. Primarily, it puts pressure on the government that tends to be
more responsive to the needs of the urban population. The fear of urban
uprising, such as riots and strikes, leads to extensive government programs
to support the urban population. However, most of these programs work at
the expense of the rural population. In the agricultural sector, the need for
protecting people from unexpected contingencies, such as disease or
retirement, or work related accidents, is low as the very socio-economic
structures of that sector allow for other mechanisms to protect the
population. Once people move to the cities, the traditional methods of
protection against contingencies often related to extended families
structures break down.
How does this discussion relate to the distinction between the
political and economic goals of welfare transfers? In the long-term, a
growth-oriented efficient welfare state may reduce income inequality.
Malaysia is a good example of how a stable political system utilized
resources to redistribute income for the purpose of long-run growth and
met high standards in both efficiency and equity, despite a rather divided
population (Hammer, 1995).

The China Experience

There is clearly an association, as indicated in the above discussion,
between resource distribution and political stability that is crucial to the
balance of the short-term goal of political survival and the long-term goal of
economic development. The China case is quite similar to the Malaysian
experience in many aspects, despite the differences in territory and
population. One of the major similarities can be seen in the government
effort to employ the social security system as a means to achieve social
cohesion as an end by distributing surplus resources to balance out the
interests of rural and urban populations in order to reduce social tension.

382

Political, Economic

The other major similarity is the way in which the government mobilizes
both the state and private resources to finance the extensive social security
scheme through sustained economic growth. As in the case of Malaysia,
China is faced with a policy-making dilemma namely it must strike a
balance between the need to maintain political stability and the necessity
to redistribute resources such that sustained economic growth will not be
hampered. The following will discuss the emerging social security system in
China as an initial effort in the development of a modern welfare state and
the potential problems that may arise given such an endeavor.
As many scholars point out, the reason why China did not
experience uncontrollable social turmoil in the Mao years is that Chinas
traditional social protection system, developed in the 1950s and 1960s,
played a crucial role in ensuring political stability. This traditional social
welfare system became effective because it was built into the highly
centralized administrative arrangements of social control mechanism, a
unique experience in the pre-reform period (Li, 1996). The principal feature
of the traditional system is that it operated under the command economy at
three levels of coverage. The state protection program covered the
employees of government, military or state-related organizations. The
enterprise protection program covered those working in state-owned
enterprises, mostly in urban areas. The collective protection program
covered peasants organized into production teams in rural areas. The state
protection program was entirely financed by the state treasury, and
considered the best of all three programs. While the enterprise protection
program provided for employees was financed by each state-owned
enterprise through its productive earnings, the collective protection
program was primarily supported by funds allocated from economic gains in
farming. Thus the traditional social protection system functioned as a
closed system with the three programs basically isolated from and
independent of each other.
The system eventually turned into a source of societal instability as
the system became not only a heavy financial burden to the state, but also
the source of social tension due to the unbalanced distribution of limited
resources. The economic reforms initiated by Deng Xiaoping have greatly
changed the economic landscape of China in the past twenty years. In
particular, economic restructuring has greatly weakened the old social
control mechanisms. The traditional social welfare program has become so
incompatible with economic restructuring that it is falling apart as a result
of decentralization process characterized by the rapid growth of private
industries and radical reform in state-owned enterprises. Demographic
change caused by fast urbanization has triggered massive labor and

Political, Economic

383

population migration, creating difficulties for social control. A current

challenge is to balance the interests of those working in public and private
sectors in terms of social welfare coverage, as a large portion of agricultural
population has moved into non-agricultural sectors, and as semi-private
and private industries are playing an increasingly important role in the
national economy.
As China is in a critical transition of economic development, political
stability is now the top priority on the governments agenda. The new social
security system will inevitably become a test ground for the states ability
to mobilize resources to achieve the goals of social cohesion as well as longterm economic growth.
The macro framework for a new social security system is proposed
as consisting of six independent subsystems, and yet they are in close
coordination with one another to have a wide range of coverage (Zheng,
1997). These six subsystems are social assistance, social insurance, social
welfare, medical care, military personnel protection, and supplementary
protection programs. Specific programs under each subsystem cover old-age
insurance, work-related injury insurance, unemployment insurance,
medical insurance, and pregnancy insurance. They constitute the core of
the whole system.
The major difference between the traditional system and the new
system is that there is a transformation from a closed system to an open
system in which all six subsystems are coordinated with each other to
create a comprehensive coverage. For example, old-age insurance could be
financed through multiple sources cutting across two to six subsystems.
Unemployment insurance is designed to cope with social tension arising
from a fluctuating market economy. The new system also extends its
coverage to the vast rural population that has historically been considered
second citizens as compared with the urban population in terms of social
welfare benefits.
As previously discussed in the case of Malaysia, whether or not a
comprehensive social security scheme can be successfully implemented
depends critically on how well the relative balance can be achieved among
the redistribution of resources, the decrease in wealth inequality, the
increase in political stability, and long-run economic growth. To a large
extent, this balancing process determines how effective the social welfare
programs can be to help minimize the degree of threat to the political
regime. In other words, badly implemented social welfare programs will
only invite social unrest as resources are distributed disproportionately in

384

Political, Economic

society. In reality, most welfare transfers are targeting urban populations.

Moreover, pensions are especially designed to support the retired working
force that lose their income as they exit the working force. Pensions, as
such, have small relevance to peasants. The experiences from other
developing countries demonstrate that the social security system, if not
carefully planned and carried out, will increase social inequality rather
than narrow the gap between the rich and the poor. Clearly it is not an
easy task.
Structural barriers and progressive extension of the welfare
programs determine the restricted coverage of the population. In developed
countries the majority of the labor force consists of urban salaried
employees, whereas in developing countries the labor force is still primarily
concentrated in the agricultural sector or self-employment. In developing
nations, self-employed workers or farmers have low incomes and they are
unable to contribute to the social insurance system. Furthermore, the
existence of an extensive informal sector prohibits an additional segment of
the population from seeking coverage from the welfare programs. These
demographic restrictions imply that the universal welfare state that exists
in European countries is not possible for developing countries. Moreover,
accumulated economic crises impose fiscal constraints on the economies of
most developing countries and their ability to expand welfare programs to
cover a large segment of the population (Mesa-Lago, 1991: pp. 186-187).
The major problem that encounters China in its effort to build up a
comprehensive social security system is a structural one. It remains an
uncertainty whether China will reform its economic and political
infrastructure to such extent that it could fit in an open, market-oriented
social security system to be supported by societal wealth. Recently, this
uncertainty has been reinforced by structural constraints that have slowed
down the transition of state-owned enterprises toward semi-privatization,
which will adversely affect the efficiency of the emerging social security
system.
Another problem related to the structural constraints is a
fragmented administrative system in terms of resource allocation for
welfare needs. Currently, there are as many as twenty government
agencies that are involved in managing diverse social welfare programs,
resulting in inefficiency and opaqueness in responsibility and
accountability.
As a consequence, these tunnel-visioned government agencies are
not capable of dealing with cases that cut across many government

Political, Economic

385

administrative departments. It is, thus, necessary to have a social security

administration to coordinate social assurance and welfare. The Ministry of
Labor and Social Security, which was established in 1998, is one major
effort to facilitate welfare transfers through redistribution of resources.
However, it will be no easy task to disentangle the complicated
relationships in the current system, due to the resistance from state
bureaucrats who care more about their own gains than the nations benefit.
The task is even more challenging, since the coordination of various social
welfare programs in China has historically involved complex and even
intricate relationships that exist between government agencies.
As in the case of Malaysia, Chinas formidable task is how to narrow
the gap between resource-rich and resource-poor regions through the
means of social security programs that avert the social violence threatening
the political regime. Unequal economic development between coastal and
interior regions in recent years has already generated regional animosity,
and similarly, the unequal distribution of resources between the urban and
rural regions has widened the income gap that aggravates tensions between
social groups. While the populations in advanced (urban) regions will
continue to benefit from social welfare (as they simply can afford it), the
populations in backward, rural regions will remain less protected. As social
control mechanisms are no longer effective due to economic restructuring,
popular grievance is likely to spread out to cause political instability.
Without compatible social control mechanisms, it is hard to expect the new
social security system to become functional and effective in rural areas,
unless there is a great redistribution of resources in welfare transfers to
narrow the gap of income between the regions. Lessons learned from the
experience of Malaysia discussed in previous sections indicate that social
stability can be guaranteed only if there is congruence between the
economic and political goals of the social security system. In other words,
welfare transfers should be carried out to the extent that they will not
impede long-term economic development.
In order to expedite welfare transfers, China needs to set up a
strong legal system to protect the process of transfer as demonstrated in
the case of Malaysia. In the legal arena, China currently lacks a powerful
legal-rational environment to effectively protect and enforce the
implementation of the new social security system. From the 1950s until the
end of the 1980s, China had no systematic legal codes relating to social
insurance, and even in the past decade, Chinas legislature has been very
slow in making social security and welfare laws.(14) The existing political
system remains resistant to any substantial change of legal codes to replace

386

Political, Economic

its conventional control mechanism characterized by top-down

administrative orders, which is viewed as the corner stone of Chinas
social-legal system. As we have learned from the experiences of many
developing countries, lack of legal-rational protection will render any kind
of social security system ineffective. Furthermore, the governments
arbitrary policy may be inconsistent with the long-run economic
development of the nation. As a result, the social security system may
become a source of reinforcing the existing inequalities rather than
alleviating social poverty and tension as originally intended (BendaBeckmann, 1988).
China traditionally lacks the social base of civil society. In the
relevant literature, a civil society is commonly believed to be the source of
societal wealth to be mobilized to fund social welfare systems. As Mann
(1986) points out, a strong civil society is key to a strong state power to
enforce its policy, not vice versa. In the case of China, the near absence of
non-governmental and non-profit welfare organizations and charities are a
clear sign of a weak civil society. As compared with China, Malaysia, as a
developing country, made a great effort to build a civil society in a
diversified and formerly colonized territory. Although the size of the
country implies significant differences in the design and implementation of
its social security policies, there are two general rules that might be useful
references to China. First, there is the need to bring harmony between the
political and the economic goals of welfare transfers and social security.
This implies that a growth-oriented government must adopt a shared
growth strategy so as to have broad-based support for its development
programs. Balancing out the political and economic goals of a social security
system has proved to be a good strategy for reducing the income gap
between social groups while maintaining economic development, as
exemplified in the case of Malaysia. Second, sustained and shared economic
growth is the caveat for financing such programs when there is no
extensive tax-base for the governments to collect resources. Thus, tapping
the funding sources from within society to support social security is
obviously an option for China.
Chinas economy is currently at a downturn. Consumption has
significantly slowed down in China in recent years. The main reasons for
the lack of purchase are that the prospects of lay-off are looming large
when the restructuring the state-owned enterprises deepens and that a
sound social security system is lacking. What contributes to the decrease in
economic growth is that the people are concerned about the sufficiency of
unemployment compensation, pension funds and medical benefits, causing
them to hoard resources while they still can. The lack of purchasing

Political, Economic

387

momentum dampens economic activities, which worsens the whole

economy. Social security and welfare reforms build a safety net for not only
those who are adversely affected by the privatization of the economy, but
also the ultimate success of economic reforms that have been in force since
1978.

Notes
1. The authors are grateful to a reviewers constructive comments. Yi
Feng would like to thank the Fletcher-Jones Foundation for a
faculty research grant, which has facilitated this research.
2. Inefficiencies undoubtedly plague the welfare state. Nevertheless,
eradicating welfare state inefficiencies should not jeopardize the
existence of the welfare state.
3. Educational expenditures contribute more to equality of opportunity
than to social security and equality. For more information on this
argument see Wilensky, 1975. For the variety of welfare programs
and the different types of welfare state, see Baldwin, 1989,
Kloosterman, 1994, and Sainsbury, 1991. Last, but not least, see the
seminal work by Epsing-Andersen, 1990.
4. Most of the historians of the welfare state accredit imperial
Germany as the forerunner of modern welfare programs. In 1881
Bismarck instituted the basis of the first social security legislation
in an effort to shift the loyalties of the working class. Bismarcks
system was a carrot and stick policy, targeting the social
democratic movement. It was specifically planned to cope with
prevailing social problems. Insurance reform was not an actual
expansion of the states functions but a qualitative transformation
(Ullmann, 1981: pp. 134-135). The term welfare state was coined in
Britain in 1941, while Great Britain alone was standing against
Germany. The predecessor of the British welfare state was
established in 1911 as the Liberal governments National Insurance
Act, promoted by experts such as William Beveridge and prepared
by Winston Churchill and Lloyd George. This Act was targeting the
left out millions who were miserable in the heyday of the British
empire. In both cases of policy-making, British administrators
replicated the social policies established in imperial Germany
(Flora, 1981: pp. 18-19). The welfare state has been an integral
component of the developmental process and the solidification of the

388

Political, Economic

state within the developed countries in the late nineteenth- early

twentieth centuries.
5. There are concerns regarding the authority of the state to provide
welfare programs. First of all, from a critical point of view, the state
distribution follows the predetermined distribution of resources.
The right critique to welfare state is that welfare programs create a
condition of moral hazard since they provide incentives to people to
get into undesirable behavior. On the other hand, the counter
argument remains that the state is the only institution that has the
power to ensure that the system is not abused. Most of the
arguments that favor state interference are based on moral and
ethical considerations. The most well known argument is by John
Rawls. Thus, the tradeoff is between the societys need to expand its
production and the redistribution of production goods in a socially
appropriate way (Taylor-Gooby, 1994: pp. 82-85).
6. One of the first studies on this area was Lenskis (1966) theoretical
argument that combines the "functionalist" and the "conflict" school
of thought. Lenski argued that countries that do have a surplus
product tend to follow the power distribution in the society, when
they distribute the surplus (the conflict argument). The surplus is
affected by technology, which determines the political and economic
structure, as well (Cutright, 1967: p. 562).
7. Endogenous theories of growth have indicated that investment has
positive externalities on economic development. For efficient
investment to occur, however, a stable political system is required.
8. Alesina and Rodrik assume that the consequences fall on public
investment, while Perotti, and Persson and Tabellini assume they
occur through redistribution.
9. See Becker et al. (1990: pp. S12-S37) and Perotti (1996: pp. 149187.)
10. As a reviewer points out, the growth-oriented government will not
necessarily employ welfare program or social security system to
reducing income inequality. Likewise, income inequality may not
rise in a survival-oriented government. For example, suppose there
are two groups of agents in a society: rich and poor. The rich are
endowed with human capital that drives long term growth. The poor
provide labor. If the median vote happens to be among the rich, a

Political, Economic

389

survival-oriented government will choose not to redistribute from

the rich to the poor. Furthermore, this survival-oriented
government is also a growth-oriented government.
11. Studies have concluded that the relation between income inequality
and political violence is spurious, while controlling for levels of
economic development (Hardy, 1979; Nagel, 1974; Weede, 1981).
The literature is divided as to whether political violence is the
outcome of discontent or of "resource mobilization" and the
organizational structure of general dissatisfaction (Muller, 1985:p.
48).
12. The remainder of the population (less than 1 per cent) consists of
various ethnic groups. The British policy of immigration encouraged
the explosive mixture of Chinese, Indians, and Malays. Till the
beginning of the twentieth century the Malays were the majority of
the population, even further back in history they were the only
ethnic group inhabiting Malaysia. By the end of 1930s Malays were
a minority within their own land.
13. At that time Malays controlled only 1.5 percent of businesses,
contrary to 22.5 per cent held by the Chinese, while the rest of the
corporate equity was held by foreigners (Root, 1996: p. 71).
14. The answer could be found in Chinas own legal development. As in
many other areas, Chinas legal system is also in transition.
Whether the reform would bring the system toward formal legalism
remains uncertain and questionable (Li, 1996).

References
Alesina, Alberto, and Dani Rodrik. 1991. Distributive Politics and
Economic Growth. Working Paper no. 3668. Cambridge, Massachusetts:
NBER.
Alesina, Aberto, and Dani Rodrik. 1994. Distributive Politics and Economic
Growth. The Quarterly Journal of Economics. 109: pp. 465-490.
Alesina, Alberto, and Roberto Perotti. 1996. Income Distribution, Political
Instability, and Investment. European Economic Review. 40: pp. 12031228.

390

Political, Economic

Alesina, A., N. Roubini, S. zler, and P. Swagel. 1992. Political Instability

and Economic Growth. Working Paper
No. 4173. Cambridge,
Massachusetts: NBER.
Ames, E. and R.T. Rapp. 1977. The Birth and Death of Taxes: A
Hypothesis. Journal of Economic History. 37: pp. 161-178.
Aranson, P.H., and P.C. Ordeshook. 1981. Regulation, Redistribution, and
Public Choice. Public Choice. 37: pp. 69-100.
Bagchi, Amiya Kumar. 1982. The Political Economy of Underdevelopment.
Cambridge: Cambridge University Press.
Baldassari, Mario, and Gustavo Piga. 1996. Distributive Equity and
Economic Efficiency: Trade-off and Synergy. In Equity, Efficiency, and
Growth: The Future of the Welfare State. Eds. Mario Baldassari, Luigi
Paganetto, and Edmund S. Phelps. London: Macmillan. pp. 257-275
Baldassari, Mario, Luigi Paganetto, and Edmund S. Phelps. 1996. Equity,
Efficiency, and Growth: The Future of the Welfare State. London:
Macmillan.
Barro, Robert. 1991. Economic Growth in a Cross-section of Countries.
Quarterly Journal of Economics. 106: pp. 408- 443.
Becker, K.V. Murphy, and R. Tamura. 1990. Human Capital, Fertility,
and Economic Growth. Journal of Political Economy. 98: pp. S12-S37.
Benda-Beckmann, F. von, K. von Benda-Beckmann, E. Casino, F. Hirtz,
G.R. Woodman and H.F. Zacher. 1988. Eds. Between Kinship and the
State: Social Security and Law in Developing Countries. Dordrecht,
Holannd: Foris Publications.
Brinton, Crane.1938. The Anatomy of Revolution. New York: Free Press.
Chen, Baizhu and Yi Feng. 1996. Some Political Determinants of Economic
Growth. European Journal of Political Economy. 12: pp. 609-627.
Chong, Dennis. 1991. Collective Action and the Civil Rights Movement.
Chicago: The University of Chicago Press.
Cutright, Philips. 1967. Inequality. A Cross-national Analysis. American
Sociological Review. 32: pp. 562-578.

Political, Economic

391

Davies, James C. 1963. Human Nature in Politics. New York: Wiley.

Diamond, Peter. 1996. Proposals to Restructure Social Security. Journal
of Economic Perspectives.10: pp. 67-88.
Dilnot, Andrew and Ian Walker. 1989. Introduction: Economic Issues in
Social Security. In The Economics of Social Security. Eds. Andrew Dilnot
and Ian Walker. New York: Oxford University Press: pp.1-16.
Downing, Brian M. 1988. Constitutionalism, Warfare, and Political Change
in Early Modern Europe. Theory and Society. 17: pp. 7-56.
Dreze, Jean and Amartya Sen. 1991. Public Action for Social Security:
Foundations and Strategy. In Social Security in Developing Countries, ed.
Ahmad, Ehtisham, Jean Dreze, John Hils, and Amartya Sen. New York:
Oxford University Press: pp. 1-40.
Epsing-Andersen, Gosta. 1990. The Three Worlds of Welfare Capitalism.
Princeton, New Jersey: Princeton University Press.
Feng, Yi. 1997. Democracy, Political Stability and Economic Growth.
British Journal of Political Science. 27: pp. 391-418.
Flora, Peter, and Jens Alber. 1981. Modernization, democratization, and
the development of welfare states in Western Europe. In The Development
of Welfare States in Europe and America. Eds. Peter Flora, and Arnold
Heidenheimer. New Brunswick: Transaction Books: pp. 37-79.
Flora, Peter, and Arnold Heidenheimer. 1981. The Historical Core and
Changing Boundaries of the Welfare State. In The Development of Welfare
States in Europe and America. Eds. Peter Flora, and Arnold Heidenheimer.
New Brunswick: Transaction Books: pp.17-33.
Galor, O and J. Zeira. 1993. Income Distribution and Macroeconomics.
Review of Economic Studies. 60: pp. 35-52.
Galor, O. Galor and H. Zhang. 1993. Fertility, Income Distribution and
Economic Growth: Theory and Cross-Country Evidence. Brown University,
a typescript, 1993.
Gizelis, Ismene.1999. Welfare Spending, Social Cohesion, and Relative
Political Capacity: Exploring the Political Future of the Welfare State.
Ph.D. Dissertation.

392

Political, Economic

Goodin, Robert, and Julian Le Grand. 1987. Not Only the Poor: The Middle
Classes and the Welfare State. London, Boston, Sydney, Wellington: Allen
and Unwin.
Gupta, Dipak K. 1990. The Economics of Political Violence. New York:
Praeger.
Gurr, Ted Robert. 1970. Why Men Rebel. Princeton, New Jersey: Princeton
University Press.
Hammer, Jeffrey S., Ijaz Nabi, and James Cercone. 1995. Distributional
Effects of Social Sector Expenditures in Malaysia, 1974 to 1989. In Public
Spending and the Poor. Eds. Dominique van de Walle and Kimberly Nead.
Baltimore: The Johns Hopkins University Press: pp. 522-554.
Hardy, Melissa. 1979. Economic Growth, Distributional Inequality, and
Political Conflict in Industrial Societies. Journal of Political and Military
Sociology 5: pp. 209-27.
Hasan, Parvez. 1976. Korea: Problems and Issues in a Rapidly Growing
Economy. Baltimore: The Johns Hopkins University Press for the World
Bank.
Hirschman, Albert O. 1970. Exit, Voice, and Loyalty. Cambridge,
Massachusetts: Harvard University Press.
Kaldor, Nicholas. 1956. Alternative theories of Distribution. Review of
Economic Studies. 23: pp. 83-100.
Klausen, Jytte. 1995. Social Rights Advocacy and State Building: T.H.
Marshall in the Hands of Social Reformers. World Politics. 47: pp. 244267.
Kloosterman, Robert. 1994. Three Worlds of Welfare Capitalism: The
Welfare State and the Post-industrial Trajectory in the Netherlands after
1980. West European Politics. 17: pp.166-189.
Kriesberg, Louis. 1973. The Sociology of Social Conflicts. New Jersey:
Prentice-Hall, Inc.
Kuznets, Simon. 1955. Economic Growth and Income Inequality. The
American Economic Review. XLV: pp. 1-28.

Political, Economic

393

Lenski, Gerhard.1966. Power and Privilege: A Theory of Stratification. New

York:
McGraw-Hill.
Legrand, Julian. 1987. Measuring the Distributional Impact of the Welfare
State: Methodological Issues. In Not Only the Poor: The Middle Classes
and the Welfare State. Eds. Robert Goodin, and Julian Le Grand, 17-33.
London: Allen and Unwin: pp. 17-33.
Li, Jieli. 1996. The Structural Strains of Chinas Socio-legal System: A
Transition to Formal Legalism? International Journal of the Sociology of
Law. 24: pp. 41-59.
Londregan, J John B. and Keith Poole. 1990. Poverty, the Coup Trap, and
the Seizure of Executive Power. World Politics. 32: pp. 151-183.
Meerman, Jacob. 1979. Public Expenditures in Malaysia. World Bank:
Oxford University Press.
Meltzer, Allan H., and Scott H. Richard. 1978. Why Government Grows
(And Grows) in a Democracy. Public Interests. 52: pp. 111-118.
Meltzer, Allan H., and Scott H. Richard. 1981. A Rational Theory of the
Size of the Government. Journal of Political Economy. 89: pp. 403-418.
Mesa-Lago, Carmelo. 1991. Social Security in Latin America. Economic
and Social Progress in Latin America: 1991 Report. Washington, D.C.:
Inter-American Development Bank: pp. 179-216.
Miller, Gary J. 1989. Confiscation, Credible Commitment, and Progressive
Reform in the United States. Journal of Institutional and Theoretical
Economics. 145: pp. 686-692.
Mommsen, W.J. and Wolfgang Mock. Eds. 1981. The Emergence of the
Welfare State in Britain and Germany. Kent: Croom Helm London on
Behalf of the German Historical Institute.
Mueller, Dennis. 1991. Public Choice II. rev. ed. Cambridge, New York,
Port Chester, Melbourne, Sydney: Cambridge University Press.
Mueller, Dennis C., and P. Murrell, P. 1986. Interest Groups and the Size
of Government. Public Choice. 48: pp. 125-145.

394

Political, Economic

Muller, Edward. 1985. Income Inequality, Regime Repressiveness, and

Political Violence. American Sociological Review. 50: pp. 47-61.
Nagel, Jack. 1974. Inequality and Discontent: A Nonlinear Hypothesis.
World Politics. 26: pp. 453-472.
North, Douglass C. 1990. Institutions, Institutional Change and Economic
Performance. Cambridge: Cambridge University Press.
North, Douglass C., and Barry R. Weingast. 1989. Constitutions and
Commitment: The Evolution of Institutions Governing Public Choice in
17th century England. Journal of Economic History. XLIX: pp. 803-832.
Offe, Klaus. 1994. A Non-productivist Design for Social Policies. In Social
policy in transition: Anglo-German perspectives in the new European
Community. Eds. John Ferris and Robert Page. Aldershot, Brookfield, USA,
Hong Kong, Singapore, Sydney: Avebury: pp. 87-105.
Pampel, Fred C. and John B. Williamson. 1988. Welfare Spending in
Advanced Industrial Democracies, 1950-1980. American Journal of
Sociology. 93: pp. 1424-56.
Pampel, Fred C. and John Williamson. 1989. Age, Class, Politics, and the
Welfare State. Cambridge: Cambridge University Press.
Peltzman, Samuel. 1980. The Growth of Government. Journal of Law and
Economics. 23: pp. 209-288.
Perotti, Roberto.1993. Political Equilibrium, Income Distribution, and
Growth. Review of Economic Studies. 60: pp. 755-776.
Perotti, Roberto. 1996. Growth, Income Distribution, and Democracy:
What the Data Say. Journal of Economic Growth. 1: pp. 149-187.
Persson, Torsten, and Guido Tabellini. 1994. Is Inequality Harmful for
Growth? Theory and Evidence. American Economic Review. 84: pp. 600621.
Pierson, Christopher. 1991. Beyond the Welfare State? The New Political
Economy of Welfare. Pennsylvania: The Pennsylvania University Press.
Roberts, K.W.S. 1977. Voting over Income Tax Schedules. Journal of
Public Economics. 18: pp. 329-340.

Political, Economic

395

Romer, Thomas. 1975. Individual Welfare, Majority Voting, and the

Properties of a Linear Income Tax. Journal of Public Economics. 14: pp.
163-185.
Root, Hilton. 1996. Small Countries Big Lessons: Governance and the Rise
of East Asia. Oxford: Oxford University Press for the Asian Development
Bank.
Sainsbury, Diane. 1991. Analyzing Welfare State Variations: The Merits
and Limitations of Models Based on the Residual-institutional Distinction.
Scandinavian Political Studies. 14: pp. 1-29.
Scully, Gerald W. 1991. Rights, Equity, and Economic Efficiency. Public
Choice. 68: pp. 195-215.
Taylor-Gooby, Peter. 1994. Welfare Futures. In Social Policy in
Transition: Anglo-German Perspectives in the New European Community.
Eds. John Ferris and Robert Page. Aldershot, Brookfield, USA, Hong Kong,
Singapore, Sydney: Avebury: pp. 70-87.
Tullock, Gordon. 1959. Some Problems of Majority Voting. Journal of
Political Economy. 67: pp. 571-579.
Tullock, Gordon. 1970. Private Wants, Public Means. New York: Basic
Books.
Ullmann, Hans-Peter. 1981. German Industry and Bismarcks Social
Security System. In The Emergence of the Welfare State in Britain and
Germany. Eds. W. J. Mommsen and Wolfgang Mock. London: Croom Helm
on behalf of the German Historical Institute: 107-133.
Venieris, Yannis and Dipak K. Gupta. 1986. Income Distribution and
Socio-Political Instability as Determinants of Savings: A Cross-Sectional
Model. Journal of Political Economy. 96: pp. 873-883.
Weede, Erich. 1981. Income Inequality, Average Income, and Domestic
Violence. Journal of Conflict Resolution. 25: pp. 639-53.
Wilensky, Harold, L. 1975. The Welfare State and Equality: Structural and
Ideological Roots of Public Expenditure. Berkeley: University of California
Press.

396

Political, Economic

Zak, Paul J. 1997. Socio-Political Instability and the Problem of

Development. Working Paper, Department of Economics, Claremont
Graduate University.
Zheng, Gongchen. 1997. On Social Protection System with Chinese
Characteristic, Wuhan, China: Wuhan University Press.

Biographical Sketches
Yi Feng is Associate Professor at the School of Politics and Economics,
Claremont Graduate University. He has published more than forty journal
articles, book chapters and reviews on the topic of political economy of
growth, development and political transformation and has edited Financial
Market Reform in China: Problems, Progress, and Prospects (with Baizhu
Chen and Kim Dietrich), published by Westview 1999 and The Applied
Expected Utility Model (with Jacek Kugler) published by International
Interactions 1997. He has recently completed a book manuscript titled
Democracy, Governance and Economic Performance: Theory, Statistical
Analysis and Case Studies. His current research interests include regional
integration and globalization and the labor market and endogenous trade
policy in China. He is also a co-principal investigator in a project on
political development, demographic change and sustainable growth, which
is sponsored by the National Science Foundation.
Ismene Gizelis received her doctoral degree in politics and policy from
Claremont Graduate University. She is the Theodore Lentz Post-Doctoral
Fellow in Peace and Conflict Resolution 1999-2000 and a lecturer at the
Center for International Studies at the University of Missouri - St Louis.
Recent publications are "Fighting in Bosnia: An Expected Utility
Evaluation of Possible Settlements," in International Interactions (1997),
and "Managing Economic Development with Ethnic Diversity: the
Malaysian Experience," in Managing Economic Development in Asia: From
Economic Miracle to Economic Crisis (forthcoming). Her research interests
include conflict resolution and the impact of institutions in the bargaining
process with special emphasis placed on secessionist ethnic conflicts. Also,
she is currently working on welfare state, economic and political
development, and the impact of European integration on member states'
domestic political stability and income distribution.
Jieli Li received his doctorate in Sociology from University of California at
Riverside in 1996, and currently is Assistant Professor of Sociology at Ohio
University. His areas of interest include theory, social change, social

Political, Economic

397

organization, and race and ethnic relations. He has published articles in

Sociological Perspectives, International Journal of the Sociology of Law,
Michigan Sociological Review, and Journal of Contemporary China. His
recent research focuses on problems and prospects of China's emerging
social security system and micro mobilization of social movements.