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How Strong Is the State in China, Really?

The strength of China’s centralized government means that state policies trump any proactive environmental efforts of private enterprise. This simply mirrors China’s modern history, reflecting the power of the Communist state versus the private sector and markets.

The U.S. government was designed by the Founding Fathers to be weak. The system encourages participation by “factions” (special interests, as we call them today). So unless businesses provide strong support for a new policy, change isn’t likely to happen. This is especially true when it comes to sustainability and climate change, where the tango between government intervention and the interests of private businesses keeps us all tapping our feet but not making much progress across the dance floor. Government agencies have been forced to let businesses take the lead in capping carbon, reducing fossil fuel dependence, and supporting clean technology innovation. To paraphrase President Bill Clinton: It’s the free market, stupid.

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In comparison, the strength of China’s centralized government means that state policies trump any proactive environmental efforts of private enterprise. To some extent, this simply mirrors China’s modern history, reflecting the power of the Communist state versus the private sector and markets. It may also reflect who pays the bills for universities, roads, dams, buildings, and coal-fired electricity generating units (the government). Regardless, climate activists in the West sometimes look at China with envy, wishing they had the power to impose from above the policies they prefer.

When one looks carefully at China’s system, however, there are many chinks in the armor of the supposedly all-powerful state. To begin with, the simple fact that China is a very large country means that it has to delegate some power to lower levels of government. To an extent, it shares with the U.S. a federal structure in which regional political authorities hold considerable power. And even though the state controls the creation of infrastructure, it has a hard time controlling how facilities operate once they are built–so a major new waste water treatment plant might be engineered and built, but then fail to actually be put into use.

Another limit on the Party’s power is the constant fear of unrest from the impoverished masses in rural China. Indeed, there are thousands of protests each year. To prevent an overthrow of the government, the Party feels it needs to keep economic growth rates high. To do so, local party leaders are rewarded for economic growth, not protecting the environment. As a result, the central government cannot effectively enforce the environmental laws that are on the books. Even though many public protests involve environmental concerns, the Party has created a bureaucracy that is poorly suited to deal with them. Overall, the state finds itself in quite a bind regarding environmental regulation.

One possible solution is greater transparency and information disclosure. With better information, local citizens will have an easier time pressuring their local leaders to take care of the environment. The academic world offers a glimpse into what greater transparency may create. When I lectured on renewable energy policy at North China Electric Power University, a leader in research and leadership training for the electric industry, the hall was absolutely packed to the rafters. Students had dozens of challenging, thoughtful and incisive questions about the state of green business in China and the rest of the world. They are aware of the market-driven electric industries in many other countries, and are very interested in market opportunities. And because they come from a leading university, these students may have the opportunity to help some of these changes come to fruition.

In the West, scholars at business schools, law schools, and other institutions play a key role in moderating the balance of power between state and private industry, by demanding and providing greater information about each sector’s activities. When it comes to climate change, sustainability and other environmental questions, academics have played a major role in framing both the questions that should be asked of businesses and the strategies they should adopt to respond to the pressures for a more sustainable enterprise.

But academics are still weak in China, especially in fields like the environment that have not always had full Party support. Academic work alone is not likely to bring about change anytime soon. Several years ago, I was excited to receive a call from a reporter asking for my thoughts about China’s new Green GDP accounting system. I told him I was delighted that China had taken this bold step, one the U.S. has been unwilling to take. But the new accounting system was scrapped after it revealed that much of China’s apparent GDP growth is offset by the harms of environmental degradation. Although the central government still retains a powerful hold on much data, the Internet is a powerful force for transparency. Sustainability leaders will work to provide more and more information to the public, with the hope of transforming the State’s approach to environmental governance and reporting. As more information goes public (some with the help of academia), it will be easier to ensure that the state marching order for “growth at all costs” is transformed into sustainable growth, with full disclosure of hidden environmental costs.

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Thomas P. Lyon is a Director and the Dow Chemical Professor of Sustainable Science, Technology and Commerce at the Erb Institute of the University of Michigan. Professor Lyon’s teaching experience includes managerial economics, business and government, game theory, business strategy, and the management of innovation. He is the author of Good Cop/ Bad Cop: Environmental NGOs and Their Strategies Toward Business.

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