Study On The Encompassing Of Interest Organizations During Economic Growth Process

Since the reform and opening up which started from 1978, China's economy has undergone a sustained development, and it mainly dues to the industrialization and institutional reform. However, with the gradual exposure of the disadvantages of capital-oriented development mode, how to guarantee the fast development of economy in the next stage becomes a major concern at the present time. Based upon this situation, this thesis concludes two predicaments that China is facing:the one is the deepening of reform and the institutional evolutions are hampered by the vested interest groups; the other is the widening gap of income caused by labor conflicts. The two predicaments are closely related with each others, the dominant position and rent-seeking activities of the interest groups directly lead to the income gap. Hence, how to interpret the current problems from the theory of interest group? The social order theory by North and others suggests that in general the society will undergo three social orders:the primitive order, limited access order and open access order. And the formation of groups and the entry condition under each social order are completely different. The present China is in a stage of limited access order where various interest groups have no free access to the market and many rent-seeking activities and insufficient competition existing in the market. Under this circumstance, the interest groups are always able to apply their strength to take collective actions. Olsen and others collective action theory indicates that due to the shortage of workers number and motivating factor, it is hard for workers to take effective collective actions to bargain with the opposite groups or enterprises, and as a result,workers' salary has been low for a long time.Then on the basis of deepening Olsen "compatibility" conception, the paper analyzes the relationships between interest groups and economic development. The historical data show that a country economy will be damaged by the interest groups of distributive property and especially the groups that are active in seeking for traditional rents, which can be proved by the data from such developed countries as British, Japan and Germany. But in the open access order, the great number of interest groups will motivate the competition in the market as well as sustain the economic democracy and equal chance to maintain the economic development. The reason lies in the fact that in the limited access order, the groups have distributive property and what they pursuit is the rents produced by their privilege while in the open access order, the groups have certain compatibility and they are seeking for marginal rents caused by competition and innovation. The theoretical analysis above can be further verified by the process of the development of interest groups in both feudal and capitalist society in different stages.Finally, this thesis makes a thorough study on the existence and influences of interest groups in China. In this section, the existence of interest groups is firstly discussed from historical view. And then two social problems caused by the development of interest groups are analyzed:one is workers low income and the other is the obstructive influence of local protectionism on the reform. The absence of workers collective action weakens their capability to bargain with the groups on the matter of salary. Being placed at a vulnerable status, the workers get low payment. Consequently income gap becomes larger and larger, which hampers the growth of domestic demands and economic development. Furthermore, the local protectionism impedes the deepening of reform. As a result, a uniform market can not be easily founded. In the terms of industry access, there are many limiting factors. Monopolistic privileges generate the existence of rent. So it is not easy for various property rights to have fair plays with each other. The government, as the biggest interest group, involving in the problems above. The government behaviors influence the perfecting of economic access order and the providing of institutions. If the government combines with interest groups, a predatory institution will come into being, which will do harm to economic growth. Therefore, the government should do its best to keep his '"compatibility" actively and take neutral economic policies so as to promote the foundation of protective institutions,perfect groups access order and advance the competition, and eventually boost the economic growth.