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Capitalism from Below

Capitalism from Below

Markets and Institutional Change in China

Victor Nee, Sonja Opper

ISBN 9780674050204

Publication date: 06/19/2012

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More than 630 million Chinese have escaped poverty since the 1980s, reducing the fraction remaining from 82 to 10 percent of the population. This astonishing decline in poverty, the largest in history, coincided with the rapid growth of a private enterprise economy. Yet private enterprise in China emerged in spite of impediments set up by the Chinese government. How did private enterprise overcome these initial obstacles to become the engine of China’s economic miracle? Where did capitalism come from?

Studying over 700 manufacturing firms in the Yangzi region, Victor Nee and Sonja Opper argue that China’s private enterprise economy bubbled up from below. Through trial and error, entrepreneurs devised institutional innovations that enabled them to decouple from the established economic order to start up and grow small, private manufacturing firms. Barriers to entry motivated them to build their own networks of suppliers and distributors, and to develop competitive advantage in self-organized industrial clusters. Close-knit groups of like-minded people participated in the emergence of private enterprise by offering financing and establishing reliable business norms.

This rapidly growing private enterprise economy diffused throughout the coastal regions of China and, passing through a series of tipping points, eroded the market share of state-owned firms. Only after this fledgling economy emerged as a dynamic engine of economic growth, wealth creation, and manufacturing jobs did the political elite legitimize it as a way to jump-start China’s market society. Today, this private enterprise economy is one of the greatest success stories in the history of capitalism.


  • Chinese leader Deng Xiaoping’s decision to open China to global markets is often identified as the beginning of the transition, but Victor Nee and Sonja Opper argue in their book Capitalism from Below that the Chinese economic miracle is based on the actions of ambitious entrepreneurs who did not wait for Beijing’s sanction to launch their ventures. Nee and Opper claim, ‘the emergence and robust growth of a private enterprise economy in China was neither envisioned nor anticipated by its political elite.’ This bold assertion is substantiated by the findings from a meticulous study of more than 700 manufacturing firms in the Yangzi region that set up shop following the modest economic reforms of 1978. These companies decoupled from the traditional socialist system and, through informal lending, were able to finance small manufacturing outfits supported by their own networks of suppliers and distributors. While Nee and Opper do not ignore the role communist party leaders played in initiating the shift to a market economy, they ultimately credit entrepreneurs motivated by profit with China’s success… Nee’s and Opper’s hypothesis is especially intriguing considering the current state of the Chinese economy, which in recent months has shown clear signs of a slowdown. The country has entered a new era. If China is to continue its unparalleled growth, it will have to rely on ambitious entrepreneurs to take its economy into a new phase of development. In short, it will need another ambitious wave of the type of people Nee and Opper credit with leading China’s last great economic transformation.

    —Terrance Murray, The Financialist


  • 2013, Winner of the George R. Terry Book Award


  • Victor Nee is the Frank and Rosa Rhodes Professor at Cornell University, and Director of the Center for the Study of Economy and Society.
  • Sonja Opper is Gad Rausing Professor of International Economics and Business at Lund University.

Book Details

  • 456 pages
  • 1-3/8 x 6-1/8 x 9-1/4 inches
  • Harvard University Press