·Part A Law and Institutional Studies·

The Belt and Road Initiative Implementation Institution-culture Constraint

Tao Yitao[1]

The proposal of Belt and Road Initiative is an important manifestation of Chinese society’s shifting from policy opening to institution opening and from export-oriented economy to an open economy; the natural choice with high accumulations of capital, technology and productivity that are due to thirty-eight years’ tremendous economic development in Chinese society since the reform and opening-up policy; the inevitable trend of economic transition and sustainable development in Chinese society; and moreover, the concrete embodiment of inclusive development and common prosperity ideas that China adheres to in economic globalization process today. Basically, the implementation of the “Belt and Road Initiative” is not a pure economic issue for China or neighboring countries, but a non-economic issue that the culture outweighs capital and institution outweighs technology. In terms of capital and technology, the institution-culture constraint is not only the softest constraint, but also the hardest constraint, and therefore the most fundamental constraint. As a matter of fact, it is the common rules and value which define a society and the choice behaviors of this society or community and individuals. Given this, the established informal institution developed in a society or community is not only a constituent part of the institutional system, but also a part of the cultural system. Therefore, the crux of crossing institution-culture constraint is establishing a common operable institution-culture cognition system with mutual respect and mutual inclusion. Whether in logical or in realistic significance, it would be a leading strategy and wise consideration to the powerful implementation of the Belt and Road Initiative.

1 Interpretation of Culture Constraint — Institution from the Perspective of Institutional Economics

The institution-culture constraint here is not simply the combination of institution constraint plus culture constraint, but a concept in institutional economics. It means mutual recognition barriers among different internal institutional arrangements that are formed by different customs, values, and other cultural factors, and also refers to the influences of these internal institutional arrangements with different cultural traits on formal institutional arrangements and conclusions and on the institutional environment formations inside wider areas or communities. As we know, there is no institution without cultural characteristics or culture without institutional functions. In a sense, the culture is institution and the institution is culture. Different nations create different cultures in different modes and different cultures create different nations in different modes, and in this process, the national or state rules, institutions and selection behaviors are determined and formed. Just as Thomas Sowell - an outstanding contemporary American economist said (Sowell, 1998): “Cultures were not collections in museums. They were working regulatory mechanisms in daily life. Definitive judgments were not from researchers and theorists but implied in thousands of millions monomial decisions. These decisions may retain or give up various certain cultural practices. These decision makers might benefit from, or had to assume possible consequential costs, inefficiencies and abandonments all by themselves. The consequential costs did not always appear in the form of currencies, and they might be in varied forms from inconveniences to death.” In fact, the meaning of his words is quite simple. If people cannot reach agreements on some issues, especially on culture-value, they won’t contact with each other smoothly. It also applies to countries.

People usually define the institution as a rule that is made by people. It inhibits arbitrary behavior and opportunistic behavior that may occur in interpersonal communication, and enhances the order and trust between people and people, therefore reducing the uncertainty and cost of communication. German institutional economists Wolfgang Kasper and Manfred E. Streit once stated institution functions in this way (Kasper & Streit, 2000, p1): “All interpersonal communication needs a certain degree of predictability. When people are constrained by the rules (which we call the institution), the behavior of the individual is more predictable. Of course, people would need institutions to improve economic life, as economic transactions would not function in a vacuum. In fact, the type and quality of institutions cause huge differences when the economic growth rates and community members meet the economic goals. A brief review of the economic growth theory proves that the growth is a complex phenomenon. Neoclassical growth theory can only identify the most immediate growth conditions, such as capital accumulation and technological change. To explain why the people should save, invest, study and collect the useful knowledge, we should look at various institutional systems and value systems at the back of economic success or failure.”

The institution, as a mean to guide the people’s actions may be divided into internal institution and external institution according to different sources. The internal institution is defined as a rule that evolves with experience within a group, such as habits, customs, manners, morality, culture, values and etc.; while the external institution is defined as the social rules which are designed extrinsically and imposed on the society from top to bottom by means of the political actions. That is to say in real time, many internal institutions evolve according to experience and control the interactions between people. The people have reserved internal institutions for a long time as some people find them and think them useful. The importance of internal institution on building social interactions, communicating between the self-centered individuals and realizing the social integration, has been recognized by antecedent philosophers and sociologists. Scholars like John Locke (1632-1704), David Hume (1711-1776) and Adam Smith (1723-1790) once expressed similar ideas: The institutional framework of a society must be based on the evolution of the internal institutions. The rules adopted consciously and passed by legislation, and the whole structure of institutions determined in the political process should base on the internal institutions (Kasper & Streit, 2000, p112). The most powerful supporters also include Friedrich August von Hayek (Hayek, 2000, pp52-78, 152-190).

The institution is also divided into formal institution and informal institution according to the punishment mode or different compulsory degrees regarding breach behaviors. Generally, the punishment for violating the internal institution is the decentralized and spontaneous social feedback because most internal institutions recourse to voluntary coordination. However, the punishment for the violation of the external institution is enforced through the formal and organized mechanism. Relative to informal institution, the compulsory order of formal punishment leaves much smaller space for the individual to evaluate the loss and gain. Most internal institutions are informal institutions. However, in many cases, the internal institutional arrangement is not only rigid, but also restricts the formal institutional arrangements to a considerable extent. It often plays a vitally important role in the real life. Customs, habits and values as the important contents of the internal institution have such power and effects.

Some types of the internal institutions fall into the category of culture, and even the rule system is a part of culture basically. British sociologist, Edward Burnett Tylor once defined culture in the following way (Tylor, 2005, p1): “Culture, or civilization, taken in its broad, ethnographic sense, is that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society.” Scholars of institutional economics believe that Tylor’s definition of culture not only appropriately points out the communications between man and social group through culture communication, but also focuses on a fact, that is, culture adheres to learning-and-acquisition institutions and the values supporting these institutions. In this sense, the culture consists of language, thought, value, internal institution and external institution, and even, it is a concept with connation larger than that of the institution.

Culture contains many internal institutions, such as customs and habits and so on. Some scholars believe that the habits and customs influenced by different cultures and with the particular culture brands are difficult to clearly expound with language, but also difficult to transmit to the people outside the culture scope. Therefore, culture can be regarded as a system of rules which basically can only be sensed. The internal institution, formed from the culture which is commonly familiar with and recognized, reduces the people’s communication risks and costs. Therefore, the people are more adept in the institution arrangement within their own culture and feel more active and easier relative to other cultural rule system. However, with international and cultural diversity, a person may belong to a village culture but also share a world of cultural practices in the industry. When sharing the benefits of international division of labor, people have also gradually realized that alien things are not absolutely bad or threatening. Even so, in a multicultural society, the people can only compare the quality of cultural institutions by verifying that how the cultural institutions help the people to achieve the common basic values of freedom, peace and prosperity in practice. With regard to coordinating the people’s behaviors or coping with the changes, not all cultures are equally effective. Therefore, the open and inclusive culture does not affirm all cultures have values without criticism, but includes those rules which we are familiar with and accustomed to and save our transaction costs (Kasper & Streit, 2000, pp196-198).

The culture usually evolves slowly. The so-called path dependence is often due to the solidification of the culture, especially the role of the cultural institution.[2] However, when new ideas occur from the original cultural system and the external factors strike and influence the existing cultural system, people would either deeply feel that they may not obtain the potential benefits if not changing the original rules, or they would strongly realize that when the external cultural institution has more superiority than their own culture, the new culture characteristics are imitated and the number of people receiving the culture exceed a critical point, such external cultural institution will become a new rule or institution. From the aspect of world economic development history, “Merchants and manufacturers would move to other countries, whose governments are thought to be more restricted by rules and whose institution environments are thought to be more reliable. It not only forces the rulers to give up arbitrary opportunism and provide reliable rules, but also encourages some internal cultural institutions, such as honesty, punctuality and frugality” (Kasper & Streit, 2000, pp196-198). When internal cultural institutions and external institutions are generally accepted by different nations with varied cultures, an institution with public goods’ nature -- an international practice is thus formed.

What could be said is that, the process of breaking institution-culture constraint during the Belt and Road Initiative implementation is the process of gradual inclusion and recognition of the important components of internal institutions, cultural institutions (such as customs, habits, values and beliefs) in wider regional communities Because they are the softest as well as the toughest bases or the conclusion of formal institutions between regional communities.

2 Institution-culture Constraint for the Belt and Road Initiative Implementation

It should be said that after nearly 38 years of reform and opening-up and national strength increasing, China has the considerable potential to expand the impacts in the developing countries through exporting infrastructure construction. However, we, to some extent, have a poor knowledge about many countries along the Belt and Road Initiatives; to some extent, we regard the Belt and Road more as a pure economic project; to some extent, we focus more on our wishful thinking of achieving political performances; and to some extent, we haven’t fully gotten rid of “movement psychology” and subconscious of seeking quick success and instinct benefits. Thus, in objective reality, our original goodwill and actions that would benefit ourselves and please others as well might encounter awkwardness and setbacks. The issue of Burma’s Myitsone Dam is the most typical case.

On September 30, 2011, Thein Sein - the President of Burma announced that “to respect the people’s wish”, Myitsone Dam invested and established by China has been paused until his five-year term ends. This heart-breaking ending surprised many of us, including the top leaders in China Power Investment Corporation. However, it was an over-five-year joint effort of Burma’s local villagers, social activists, scholars and scientists, and badly, we’ve lost this good chance of further communicating, mutual understanding and reaching consensuses with local inhabitants and civil society organizations.

From the abortion of Myitsone Dam project, we should realize the institution-culture barriers from three aspects. Firstly: the biggest bottleneck of implementing the Belt and Road Initiative is a poor knowledge, which refers that we have a poor knowledge about countries along the route, especially about customs, habits, values, religious beliefs, and other cultural institutions; that is to say, we have a poor knowledge about internal institutions of the countries along the route. At present, the most important and efficient power that may help us to extricate ourselves from knowledge-lacking plight is experts and scholars rather than the capitals and technologies purely. Regional research experts and scholars are the power that may drive deep and acceptable capital and technology flows. They are able to fluently use local languages, familiar with and doing a lot researches on relevant target countries’ histories and cultures, and well-connected in the countries where they do research through long years tracking and researching (Fuller, 2011). In the case of Burma’s Myitsone Dam, if before starting the project, were the experts and scholars, who are familiar with local history and culture as well as customs and beliefs, engaged in deep investigation on the surrounding social and cultural environment, objectively appraising the government’s actual mobilization on demolishing, social mobilizing and many other issues, scientifically predicting the complicated ethnic relations and inextricable western countries’ influences and interventions, and accurately judging that major issues involving public choices could not be solved orderly and uniformly in methods and speed of “Chinese style” under a weak government leadership in Burma, the U. S. -British backed Kachin people’s wide protest against Myitsone Dam building would not be triggered in England, Japan, Australia, the United States and other places; the irreversible influences on international public opinions might not happen; and the completely passive situation that Burma’s leaders finally had to compromise may not be caused (Fuller, 2011). So, it could be said that, on many issues and to a great extent, it is the recognition barriers on customs, habits, values and other cultural institutions that compose internal institutions, rather than the pure choices and options in economic interests, that affect and restrict the conclusion of formal institution arrangements between regional communities with different cultures and histories.

Secondly: the greatest resistance to the Belt and Road Initiative implementation is not from the outside, but from our own cognitive abilities. Firstly, we should know that in today’s globalization, emotional strength sometimes outweighs capital strength in the process of development of cross-cultural regional community. For example, the KIO around Myitsone Dam is the most active and vocal opponent of building the dam. Kachin Ethnic respects the intersection of Makar river and Malian river (Myitsone Dam site) as the cradle of their culture because here is the wide source of Ayeyarwady. However, our project builders didn’t show enough highly and timely respect and awe to their cultural origin and complex, which finally led to unnecessary emotional confrontations that are difficult to redeem in short times (Steinberg&Fan, 2012). Secondly, rather than communicating just with officials, government departments and powerful authorities in “Chinese style”, we should learn to communicate with stakeholders in target countries, especially learn to act in accordance with the public choice programs and means in target countries. Myitsone Dam’s morass teaches us a lesson that if we ignore or refuse to establish contacts with local communities and civil organizations at first, we would pay a heavy price. For example, as the project was proceeding, other media told inhabitants in the dam that this project was merely for Chinese energy need rather than for Burma’s development. Once Myitsone Dam is completed, the generating capacity will reach 6 million Kw, which is about 1/3 of Three Gorges Dam. 90% of its general capacity will be transported to China. At the same time, a huge reservoir with size equal to Singapore’s land area and with the depth of 66 floors will submerge the central land of Burma’s culture. 12, 000 Kachin people will be moved and over 20, 000 people will be influenced by the reservoir construction and operation. Chinese investors once attempted to conduct standard practices and EIA (in fact, construction had begun before EIA completion). But the EIA came after large amounts of irresistible objections, which had lost local inhabitants’ trusts (Oh & Andrews-Speed, 2016). Thirdly, we should pay high attention to civil society organizations. The Chinese adage “the water supporting a ship can also upset it” tells the reason. A brave and strong environmental protection team was formed by NGO organizations in Yangon. Members had spent several months to mobilize and persuade senior officers in Burma’s new government into believing that people could not be ignored and the project could be seriously harmful. Afterwards, Aung San Suu Kyi gave a public call for saving Ayeyarwady, which pushed the anti-dam flight of NGO into the international stage. The organizations outside Burma (such as Burma river network) have also put unremitting efforts to improve the international society’s understanding of and attention to the dam engineering. The International Rivers provides technical analysis for a Burma NGO organization to help them to better understand the China Power Investment Group, provide them support for contacting and communicating with China Power Investment Group regarding the dam engineering (Oh & Andrews-Speed, 2016). However, we were in a passive position and even quite helpless sometimes in every aspect when facing strange social decision-making procedures and a quite powerful social organization that we hadn’t paid attention to beforehand. Because we were not familiar with the rules in target countries, and couldn’t handle affairs by our familiar rules in target countries’ mature operational society regulations. Lastly, we should learn to know the development outlooks in different cultures and countries. It is an important institution in the Belt and Road Initiative implementation - “Solution Fruit” of culture restraint. We know that Myitsone Dam is a part of seven-dam cascade project, which our nation would invest RMB 13 billion. However, whether all other countries are willing to build dams over the rivers and sacrifice their water resources to satisfy with electricity needs, which needs discussion and consultation. The different value judgments on development outlook would directly influence the project implementation and the smooth conclusion of formal institution’s arrangements. In fact, not all human’s economic behaviors are at all costs. South China Morning Post reported that China Southern Power Grid exited from several disputable dam projects in Cambodia to highlight the social responsibility. Before SINOHYDRO listed public offerings in Shanghai Stock Exchange, the potential investors, securities analysts and Chinese media discussed the environment policy draft. This draft is the measure to deal with overseas business risks. According to the media report, the world’s largest investor of dam investment, the Export-Import Bank of China delayed the investment in Nile Hydropower Station in Ethiopia considering the concerns of downstream countries. Obviously, many Chinese dam builders and investors are trying to face the concerns from target countries’ civil society organizations. Crossing institution-culture constraint might be gradually completed in gambling and settling setbacks process on the premise of common prosperity.

Thirdly: the most important issue on pushing the Belt and Road Initiative is to change ourselves’ ideas and thinking mode as well as behavior mode. China’s reform and opening-up with 38 years of experience has proved that “the whole nation system” is effective and successful. The system has incomparable efficiency and advantages in doing great things with scarce resources, quickly mobilizing the public to participate in major construction projects and solving the group’s issues efficiently. However, we cannot simply process and implement the “Belt and Road Initiatives” project with “Chinese style”, such thinking habit and methods, especially in large works directly involving local people’s benefits and even cultural belief. This may be a rational choice for us to consider, namely, to act according to law, act in accordance with international practice, abandon the thought of seeking a quick success and instant benefits and “big movement” mentality, use the time to exchange for the consensus, use understanding to exchange for the win-win and use law to guarantee efficiency and benefits. Culture may not directly change society, but it could change people, and people would change society, in most cases, internal institutions may not directly change rules, but could change the makers who, especially governments are the creators or providers of such public goods, the institution.

3 Significances and Values of Inclusive Development

When talking about the importance of institution, Wolfgang Kasper and Manfred E. Streit further pointed out (Kasper & Streit, 2000, p14): “Private individuals and businesses are only likely to buy, sell, hire, invest and innovate only if they are convinced that their expectations will be fulfilled. A large number of transactions between individuals and manufacturers are based on repetitive operations. The interactions of human beings, including economic life, rely on a certain kind of trust. Trust is based on order. To maintain this order, we must rely on a variety of rules prohibiting the foreseeable behavior and opportunistic behavior. We call these rules ‘institution’. ... Therefore, under normal circumstances, the institution to prevent the emergence of such a situation constitutes the real foundation of our living level, our security and the community.”

Certain value recognition is the premise and basis of globalization. Value recognition is potential institutional assets of regional cooperation.[3] Establishing a value community with common understanding contributes to making the evolutions of community internal institution more predictable and orderly. Thus, for the evolving community internal institutions, common value functions as a filter and coagulant. However, value recognition is an informal recognition of community members on the internal institution, so it may not be executed compulsively. But it would certainly be the result and harvest of cultural interaction and inclusion. Because any communications between civilization and culture are not unidirectional, instead, they should show bidirectional communication and harvest trends. Only communications like this are healthy and sustainable. So are the economic exchanges. In addition, what we should pay attention to is that deviations of the cooperation conclusion are not simply deviations between the goals and development paths, but the deviations of trust relationship based on emotional recognition and value recognition. The existence of these deviations is not only an inevitable problem in the regional joint development and prosperity, but also the softest and toughest barrier that needs joint efforts to overcome.

Whether between countries or regional communities, inclusive development is not just a state, a concept and a value, but an ideological foundation for the actual realization of cooperation and the alliances formation for common prosperity. In this sense, ideas, values and consensuses are resources in nature the treasures that could create wealth, and intangible capitals and guarantees that may bring prosperity.

The tenet of inclusive development is common development and prosperity. However, the process of common prosperity is never the process of one concept overcoming another one, but the process of one concept embracing another one, one value respecting another one, and one culture compatible with another one, on the premise of the recognition and respect for the human’s universal value.

The gist of inclusive development is the recognition and support for the target countries’ development, and the acceptance and respect for national differences, but not the competition and fight against each other, nor the restrictions on and denies to national differences by using similarities. The reality of globalization not only provides space in the economic operation mechanism for the individual growth, development and prosperity in communities, but also provides infinite possibilities for community’s common development and prosperity.

An important premise of inclusive development is the protection and respect for mutual core benefits. Market is based on fair exchanges. The market is not like a battlefield. In the latter, we kill opponents; while in the former, we develop opponents and partners. Without a healthy partnership, there would not be healthy market orders and even the lasting development and prosperity that benefit every party. The economic development of regional community always comes along with positive externality; in other words, it is along with creation and release of “neighborhood effect”, such as the mutual economic promotion and actuation. Although the different emissive power of the various countries’ positive “neighborhood effect” created and released are determined by their economic volumes, opening degrees, economic development types and other factors, undoubtedly, their positive externality are “social surplus” that could be shared among regional countries and even communities therein. This “social surplus” has characteristics of public goods. If we share, we are just “free rider”; or otherwise, we make “meaningless social loss”.

Parties involved may also have to directly face contradictions, differences and even conflicts during inclusive development. Contradictions, differences and even conflicts are inevitable during regional cooperation. Because different countries have their own interests, values, value judgments and even political tendencies, the crux point is how to resolve, reduce, weaken and solve them. In my opinion, Lao-Zhuang philosophy (Laozi, Zhuangzi) needs brushing up. Taoism shows a kind of power of softness. Power of softness has tenacity beyondfortitude, wisdom higher than braveness, and conquering power getting rid of the powerful. “The highest goodness is like water, in that it benefits everything and harms nothing.” Its true essence lies in “doing things for no particular purposes, a person could make a difference.”“Winning victories without fighting.” Its gist lies in “the best victory is by merely applying tactics.” We could use strength against strength, use violence against violence, and use weapons to destroy enemies’ weapons, but we cannot use the above things to annihilate ideas, wisdom and state. This is the power of softness. Sometimes, our failures are not because of lacking braveness, but because of just having braveness; our faults are not because of lacking strength, but because of just having strength; our stagnation is not because of lacking perseverance, but because of just having perseverance; our losing to others is not because of lacking endeavor, but because of just having endeavor. Wisdom endows softness with strength, just as art of war endows weapon with wisdom. We admire the ancients not only out of our respect for our history, but also because of the endless nourishment of history for us.

The base of inclusive development is the cultivation and establishment of value recognition. Since ancient times, the Silk Road has primary characteristics of some regional economic markets. It is not only a trading channel, but also a primitive common market in the economic sense. The channel just maintains the real-existing traffic system for common markets, while value recognition is a communication rule with further and wider cooperation in future common market. In a multi-cultural community, the inclusive development based on value recognition is quite important to members’ benefits. These informal internal institutional elements can not only enhance the optimized evolution ability of internal institutional systems, but also benefit the conclusion of formal institutions among regional communities. Culture opening and inclusion is a good way for communities to face outside changes, which could make culture evolution move towards the direction of resolving conflicts and reducing transaction costs.

The Belt and Road initiative is never a short-term project, but a great action that would change the world’s political and economic patterns. For the implementation of Belt and Road Initiatives, the task in urgent need of accomplishment is the establishment of mutual trust. Mutual trust between nations can be achieved by the recognition of culture and value. The process of culture and value recognition cannot be simply recognition or deny of a culture over another one, but should be a process of achieving win-win results through mutual respecting, a process of realizing mutual prosperity through inclusive development, and a process of improving mutual cognition and civilization through learning advanced human culture. It should be said that nothing but knowing each other and establishing emotions would be more conducive to the establishment of mutual trust between countries. Only in an environment like this, can a common rule recognized and followed by regional community members become a kind of resource and wealth.

References

［1］Fuller, T., “Myanmar Backs Down, Suspending Dam Project”, The New York Times, September 30, 2011.

［2］Hayek, F. A. (Translated by Deng, Z. et al.), Law, Legislation and Liberty, Volume 1 (Encyclopedia of China Publishing House: 2000).

［3］Kasper, W., and Streit, M. E., Institutional Economics: Social Order and Public Policy (The Commercial Press, 2000).

［4］Oh, S.A., and Andrews-Speed, P., “Chinese Investment and Myanmar’s Shifting Political Landscape”, ISEAS Trends in Southeast Asia, Issue 2015, No.16, 2015.

［5］Sowell, T., Conquest and Culture: A world View (New York: Basic Books, 1998).

［6］Steinberg, D., and Fan, H. Modern China-Myanmar Relations: Dilemmas of Mutual Dependence (Copenhagen: NIAS Press, 2012).

［7］Tylor, E. B. (Translated by Lian, S.), Primitive Culture:Researches into the Development of Mythology, Philosophy, Religion, Language, Art, and Custom (Guangxi Normal University Press, 2005).

---

[1] Tao Yitao, Ph.D. in economics, professor and doctorial supervisor at Shenzhen University; Deputy Secretary of CPC and Secretary of Discipline Inspection Commission; director of China Center for Special Economic Zone Research, Shenzhen University, a key research base for humanities and social sciences of Ministry of Education of China. Her major research directions are: history of economic thoughts, western economics, and studies on Chinese and foreign special economic zones, etc.

[2] German sociologist, Max Weber, who was a great pioneer studying cultural institution in economic growth, created the concept of “Protestant work ethic”. He once asserted that Chinese culture was so confined in its “pro-conservative pole” that economic growth might not occur. However, nowadays, scholars admiringly talk about the “New Confucian Economy”, and attribute their success to cultural features.

[3] The concept of institutional capital was proposed by Wolfgang Kasper and Manfred E. Streit based on the understanding regarding institutional competition. They thought that institutions could improve efficiency of production factors, such as labor on satisfying human needs. This method functions as other production factors do, such as capital -- capital enables labor to have higher productivity. Thus, we could regard community institution as valuable productive assets. And we could name it “institutional capital” (Kasper & Streit, 2000, pp143-144).