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More than 150 years ago, Marx predicted that the working class would become "the gravedigger of capitalism," a seemingly prescient prediction as socialism flourished between the two World Wars. However, traditional capitalist countries are thriving, while many socialist countries have collapsed during the past quarter-century. Nonetheless, capitalism is revealing its flaws both in the developed world (e.g. recent financial crises) and in rapidly developing countries (e.g. ecological damage), leading to social unrest that is making Marx's prediction relevant once more. Considering this situation from a broader historical perspective suggests that new social groups often evolve to fill niches left open by more traditional groups and can support the evolution of new social systems during the establishment of new industries, technologies, and institutions. Thus, they play a crucial role in initiating and guiding fundamental institutional change. Although capitalism has been surprisingly long-lived by historical standards for such systems, new systems may be evolving to push it aside. China's rapid socioeconomic changes in recent decades provide an opportunity to watch new social groups emerge and begin to play an important role in changing social institutions. The institutional diversity created and sustained by these groups may be important for humanity's long-term survival. [ABSTRACT FROM AUTHOR]

Globalization represents an intriguing new way to increase global prosperity. However, it represents a dramatic contrast to events in previous centuries, both in the West and in China, when most unions resulted from warfare and conquest rather than from peaceful negotiations. This can be seen in the increase in military conflict and decrease in political stability in many parts of the world in recent years. Therefore, achieving a union of nations through economic methods may reduce the risk of military conflict if nations can find ways to turn conflicts into a mixture of national cooperation and healthy competition ("coopetition"), leading to the evolution of a new world political order. Unlike previous efforts to create peaceful unions, such as the Global League of Nations, the new union of nations may succeed because it emphasizes the political and economic self-interest of each member state, thereby offering the possibility of win–win solutions. Through this process, conflict can become cooperation because the union of political powers with different ideologies under a unified regime will provide a dispute resolution mechanism and mitigate the risk of conflict. To achieve that goal, it will be necessary to develop a new way of thinking that emphasizes peaceful cooperation and competition rather than warfare. [ABSTRACT FROM AUTHOR]

China's economic and political reforms since 1978 represent one of the biggest institutional changes in the last century. Because most research has focused on the economics of institutional change rather than the evolution of political institutions, a theoretical framework to explain China's rapid economic development is lacking. To understand the successes and failures of China's institutional change, we reviewed China's innovative political and economic practices during the past 30 years. We found that the country's political and economic institutions combine to form a dynamic equilibrium that can explain the impressive economic results. China's leaders dream of new institutions that will improve upon traditional Western capitalism, based on a combination of central planning with traditional capitalist approaches that increase the system's flexibility. If China's leaders can combine this approach with decreased social costs compared with previous socioeconomic systems, this will represent a new era and a model that other nations can follow. [ABSTRACT FROM AUTHOR]

Disorder seems inevitable when a social system changes. The Soviet Union's collapse provided a recent example, and China is now providing a new example. During China's transformation from a communist society with a centrally planned economy to a market-based socialist society, "ethical decline" has become an increasingly serious issue, and one that has high social and economic costs. Historical experience from many cultures shows that this ethical decline is not inherent to Chinese culture. Chinese ethics are being compromised by partnerships between government officials and businessmen who benefit at the expense of society because of a lack of monitoring of such relationships during China's radical institutional change. This growing problem poses serious risks to China's social stability and economic development. To solve the problem, it will be necessary to establish a sound legal framework and more effective monitoring and enforcement, rather than hoping for spontaneous evolution of stronger individual ethics. [ABSTRACT FROM AUTHOR]

Institutional change is a response to socioeconomic pressures caused by resource scarcity, population growth, cultural change, and economic inefficiency. Historical evidence shows that the unequitable resource redistribution among groups caused by institutional change can indirectly reduce income, particularly when it leads to civil conflicts. A more equitable and effective approach to institutional change would seek win–win solutions. To examine this possibility, I review historical examples of institutional change in China to show how gradual institutional change that lets all stakeholders share the economic benefits is the most successful path. Therefore, innovation to replace or modify old institutions and equitably increase economic growth will be a key approach. This win–win approach requires persuasion, compromise, demonstration projects, competition, and embracing institutional diversity. Increased economic benefits come from economic innovation and encouragement of stakeholders to participate in institutional change, but require nurturing of new social groups that will drive the change process. [ABSTRACT FROM AUTHOR]

Diversity sustains an ecosystem when the environment changes, and a diversity of human institutions improves the ability of cultures to adapt to change and survive. Because it is not always clear which of several potential policies will be the optimal solution for a given situation, preserving a mix of policies often performs better than insisting on a single policy. The survival of Chinese civilization for millennia is a consequence of how this huge, economically vibrant nation perceives itself and its global role. To understand the dynamics of institutional diversity and their consequences during China’s long history, it’s helpful to understand the meaning of the Chinese lóng (dragon) symbol and its impacts on China’s socioeconomic development. In contrast with evil western dragons, lóng symbolize harmony through the ability to incorporate a range of ideas, resulting in increased institutional diversity. This diversity has helped Chinese civilization survive many historical crises, and is now sustaining China’s socioeconomic development by promoting a robust, resilient, adaptable, and harmonious system that encourages culture and trade. The acceptance and conservation of institutional diversity will undoubtedly continue to sustain China by encouraging peaceful exchanges among cultures that reduce conflict and by teaching new ways to handle evolving situations. [ABSTRACT FROM AUTHOR]

Despite fears of global overpopulation, population declines are becoming a significant demographic problem in developed and rapidly developing countries. If we have no effective measures to solve the problem, the world’s population will continue to age, and some small ethnic groups will face a risk of extinction. The human race’s social and genetic diversity therefore face significant challenges. The failure to raise birth rates in developed regions suggests that preventing adverse consequences from the population decline will not depend on our good intentions or on new technology, but rather on recognition of the problems resulting from an evolved institution based on low birth rates. Changing this institution will require us to enhance the social status of women, but will also require practical recognition of their unique needs in the context of childbearing and raising children. However, this innovation represents a huge challenge to overcome because of human resistance to change of existing institutions. [ABSTRACT FROM AUTHOR]