One of my favourite blogs just now is China Law Blog. Its writers are very pro-freedom and pro-capitalist, and are optimistic about the future progress of China, both economically and politically, despite all the present miseries, muddles and horrors.
A recent post there by Dan Harris is about the relationship between the rise of capitalism in China, and corruption. The cliché is that the former causes the latter, by providing the money for it. The price of politicians in China is being driven up by the increased amounts of money now available to pay for them. Ergo, there is more corruption in China now, because there must be. Besides, better to blame corruption on the evil capitalist buyers of politicians than on the sellers, the corrupt politicians themselves.
But the picture Harris paints, helped by a recent World Bank study, written about by one of its authors in Newsweek, is that corruption, which was already a well-established fact in China well before capitalism got into its recent stride there, inhibits capitalism. However, once relatively uncorrupt, relatively uninhibited capitalism gets established and starts to spread, well, it spreads, and with it spreads the habit and the idea of non-corruption.
The deeply corrupt and long established industrial cities, with their big state-owned enterprises, have remained corrupt, and have stagnated. The new industrial cities, many of them near to the coast, had pretty much no industry a generation ago, and hence no old industry to protect with corrupt and discriminatory measures against new enterprises. In these newly erupting cities, corruption is not nearly so great. That is why they are erupting. The claim that capitalism causes corruption is wrong. Lack of corruption causes capitalism, and capitalism diminishes corruption by rewarding its absence.
Coastal cities. Lots of new industry. Openness to global ideas and influences. Sounds familiar, does it not? It is as if those Four Tigers are now raising a mass of tiger cubs on the mainland, and I bet you that lots of the exact same people who made the first tigers are now deeply involved in raising the new litter.
China, viewed from a distance, through blog postings and news stories, now seems very Victorian British to me. Yes there is a universe of Dickensian misery, but there is also a rising commercial class and a rising puritanical zeal for honesty, first established by those who do trade and by those who see the point of trade, but now, it would seem, starting to infect political activity. Meanwhile, democracy advances, step by little cautious step, just as it did in Victorian Britain. At present, the big deal is that they are allowing elections for Communist Party posts, and expanding the Communist Party. Sort of like how the Victorian aristocracy of Britain co-opted the new capitalists, and also became much more productive sorts of capitalists themselves. For more about this process, see this article.
Others, equally devoted to the spread of the free market (they would say more so), like these guys have a much gloomier view of modern Chinese development. The fat cats of state capitalism have merely found a new way to skim off the cream. They have a point. Like Victorian Britain, China now is a harsh and unfair place, unless you are one of the lucky ones who is working hard and is being rewarded.
To switch metaphors from cats to cookery, at least now in China, amidst all the broken eggs, there is the beginning of a seriously tasty omelette to be seen sizzling in the frying pan. A few decades ago, all they had to show for their broken eggs was broken eggs.
Russia is going through the same metamorphosis. The Russian Mafia is made up of former Communist bureaucrats and KGB officials. They were corrupt before the fall of communism, and they are corrupt now.
It has been proven again and again that Communism causes corruption and that corruption makes it hard for Communist countries to make the transition to free markets. The corruption is ingrained in almost every member of the country as that is the only way they survived
As a result of having had “socialist” education systems, both China and Russia have entire populations who have had it drummed into them all their lives that capitalism and criminal activity are synonymous. Thus, capitalism and ethical conduct are seen as contradictory and incompatible. It is not surprising, then, to find people acting on these beliefs.
These ideas are not confined to China, Cuba, and Russia. Fortunately, some of us in the West have been spared such miseducation.
The epic misallocation of resources that is taking place in China at present will be its downfall. This is inevitable.
It is not surprising, then, to find people acting on these beliefs.
I disagree. Corruption has always occured in China and will occur more readily if the State is a monopoly gatekeeper than if it is a true open market. Years of degradation and head-mangling has made many Chinese totally and utterly ruthless towards others who stand in their way or threaten their financial gain, power or position. I have seen this at first hand.
Capitalism did not mess these people up, Communism/Mao did. In a free market you decide the price. Alas, the courts are a monopoly, so they remain as a focus on corruption. However, once people begin to regularly not need to handle corruption in other areas of life they will slowly demand NOT to have it in the courts as well and then finally the economy and life will truly improve.
As for the UK we are beginning to slide back into monopolistic chaos and corruption thanks to New Labour. The more the State controls the more it becomes a gatekeeper and the more corruption will follow.
Besides, better to blame corruption on the evil capitalist buyers of politicians than on the sellers, the corrupt politicians themselves.
This question has been puzzling me for years: If every official is equally corrupt then how can corruption actually lead to a misallocation of resources?
The one company that expects the highest profit from a certain project should be the one willing to pay most in corruption. If that is true you cannot really speak of a misallocation of resources. If corruption is universal then it becomes something of a flat tax.
Quite on the contrary corruption might even serve as an indicator for otherwise hidden private preferences and might actually improve the allocation of government resources. Like an auctioning system so to speak
The main problem with corruption is that it makes business highly unpredictable in the setting-up stages, and information flows become unreliable, further driving up costs. Not good for efficiency, though they’re taking their time to work through it.
And contrary to what TimC wrote, the chinese never did need the commie/Mao period to become corrupt. Going all the way back to the warring states era, corrupt officials have ever been the bane of China, and a significant minority of the population along with them.
Why is that? I have no idea, save that I believe it’s somehow ingrained in much of the chinese psyche.
TWG
EVERY pound, dollar, yuan or whatever in the hand of a government official is not just misallocated, it’s not just wasted, it winds up being COUNTER-PRODUCTIVE.
Corruption is as old as humanity itself. It has nothing to do with the Chinese or any other psyche except that they are permutations of the human species.
It is important to remember that most of mankind for most of our history has been controlled by one form of gang or another, with the morality of might makes right the operative system. Whether informal, or structured and codified, the rules were made by whichever group could kill its adversaries and impose its will on the rest of the clan, society, or nation.
We know of, and can identify, the cruelty and corruption of the great empires. It has all been documented and demonstrated again and again in both scholarly historical studies and modern testimony.
When someone has the power to strangle every person, idea, or innovation that comes his way, and he is too strong to kill, then the next obvious tactic is to buy him off to get him out of the way, or to obtain his favor, to buy a higher position, and consequently, some of the power to protect oneself, and have a chance to collect some graft oneself.
All of this is a cancerous growth stemming from exposure to two toxic premises—the plutonium of socio/political beliefs, as it were.
The first is that there are no limits on the power of the ruler, other than that which other violent men may impose.
The second is that the individual is subject to anything those in power may impose, and a subject to whoever can sieze that power.
This is the common political and moral heritage of mankind, passed down through the millenia by any number of kings, emperors, khans, shahs, priests, popes, lords, dukes, counts, and first secretaries.
Corruption is ingrained into so many social systems, it is possible they wouldn’t work without it. Indeed, it was often said of the Soviet Union that nothing was ever done except by payment of vodka and cigarettes, the common currency of the nomenklatura and party cadres.
The reason that I believe so fervently in the need for limited state power and a fundamental recognition of the rights of the individual is precisely that these two precepts block off the imposition of the age old system of divine rights for the ruler and abject servitude for the ruled.
And, in a very real sense, the never ending hostility of so many around the world to libertarian ideas and individual rights is based on their very clear understanding that, in such a system, they would have no power, and no place to hide.
Those who oppose the transparent rule of laws, instead of the whims of men, and oppose the rights and liberties of the individual, advocating instead the powers of the collective, are no friends of mankind.
“For he may smile, and smile, and be a villain…”
“The deeply corrupt and long established industrial cities, with their big state-owned enterprises, have remained corrupt, and have stagnated. The new industrial cities, many of them near to the coast, had pretty much no industry a generation ago, and hence no old industry to protect with corrupt and discriminatory measures against new enterprises.”
This sounds like a description of the difference between old “rust belt” cities like Detroit, Buffalo, and Philadelphia; and emerging cities like Houston, Atlanta, and Phoenix. The old cities are choking on high taxes, regulations, and public sector unions and the politicians who pander to them. These cities are dying while cities with low taxes and right-to-work laws are growing faster than ever.
@wobbly guy — Corruption is not in ingrained in the Chinese psyche. I don’t think it is ingrained in any culture’s psyche, but there is proof it is not ingrained in the Chinese psyche and that is Hong Kong and Taiwan, which are both relatively clean “states.”