Corruption in China

I suppose I'm just an optimist at hear, but reading about how the People's Republic of China is going to execute to former head of the PRC food and drug regulatory agency tends to confirm my belief that China's going to find it extremely difficult to continue on the path of prosperity and autocracy.

You reach for these kind of extremely harsh punishments when you recognize that you have a lot of people getting away with a brand of crime that you think it's very important to curb. China, in short, has a large corruption problem, and very little success at catching corrupt officials. Thus, executions. But this sort of law enforcement strategy rarely works. It's much better to catch a large proportion of violators and mete out a moderate punishment than to catch only a small proportion of violators and then clamp down super harshly. But the only even vaguely effective means of clamping down on public corruption is to allow for a free press and competitive politics; the things that create institutions with incentives to expose corruption.

Comments

Is corruption that big of a deal? To my mind, there are all sorts of things that could derail China's economy, but corruption isn't really one of them. Indeed, it's already reasonably easy for a foreigner or local entreprenaur to do business in China--sure, they might have to pay some bribes or whatever, but the obstacle is mostly just bueacratic red tape, just like here in the states. Meanwhile the fundamentals of the Chinese economy are very sound.

Posted by Korha | May 29, 2007 12:35 PM

Re "the only even vaguely effective means of clamping down on public corruption is to allow for a free press and competitive politics"
---------
Gee, I wish we had that in this country.

Posted by Don Williams | May 29, 2007 12:38 PM

My finance professor in Hong Kong told me that news like this was a good thing, since they are actually punishing the official instead of letting him save face and go to some other part of the state bureaucracy.

That he is being executed instead of jailed just speaks to the different value of an individual's life in China compared to the west. If you're one in a million in China, they've still got over a thousand guys just like you.

Posted by Beau | May 29, 2007 12:49 PM

MY:

"... But the only even vaguely effective means of clamping down on public corruption is to allow for a free press and competitive politics; the things that create institutions with incentives to expose corruption."

Singapore (which some PRC leaders see as a model) would appear to be a counterexample to this assertion.

Posted by James B. Shearer | May 29, 2007 12:51 PM

Beau:
"That he is being executed instead of jailed just speaks to the different value of an individual's life in China compared to the west."

Just. I like the complacent way you put this. Maybe this also speaks to why China has no shame about backing the genocidal regime in Sudan. Plus the innocent victims are black.

And yet they care enough about human life to try to protect Saddam Hussein via the UN Security Council, along with Russia, etc.

I agree with Matt's post, although it kinda would have been fun to see the boys of Enron executed and witness the ensuing horror of the right-wing pro-business press.

Posted by Peter K. | May 29, 2007 1:05 PM

Beau:
"That he is being executed instead of jailed just speaks to the different value of an individual's life in China compared to the west."

Just. I like the complacent way you put this. Maybe this also speaks to why China has no shame about backing the genocidal regime in Sudan. Plus the innocent victims are black.

And yet they care enough about human life to try to protect Saddam Hussein via the UN Security Council, along with Russia, etc.

I agree with Matt's post, although it kinda would have been fun to see the boys of Enron executed and witness the ensuing horror of the right-wing pro-business press.

Posted by Peter K. | May 29, 2007 1:05 PM

It is better to catch only a few violators and clamp down super-harshly than to catch only a few and let them off with a moderate punishment though, no? I would suspect that enforcing the death penalty for this sort of thing would have a significant deterrent effect.

Posted by Anonymous | May 29, 2007 1:06 PM

Re "You reach for these kind of extremely harsh punishments when you recognize that you have a lot of people getting away with a brand of crime that you think it's very important to curb. "
-----------
Or, if you're a deeply corrupt system, you throw a scapegoat into an angry crowd to deflect the crowd's attention away from the truly responsible (and truly guilty) elites. Because that's what's expedient.

Matthew seems to have the major blind spot of most pundits -- he thinks that a perfect philosopher king can create a perfect public policy and that policy will be executed perfectly.

News flash -- if you have a deeply corrupt government, it's likely that its justice system is also corrupt.

When a Mafia lord whacks an underling, he does't
give the underling a Miranda warning first -- or provide the underling with counsel. Nor does the boss agonize over bullshit like "what's the greatest good for the greatest number".

Matthew's thesis that a thoroughly corrupt oligarchy can't be an economic superpower is refuted by the example of the United States.

Posted by Don Williams | May 29, 2007 1:29 PM

For example, when is Jack Welch's successor going to dredge the Hudson River and remove all those PCBs that General Electric dumped into the river several decades ago? That legal rope-a-dope has been going on for what -- 20 years?

Posted by Don Williams | May 29, 2007 1:36 PM

Don Williams:

"For example, when is Jack Welch's successor going to dredge the Hudson River and remove all those PCBs that General Electric dumped into the river several decades ago?"

Jack Welch's successor is Jeff Immelt. I heard Welch (who happens to have a Ph.D. in Chemical Engineering) explain why dredging the Hudson would be a bad idea. Sounded pretty compelling to me. As someone who lives near the Hudson, I hope they don't dredge it.

Remember: sometimes high-minded environmentalism causes a lot more harm than good, particularly when the environmentalists aren't fluent in the science of the topic. A famous example, of course, is the ban on DDT which has resulted in tens of millions of needless malaria deaths in Africa.

Posted by Fred | May 29, 2007 1:53 PM

A famous example, of course, is the ban on DDT which has resulted in tens of millions of needless malaria deaths in Africa.

Wow. Is there any right-wing lie Fred hasn't swallowed wholesale?

Posted by Steve | May 29, 2007 2:06 PM

The initial comment from korha is so wrong in so many ways it hurts. I live in China and can safely say the economy is not sound with 700 million living in dire poverty, and the system is so riddled with corruption any comparison with the US, even under the bush administration, is ludicrous and founded on total ignorance.

Posted by richard | May 29, 2007 2:40 PM

"Is there any right-wing lie Fred hasn't swallowed wholesale?"

Did Nick Kristoff swallow the "right wing lie" as well?

Try doing a little homework before you respond next time, Steve. You could start with, for example, this professor of entomology.

Posted by Fred | May 29, 2007 2:42 PM

"You reach for these kind of extremely harsh punishments when you recognize that you have a lot of people getting away with a brand of crime that you think it's very important to curb. "

Alternatively, if you're the Chinese government, you reach for these kinds of extremely harsh punishments because you can. China executes thousands of people every year. You can be executed for robbery.

Posted by Ginger Yellow | May 29, 2007 2:53 PM

For those who're interested, Jack Welch's "compelling story" versus the EPA
are discussed here: http://www.corpwatch.org/article.php?id=304
----------
A money quote from Robert Kennedy Jr:
""General Electric doesn't want to clean up the Hudson because the Hudson is not its only problem," said Kennedy, who pointed out that the company is a responsible party at 83 Superfund sites throughout the United States. "They know if they have to clean up the Hudson, they're going to have to clean up the other 83 rivers that they've polluted as well," Kennedy said.

Kennedy called GE the "worst polluter in the world," saying that the company's prosperity is "pollution based prosperity."

"They've spent the last 30 years trying to buy politicians and trying to destroy the judicial process and the political process by hiring these phony scientists" to conduct their studies, Kennedy said."

Posted by Don Williams | May 29, 2007 2:56 PM

Matt's not looking for the perfect philospher king, he's looking for checks and balances, which can produce results when given the chance.

One benefit of executions is you can impress a lot of people with your seriousness on corruption. How many people will look at some example of local corruption and say "he'd be executed for doing that in China"?

Posted by American Citizen | May 29, 2007 3:07 PM

Fred might look at another of Jack Welch's "compelling stories" -- the earnings reports that drove up GE's stock price and earned Jack the Manager of the Year award from Fortune in 1999.

If Fred looks at GE's stock price after Jack slipped out the back door, he will notice that it fell through the floor -- from around $51 down to
around $20 in 2003.

According to this 2005 article from Barrons "You Don't Know Jack", this fall occurred because Jack had reported earnings from the sale of insurance but had underestimated the reserves that needed to be put aside to pay off the insurance claims. As a result, his successor has had to come up with $9.4 BILLION to fix that problem.

See http://www.smartmoney.com/barrons/index.cfm?story=20051228

Jack Welch couldn't acknowledge the liability to fix the Hudson --because it would have caused his house of cards to collapse before he left office and cashed in his options -- instead of after.

Posted by Don Williams | May 29, 2007 3:15 PM

Jack Welch, with his Ph.D. in chemical engineering, probably knows more about the pros and cons of dredging than Robert Kennedy, Jr., whose knowledge of the subject, such as it is, probably comes from the 1500 hours of community service he had to perform with Riverkeeper, after being busted for heroin. Nevertheless, let's concede that both are biased: Welch by being the former CEO (and presumably, still a large shareholder) of GE, and Kennedy by being an anti-corporate populist trial attorney.

So where do the towns along the Hudson stand? They're opposed to dredging, for the same reason that Welch is: because it would do more harm than good, by 'dredging up' PCBs buried by layers of sediment, and swirling them around in the river water. This would likely reverse the trend of declining PCB levels in local fish.

Posted by Fred | May 29, 2007 3:20 PM

Did Nick Kristoff swallow the "right wing lie" as well?

Yes, absolutely. The idea that DDT isn't allowed to fight malaria in the Third World is completely false. Are you under the impression that because I'm a liberal, I think Kristof's columns emerge from a burning bush or something?

Posted by Steve | May 29, 2007 3:27 PM

This seems much more like political scape-goating than any serious attempt to solve the problem. Much like most death penalty proposals in the US, it gives the appearance of trying to do something.

I used to believe that China would have to reform to continue to grow, 18 years and a great deal of studying history later, I've changed my mind. The Chinese Communist Party isn't giving up power for anything. If things get rough there's always a foreign policy crisis to stir up.

Posted by AJ | May 29, 2007 4:36 PM

Steve:

"Are you under the impression that because I'm a liberal, I think Kristof's columns emerge from a burning bush or something?"

No, but if you are a rational liberal, maybe that column by Nick Kristoff might spur you to think critically about the subject, rather than assume that everyone who disagrees with your position has "swallowed a right-wing lie". Sara Boseley's columns don't emerge from a burning bush either, but considering that she writes for the left-wing Guardian, a rational liberal might not be so quick to suggest she had "swallowed a right wing lie" when she wrote this: Green Ideal Clashes with Third World Need

Posted by Fred | May 29, 2007 4:49 PM

Don,

For your own good, please avoid arguments made concerning the price movements of stocks. Do a little research on historical P/E ratios, the P/Es of Dow Components such as GE that were considered large growth stocks in '99, their P/Es today, the concept of reversion to the mean, etc., and you'll be able to refute your own post with none of my help.

Posted by Fred | May 29, 2007 4:53 PM

"Matthew's thesis that a thoroughly corrupt oligarchy can't be an economic superpower is refuted by the example of the United States."

Ah, but the US isn't thoroughly corrupt, nor is it entirely an oligarchy, despite trends in that direction. Indeed, I'd say that anybody who thinks the US is thoroughly corrupt has not the slightest idea of how corrupt a society can become.

Posted by Brett Bellmore | May 29, 2007 5:05 PM

Is corruption that big of a deal? To my mind, there are all sorts of things that could derail China's economy, but corruption isn't really one of them.

It's a big deal if the corruption causes western conumers to eschew Chinese goods because of fears they're dangerous.

Posted by Jasper | May 29, 2007 5:22 PM

Re Fred's "please avoid arguments made concerning the price movements of stocks."
--------
Actually my argument was not based upon GE stock price -- my argument was the Barron's article which noted how Jack Welch had pumped up GE's stock via not putting enough money into insurance reserves -- a little accounting gimmick that cost his successor $9.4 BILLION . I cited how GE's stock fell through the floor merely to demonstrate the effect of Jack Welch's bookkeeping.

Somehow I don't think GE shareholders thought of their GE investment as a penny stock being manipulated in the boiler rooms. They had faith in Jack Welch's "compelling stories" as well.

I suppose that in the interest of transparency, I should mention that I was an employee of Jack Welch's for several years. Which may account for my strong personal opinion that he is a lying, psychopathic shithead who should be hung from the nearest lamppost.

I'm sure that the people of New York City appreciate your recommendation that the PCBs be left in the Hudson's sediments -- to ooze their way down into Manhattan's water plants on the spring floods.

Posted by Don Williams | May 29, 2007 5:54 PM

"Meanwhile the fundamentals of the Chinese economy are very sound."

How would you know? If, as you freely admit, everyone in power in China is cooking the books, maybe the whole thing is an accident waiting to happen?

More to the point, like any government, that in China remains in power because it delivers what the middle class want. Initially what the middle class wanted was simply some money and some degree of being left alone, and they got that. But now they want more. In particular they want
• air they can breath, water they can drink, food they can eat without worrying that these will kill them and
• when they buy an apartment rated at 900 sq feet and get one that's actually 750 sq feet, they want recourse.

Since these desires now mesh pretty strongly with the desires of the masses, who likewise want a livable environment and recourse against corruption (unlike, say, the period from 1975 till now, when the middle class were largely content to ignore the masses), it seems likely that some sort of time of change is ahead of us.
(cf the last 25 years when the middle class in the US was uninterested in the labor consequences of globalization, and has recently become a lot more interested.)

Posted by Maynard Handley | May 29, 2007 6:14 PM

A TA of mine from Hebei once mentioned that because of the meshing of the party-state and Confucian traditions of gift-giving, anyone in power is required to be corrupt. You are expecting to give gifts to those you do business with, including in the state, due to Chinese tradition. There is also always a special event like a wedding during which all necessary bribes can be rolled into one big gift. The problem is trying to figure out how to draw the line between acceptable and unacceptable gifts, which is rather arbitrary. In effect, if your faction wants to get rid of someone, they will have a history of corruption that greased their way towards their current position. You can't gain power or influence sans corruption. It's the go-to charge to use against any scapegoat. This also means that any party member or official can be potentially executed.

Posted by Reality Man | May 29, 2007 8:13 PM

Is corruption that big of a deal? To my mind, there are all sorts of things that could derail China's economy, but corruption isn't really one of them.

Take a good long look at Africa. Widespread corruption can be absolutely crippling to economic advancement.

Posted by gswift | May 29, 2007 8:51 PM

I like the idea of catching a large number of corrupt officials and executing the lot of them.
Good thing for the Republican't Party that we don't do that here.

Posted by merlallen | May 30, 2007 3:49 AM

"That he is being executed instead of jailed just speaks to the different value of an individual's life in China compared to the west."

Except for the US, where they execute people more often than any other country in the world except China.

Posted by ajay | May 30, 2007 5:13 AM

It seems like China is learning all of the lessons about safety and corruption that we did over the past two hundred years, at an accelerated pace.

Posted by Chad Okere | May 31, 2007 6:53 PM