China's Gilded Age

China's Gilded Age (2020) by Yuen Yuen Ang is an accessible read that is well worth reading for multiple reasons. The book advances theoretical understandings on corruption and poverty, it presents creative methodologies that could inspire all sorts of new research, and presents unique findings that explain how China sustained high levels of economic growth alongside pervasive corruption. Ang also wrote the excellent book How China Escaped the Poverty Trap (2016).

A few notes (three long quotes, key arguments from the book):

"The durability and gigantic scale of Chinese economic expansion, juxtaposed with reports of "rising"and "explosive"corruption, cannot simply be brushed away by assertions of imminent collapse, even amid the current slowdown. How China has come this far –from an impoverished communist regime to a capitalist superpower rivaling the United States, despite a crisis of corruption that its leadership sees as "grave"and "shocking"–must be explained. This is the task of my book." (p. 5)

"Through an "unbundled"approach, my study draws a clear distinction between the quantity and quality of corruption. Wealthy economies may have low quantities of aggregate corruption, as measured by standard cross-national indices, but it doesn't mean that they have no corruption; rather, their corruption may be of a different quality –concentrated in access money, which is difficult to capture and not immediately growth-retarding. Contrary to popular beliefs, the rise of capitalism was not accompanied by the eradication of corruption, but rather by the evolution of the quality of corruption from thuggery and theft toward sophisticated exchanges of power and profit. Compared with countries that prospered earlier, China is still a relative newcomer on this evolutionary path... Why has China prospered alongside vast corruption? I offer a four-part explanation. First, the dominant type of corruption in China is access money –elite exchanges of power and wealth –rather than petty bribery or outright theft... access money may actually raise private investment –and even spur over-investment, as seen in China's real estate sector –thereby increasing growth, at least until the onset of a crisis." (p. 14)

"One of the most intractable problems of development is the trap of "corruption-causing-poverty-causing-corruption." In other words, countries are poor because they are corrupt, and they are corrupt because they are poor... The scholarly literature poses two solutions to this problem. The first is to "skip straight to Weber" by replicating the best practices of first-world public administration in developing countries. Pay is too low? Raise it. Bureaucracy is overstaffed? Slash it. Petty corruption is rampant? Vow to punish it. Although these measures appear correct in principle, in practice they routinely fail and may even backfire, raising administrative costs and undermining public sector morale. The second solution, as Fisman and Golden underscore, is to "trigger a change in social norms." Social norms are important, and muck-raking journalism and public protests can help citizens hold corrupt elites accountable. But norms cannot fill empty stomachs. Poorly paid bureaucrats often steal, extort, or moonlight in order to subsist. Reform-era China charted an unusual pathway out of this vicious cycle. Its solution was to allow street-level bureaucrats to extract some payments to top up their paltry formal salaries, while also aligning their financial incentives with long-term economic development objectives. Essentially, the state applied a profit-sharing model to the communist bureaucracy." (p. 85-86) 

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Power tends to corrupt...

Fiction (1945):

  • "...out from the door of the farmhouse came a long file of pigs, all walking on their hind legs...out came Napoleon himself, majestically upright, casting haughty glances from side to side, and with his dogs gambolling round him. He carried a whip in his trotter. There was a deadly silence. Amazed, terrified, huddling together, the animals watched the long line of pigs march slowly round the yard. It was as though the world had turned upside-down." (George Orwell, Animal Farm)

History (1988):

  • "At the beginning of the Revolution all of us had utterly rejected anything to do with the past. We would no longer drive cars, or wear suits; neckties were considered criminal. Anything that made you look well-off or bourgeois, anything that smacked of affluence or sophistication, we scorned as part of the old order. Then, around 1978, all that began to change. Designer clothes from the best European tailors were the uniform of all senior government officials and members of the Military Council. We had the best of everything: the best homes, the best cars, the best whiskey, champagne, food. It was a complete reversal of the ideals of the Revolution." (Dawit Wolde Girgos, Red Tears)

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