China’s Number One Concern

Uighur rebellion? Nuclear proliferation? The falling dollar? Environmental pollution? Russia’s drive for political power? The price of oil? Nope. According to a survey conducted among China’s people and reported in the September 4^th New York Times, 75% of those asked cited “corruption.” China’s own most senior leadership doesn’t disagree, and we are constantly seeing stories of toppled bigwigs facing long prison sentence or even execution.

The Times noted that Huang Guangyu, an electronics industry billionaire, named the second richest man in China by Forbes last October, the 39-year-old was busted for corruption. “Soon, other prominent individuals were arrested or charged with corruption or bribery: Rixin Kang, the former head of China’s nuclear power agency; Chen Tonghai, the former chairman of Sinopec, the state-owned oil company; the head of Beijing’s Capital Airport (who was executed last month); and the former mayor of Shenzhen, one of the country’s biggest manufacturing centers.” A corporate CEO accused of using tainted milk to save money was also toast. Every year about 150,000 public officials are prosecuted for corrupt activity.

Sounds like China has got this one under control. But perhaps a closer look is in order. We’ve got our share of problems, and when we have big glaring errors as reflected in the current economic disaster, it’s because the pieces that were put in place to maintain the system simply failed. Madoff slipping through the SEC net, Congress intentionally creating loopholes to allow the questionable credit default swap market to grow with unregulated abandon and regulatory agencies being instructed by the White House to look the other way, etc. But the notion of a multiparty system with three independent branches of government (notably the judiciary) watched by a free press creates a system of checks and balances that eventually right the ship.

China’s one-party system with a controlled press does have a few advantages: central planners can unilaterally implement the kind of sweeping changes that moved China from an isolated and backwards feudalistic nation to a global economic powerhouse in just a few decades. But it also makes dealing with corruption nearly impossible. What looks like a purge of the corrupt is really a fairly thinly disguised “business as usual” – people who lose their power base are “purged” by those who have managed to squeeze their way into the system and make it work for them. When powerful friends slip from grace or retire, if those connections are not quickly and immediately replaced, those who maintain their rank and privilege are in jeopardy. It’s the way it has always been in these “communist” hierarchies. Same old, same old. Power shuffles with casualties.

It’s also the old “judge, jury and executioner” routine… inherent in a one-party system that effectively tells the judiciary whom to prosecute, who has fallen out of favor and who the new “approved” power brokers are. The newbies get the perks and the power; the old guard gets a cell or a bullet. Without a free press to report the truth, the cycle continues. Foreign companies still bribe their way into big deals, environmental laws are ignored – for a price, property changes hands (read: confiscation) without review and economic benefits and privilege are doled out to the winners, their family and their chosen circle of supporters. Each member of the cabal looks the other way in order to maintain his or her circle of corrupt advantages.

Hu Jintao, who sits are the top of the Chinese government, clearly wants to kill off this horrendous thorn in China’s side, but he only has a one party system with too many vested interests to implement this policy. The Times: “A 2007 study by the Carnegie Endowment of International Peace estimated that in 2003, corruption cost China about $86 billion, or about 3 percent of gross domestic product at the time… ‘Corruption has not derailed China’s economic rise,’ says Professor Gao at the Chinese Academy. ‘But it’s rotting the establishment of a rule of law. The Chinese government has more than 1,200 laws, rules and directives against corruption, but implementation is ineffective.’… Experts say corruption is thriving here because relatively low-paid government officials wield enormous power over business and resources. ‘The key variable is the extent to which the government gets involved in business in China,’ says Professor Pei at Claremont McKenna.”

In short, too many folks are joining the PRC government specifically because of these not-so-secret economic opportunities. They are willing to take the risks to reap the huge rewards afforded to those on the inside who stay in favor. Without a truly independent police force and accompanying judiciary, without a free press to watch the judges, it just doesn’t seem likely that this on-going, resource-sapping and public-frustration-building practice is ending any time soon. China is a key partner with the United States in trade, global policies and regional stability. What happens in China clearly impacts us here at home.

I’m Peter Dekom, and I approve this message.