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Corruptions of Different Kinds, and the Effects

A recent poll conducted by Global Transparency found that Corruption is on the rise globally, particularly among many of the “Democracies”.  China was not in this survey, but China was in a previous survey where outsiders were asked to rate China’s corruption by outside perception.

1 interesting point about the recent poll is that almost 1/2 of 107 nations surveyed perceived their own political parties as corrupt.

Another:  Indian people not only perceived corruption in some abstract manner, but more than 50% of Indians surveyed reported paying bribes themselves http://blogs.wsj.com/indiarealtime/2013/07/09/surprise-indians-still-find-india-very-corrupt/.  Globally, the average is about 25% of people paid bribes.

It got me thinking.  How many Chinese people actually paid bribes?

About the same time, a story appeared in China that a Chinese company leaked an account list of all of the bribes it paid to local officials.  http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/130710/bribery-china-ningxia.  It was very cheap on average, $163 (although still kind of high in Chinese market).

The report got spread around on the net, and generated a lot of outrage.

But that report also indicated a flip side, that perhaps corruption in China is not widespread at the “street level”, so to speak.

What do I mean?  Well, the stories from India is that the common people pay bribes, all the time.  Want to connect electricity?  Pay bribes.  Want to go see a doctor?  Pay bribes.  Yes, at the “street level”, the common man in India pays bribes, for every day kind of stuff.

In comparison, in China, the kind of bribes going on are more the upper level, for businesses, companies, most of the time.  Hence, I suspect, it is not commonly visible on the streets in China.  (otherwise, Chinese netizens don’t need some special leaked report to reveal to them the amount of bribes going on).

In the past, there have been various blog posts among expats and foreign businesses, literally asking how much corruption and bribery actually goes on in China.  Obviously, they don’t know, and they couldn’t get much of a straight answer from ordinary Chinese people that they meet.  Everyone knows that bribery does happen in China, but it could not be tabulated easily.  Why?  Probably because it’s not that widespread on the “street level” in China.  Otherwise, you can just go around and ask Chinese people if they paid bribes, and get a good answer, like they did in India.

I do not mean to claim that corruptions are better in some types, but I do think in view of the data from India, we should perhaps reexamine some of the assumptions about corruption in China.

Why do some Western media perceive and portray China as so corrupt, when they don’t really have much data on it (and going by their own flawed “perception)?

It’s sort of circular logic.

Anecdotal evidence suggests that “street level” corruption (visible corruption) is less in China than perceived.  At border crossings between China, India, and Vietnam, Indian and Vietnamese customs officials customarily and nearly always demand bribes, openly, but Chinese customs officials generally do not.

Why?

Because in India and Vietnam, the “street level” corruption are so common and so accepted now, it has become customs.  Whereas in China, the “street level” corruption is low, and it would stand out too much and cause public outcry on the spot.

The REAL visible evidence of corruption in China, are in the rich lifestyles of some Chinese officials.  Mistresses, cars, houses, on civil servants’ salary?  Such are the only visible evidence that lead to inevitable speculation of corruption.

But this is also traditional Chinese thinking, where so often in Chinese history, the rich and the extravagant are viewed with suspicion and viewed as corrupt somehow, no actual proof of wrong doing required.  (Which may not be such a giant leap of logic, considering how many on Wall Street make their money).

Here, I think, the evidence of different kinds of corruption perhaps also suggest a question and a solution:  Why do Chinese today not so easily willing to tolerate “street level” corruption, such as common every day kinds of bribes, which seems to be endemic in other developing nations??

Is it public awareness?  Public consensus?  Effective legal enforcement?  Or other reasons?

If my assumptions are wrong above, please let me know.

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  1. July 10th, 2013 at 14:35 | #1

    I suspect that the post-Revolution years put a damper on public corruption and that it has never recovered.

    I prefer to measure corruption by outcomes: does the entity in question produce outcomes to the detriment of the masses, and is the country generally dysfunctional, in decline, and prone to apparently irrational decisions that harm many people without producing much of use to anyone?

    By that measure, China is relatively incorrupt, the US, Europe and India massively corrupt, and the others in between.

  2. N.M.Cheung
    July 10th, 2013 at 16:27 | #2

    In China during the Maoist era, corruption was very much suppressed. Gambling and prostitution unheard of. Even today tip or gratuity are mostly not in fashion even in the major cities. For someone like me that’s used to offering gratuity in restaurants here it’s somewhat getting use to when visiting there. Most corruption today after the economic reforms is related to guanxi or doing favors. You give gifts on weddings, holidays, and birthdays rather than direct bribery. It’s mostly a power relationship offering partnership or stocks in exchange for facilitating land grabs or contracts. I am sure as gambling and prostitution proliferate other protection moneys are involved. It maybe less irritating as street corruption but nevertheless as damaging and corrosive. Bo was very popular in Sichuan when he touched Maoist nostalgia by fighting corruption and promote Maoist songs there. I think Xi is very much attempting to rectify the party and recent purge in the provincial level shows it.

  3. Black Pheonix
    July 10th, 2013 at 18:01 | #3

    I wonder if the changes in the forms of corruption may be some kind of socio-economic evolutionary process.

    Consider that China undoubtedly had street level corruptions, during the chaos of the Civil War period, and during the initial economic reform period. The first one may be due to lack of enforcement, the second one may be more due to increase in wealth as an incentive.

    Mao era certainly had both the lack of incentive for corruption as well as rigid harsh legal enforcement against corruption. Thus, the corruption of all forms basically had little room to grow.

    But I think in more recent years, corruption in China is undergoing a process of evolution similar to what happened in the West.

    That being, the corruption evolved from the simple street level corruptions (between common people) to more sophisticated corruption among elites.

    Consider this, when the economic system of developing China becomes increasing sophisticated, corrupt individuals are incentivized to seek “greater return” for their corrupt practices, and less risks.

    Analogy: Michael Corleone, in the last Godfather movie, trying to go “legit” by corrupting the Vatican bank.

    His solution was simple, he didn’t want to have to keep hustling street punks for small amount of money, he wanted to make corrupt money from the “legit” Vatican bank, gaining himself more legal appearance, more money, less risks. (He also bought influences with Churches and Politicians).

    The “street level” corruption of the old days were by people who had small amounts of money, and they wanted to get more by corrupting officials.

    Once those people got richer, they don’t need to corrupt low-level officials, but they now needed to corrupt the higher level officials.

    As more money are concentrated in the Elites, they can’t keep bribing all the low-level government minions. It’s not efficient, and more risky. Instead, they rather focus their bribes on a few medium or high-level officials, to get the maximum bang for their corruption, and less exposure.

    On the receiving end, high level officials want the bribes and influences, but they also worry about risks. Thus, they don’t demand “street level” bribes from the common people, That’s just too much work for little payout. Instead, the officials focus on where the money are plenty and flow constantly, the businesses.

    *We see the similar kind of “high level” corruption in Western nations, although legalized into lobbying, campaign contributions, etc. It doesn’t really make them any better by public disclosures and “transparency”, because the high level corruptions just become habitual and customary in the society.

    Now, most in the West accept these kinds of corruptions as legal and legitimate. Oh, of course, if you don’t “donate” campaign money to a politician, he’s not likely to give you any attention, right?! It’s just accepted custom now to fork over money for political influence, OPENLY, publicly, where every one can see it, but no one cares. (Kinda like in India for every day bribes).

    **And yes, absolutely this is “corrosive” for a society, and China should crack down high-level corruption, because the cost of such corruption inevitably pass down to the street level, to the ordinary people. If businesses have to pay bribes, even if it is not visible to the streets, it drives up cost of goods and services.

    On the other hand, I am a bit concerned that crack downs of corruption may cause the corruption to merely change form into something even harder to spot.

  4. William
    July 11th, 2013 at 00:30 | #4

    I agree with what Black Phoenix writes here – Vietnam border control routinely demands small bribes (Y10) at the railway crossing with Guangxi (Dong Dang / 同登), but I haven’t seen it at airports. Indian border control – not enough experience, only been there once, by air.

    And street-level corruption is generally rare here. Two possible exceptions, both to do with cars:

    – every so often your car needs to be inspected (验车). The places that do this will routinely claim that your headlights are now pointing at the wrong angle, and then charge (Y50 or so) to fix it. Before my most recent inspection I specifically asked the dealership to make sure the headlights were OK, and they just said “basically whatever we do, they will still say that the headlights need fixing”.
    – people by the side of the road collect money for parking. in most cases this is legal, and there’s a sign there. in other cases people just turn up and demand money – having made some sort of easy deal with local law enforcement. they don’t have official receipts. (apparently this is quite common in brazil too)

    For the rest, officialdom / police don’t demand cash on the spot. But getting your child into good schools, at all levels, rapidly becomes expensive (“donations”) and this is something that everyone with children will have to face.

    @Black Pheonix did you know that there’s just been another scandal involving Vatican Bank? A senior priest has been arrested, haha. Link here

  5. Black Pheonix
    July 11th, 2013 at 06:23 | #5

    @William

    An Indian American friend of mine told me about a border crossing in India. The Indian border guard demanded a bribe on the spot, threatening to hold her luggage for “additional inspections”.

    She told the guy to go to hell, and keep her luggage, because she had nothing but old cloth in the luggage.

    She thought the guy picked on her because she was American and the guy thought she would be an easy target with money.

  6. July 12th, 2013 at 01:12 | #6

    Of course there’s corruption in China. There’s been for a couple of thousand years. When there’s a competent government, it’d be combatted continuously. When there isn’t, omnipresent corruption would be out in the open, permeating every corner of society.

    In my personal experience (I’ve done more than 20 small/medium and very big projects in China from the late 80s to 2008), I only encountered it once in a small project, in the early 90s. The veiled request for “tax” was ignored (with dramatic arrogance from our side) and we never heard more from the “Tax Commissioner” of the small village in which our client’s factory was being built. Was it just luck? I don’t know.

    Street-level corruption was very bad briefly (I believe in the mid to late 80s). It is now rare (at least in the cities) from personal observation and talking to drivers, small businesses etc. that I know well — people on street-level.

    China corruption is grossly exaggeration in the Western press for many reasons. I suspect two of them are as follows:

    1. Anything bad in China is magnified 100 times, as usual. Yawn.

    2. In the earlier days, many foreign companies hired “middlemen” from HK for projects in mysterious China. These Middlemen got paid a success fee if the foreign firm got the contract (many were soft-loan or export credit projects). I knew one highly “successful” middleman who once managed to secure commission agreements from all three dumb bidders. Whoever won, he got 5%. This guy was full of wisdom about “all the complicated things in China that you outsiders cannot imagine.” He winked non-stop, and disliked me. I don’t think this kind of easy money is common anymore, but Mr. Middleman is now driving a giant Mercedes, and had long moved on to become a contractor himself, competing with his ex-clients. Interview him about corruption in China, and he’d tell you how he personally knows everyone in Zhungnanhai, wink wink, and “you guys have no idea how far up it goes.” I never employed middlemen, hence my “unusually” experience in China?

    My query over the exaggerated reports is that no other flagrantly corrupt government in human history has ever made the kind of progress that China has. So what is it that the CCP knows about “constructive corruption” which the rest of humanity don’t? Why is China the only “truly rotten country” that manages to move forward at a remarkable pace in multiple areas? If the overall effect of corruption can be so positive, then what’s wrong with it?

    However, indignant as any fair-minded person might feel about these puffy rhetorics, even blatant lies, about corruption in China, they are good for the country. Notwithstanding my personal experience in a particular line of business, corruption remains a huge challenge in general, becoming more sophisticated and “legal” all the time. Keeping everyone on their toes about this issue, using propaganda from both inside and outside the country, actually helps the Central Government in their continuous combat! That’s the irony of it: Thanks Apple Daily! Thanks Economist!

  7. Black Pheonix
    July 12th, 2013 at 06:50 | #7

    @Guo Du

    I found it mildly amusing when Dan Harris of China law Blog made up a list of corruption of his own in 2008, and listed China down on 10 of 13, as more corrupt than India and Vietnam.

    I’m pretty sure it was a ridiculous and made up list, because he didn’t back it up with any kind of numbers.

    As the “corruption perception index”, I only have to say you might as well call it the “corruption rumor index”, because that’s what it was, a bunch of people talking about “rumors of corruption” they heard about, and of course, China is in the RUMOR machine of Western media a lot.

    For all that talk, Dan Harris even later admitted that foreign companies rarely paid bribes in China, but he insisted that Chinese citizens paid bribes much more often (with no actual data).

    So, his own data for foreign companies basically contradicted the “corruption perception index”, which was based upon surveys of mostly “foreign companies”.

  8. Black Pheonix
    July 12th, 2013 at 06:57 | #8

    China arrested several employees and executives of Glaxo, for bribery.

    This recent story actually illustrates another level of differentiating corruption types:

    maintenance type corruption vs. corruption for competitive advantages.

    (1) maintenance type corruption is where one pays bribes/etc. to avoid problems from officials for existing ongoing activities. For example, you bribe an official so that he doesn’t give you a problem report for your annual tax audit of your business.

    (2) corruption for competitive advantages, is where you are bribing an official to obtain a new advantage benefit that you normally don’t have.

    Glaxo corruption investigation is the 2nd type. Glaxo executives in China allegedly bribed officials, hospitals, doctors, etc., to allow Glaxo to break into Chinese market and increase the share of its market.

    I think both types are bad, but the 2nd type is particularly bad, because it tends to be massive and more anticompetitive.

  9. July 13th, 2013 at 00:24 | #9

    @Black Pheonix

    In my view, Type (2) is definitely corruption, and potentially more damaging. Type (1) is in a way succumbing to “extortion”. If this extortion is pervasive, and condoned or ‘accepted” by society as a matter of habit, then a foreign company should make its own decision wether to stay or go. If it’s not, and clearly the act of a few, then normally there would be a way to correct the situation.

  10. Black Pheonix
    July 15th, 2013 at 06:13 | #10

    China releases details of massive $489 million Glaxo corruption.

    http://online.wsj.com/article/SB10001424127887323848804578606660146446092.html

    Some expats have painted this as China’s way of making trouble for foreign companies. Glaxo though is facing similar corruption investigations in US as well.

    I guess it’s real enough.

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