What a China Corruption Story Says About the Perils of Authoritarian Corruption in the Modern Global Economy

Yesterday, the New York Times dropped a bombshell of investigative journalism on the Chinese Communist Party, reporting that the family of Prime Minister Wen Jiabao has amassed something like $2.7 billion in wealth in recent years, mostly through insider dealings. That a top Party official has profited from his position of authority is hardly surprising—“Man who is shocked at Wen Jiabao family fortune discovered in Chinese village,” the Onion-style China Daily Show headline blared—but the scale of the family’s fortune and the speed of its accumulation is breathtaking.

Unsurprisingly, the Chinese government promptly blocked access to English- and Chinese-language versions of the New York Times web site and mention of the newspaper on Sina Weibo, China’s über-popular micro-blogging service. The article happened to drop in the middle of delicate transition period in China’s political leadership, and what it suggests about the state of that country’s political economy isn’t pretty. As the Times piece dryly noted,

Untangling [the Wen family's] financial holdings provides an unusually detailed look at how politically connected people have profited from being at the intersection of government and business as state influence and private wealth converge in China’s fast-growing economy.

I’m not a China pro, but I am interested in forces that drive the persistence and collapse of authoritarian regimes. For me, one of the most intriguing aspects of this story is what it suggests about change over time in the difficulty of concealing the patronage and rent-seeking that typically underpin the political economy of authoritarian rule. NYT reporter David Barboza was able to piece together this remarkable picture of the Wen family’s wealth by reviewing corporate and regulatory records in the public domain. I’m sure the trail wasn’t easy to follow, but it was at least possible because the entities involved operate in a global marketplace that demands a certain degree of transparency. These wheelings and dealings are the currency that buys loyalty in many autocracies, but they are rarely laid so bare.

What Barboza’s story underscores for me is the Faustian bargain the Chinese Communist Party has made with the global economy. In exchange for foreign capital and hungry markets and safe harbors for Chinese wealth, China would play by rules that could gradually erode the opacity on which the authority of its political class depends. Among other things, it would produce and file the kinds of records that made the story on the Wen family’s wealth possible.

Importantly, Barboza’s story is not unique. We’ve seen similar stories from other authoritarian regimes in recent years. In May, Radio Free Europe/Radio Liberty’s Khadija Ismayilova described how Azerbaijan’s “first family” had profited handsomely from a $134-million construction project related to the Eurovision contest that country hosted this summer—revelations made possible, in part, because of anti-corruption law Azerbaijan adopted in 2004 to help attract badly needed foreign capital. The 2011 revolution in Tunisia that marked the start of the so-called Arab Spring was apparently sparked, in part, by public furor over U.S. government cables detailing the craven corruption of President Ben Ali’s family—cables that were pushed into the public domain by Wikileaks.

I don’t mean to suggest that globalization and the Internet and all things new and shiny have made it impossible to sustain authoritarian rule. The roster of dictatorships that persist in the face of revelations like these—Azerbaijan, Zimbabwe, and Equatorial Guinea, to name just a few of the most obvious cases—proves otherwise. I do think, however, that these entanglements are marginally increasing pressures on these regimes that can hasten their demise. As Barboza’s story about the Wen family illustrates, this Faustian bargain has worked out quite nicely for many authoritarian elites so far, but Mephistopheles’ powers of concealment do seem to be weakening. And this, among many other things, may help to explain the recent acceleration of the long global trend toward more democratic government.

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1 Comment

  1. Grant

     /  November 3, 2012

    More on official Chinese nervousness from Foreign Policy.

    http://blog.foreignpolicy.com/posts/2012/11/02/china_and_the_case_of_the_missing_ping_pong_balls

    I’ll say it again. You don’t have requirements like these unless you feel vulnerable. It’s probably just for the event but it hints at bigger issues.

    Reply

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