Saturday, May 04, 2013

Quote of the Day: Power is the root of corruption; other aspects are its symptoms

The  following insightful but lengthy quote references China’s political economy, as written by Professor Weiying Zhang in "The Logic of Markets" (courtesy of and thanks to Mao Money, Mao Problems) [bold mine] 
I once used a mathematical equation to analyze and show that the increase in actual corruption has a few origins. One is that with the increase in the degree the Chinese economy has monetized; the economic value of power has increased. The second is that the complexity of economic relations has caused supervision to become more and more difficult. The third is the growth in market opportunity caused government officials to “preserve utility” (the utility they would receive if they were forced out of the government as punishment for corruption). The fourth is the level of punishment has been reduced (such as the amount embezzled to receive the death penalty was increased significantly). The fifth is the formal salaries of government officials are relatively low. 

The five factors described above are all related to power. Power is the root of corruption; other aspects are its symptoms. Anti-corruption measures must address both the symptoms and its root, but direct action would cure the root. That direct action is to reduce the power of government officials. Some have proposed “high salaries to encourage honesty,” which makes a bit of sense. In a situation where the power of government officials is excessive, honesty cannot be encouraged with high salaries. If officials’ salaries are too high, the masses will not accept it. The key issue here is that government departments in our country have monopolized many rights that belong to private citizens and businesses in other countries with a market economy. Examples include starting a business and engaging in investment activities, which require government approval. Individuals and businesses have no option but to “buy out” by means of corruption rights to engage in normal economic activity that should belong to them in the first place. In connection with anti-corruption measures at present that only cure the symptoms without curing the cause, I said in 1994 that if we do not change the fundamentals of our government controlled economic system, and reduce the government’s administrative approval authorities, corruption of private goods (according to the definition in economics, without exclusiveness) is instead a “sub-optimal” choice. My meaning is that to stop corruption we must cure its root, not its symptoms. On the one hand stressing anti-corruption measures without wanting to reduce government power on the other hand is self deception. Not only can it not succeed, or even if it succeeds in the short term, it comes at the price of a huge impairment to society. A prerequisite for high economic growth without corruption is the abolition of the government’s monopoly over the power to allocate resources. Some say that I am defending corruption, but actually this is a misunderstanding of my views. Penetrating discussion of issues is the responsibility of scholars. In 1999, at the High Level Forum on Chinese Development, I said, “Government control needs to be given up just as drugs need to be given up,” and added, “If government examination and approvals were abolished, corruption could be reduced by at least 50%.” This message had a large impact on the proceeding system of examination and approvals reform. Ten thousand good wishes cannot match one effective action!
As shown above, corruption is a byproduct of a raft of arbitrary statutes, regulations and edicts, that bequeaths unnecessary political power to political agents which incentivizes abuse or what public sees as immoral 'corrupt' actions.

And when the media and credit rating agencies pontificate on political ascendancy from so-called anti-corruption reforms by merely persecuting ‘corrupt’ officials, pay heed or be reminded of the reverberating words of Professor Weiying Zhang 
stressing anti-corruption measures without wanting to reduce government power on the other hand is self deception.
In other words, never confuse substance with form, or symptoms with the cause.

By the way here, is a short comical skit depicting "Too Much power" culled from a 1957 movie called "A King in New York City" played by the late British comedian icon Charlie Chaplin and his son Michael. (hat tip Prof Bob Murphy)

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