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Double Paradox

Double Paradox: Rapid Growth and Rising Corruption in China

Andrew Wedeman
Copyright Date: 2012
Edition: 1
Published by: Cornell University Press
Pages: 272
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  • Book Info
    Double Paradox
    Book Description:

    According to conventional wisdom, rising corruption reduces economic growth. And yet, between 1978 and 2010, even as officials were looting state coffers, extorting bribes, raking in kickbacks, and scraping off rents at unprecedented rates, the Chinese economy grew at an average annual rate of 9 percent. In Double Paradox, Andrew Wedeman seeks to explain why the Chinese economy performed so well despite widespread corruption at almost kleptocratic levels.

    Wedeman finds that the Chinese economy was able to survive predatory corruption because corruption did not explode until after economic reforms had unleashed dynamic growth. To a considerable extent corruption was also a by-product of the transfer of undervalued assets from the state to the emerging private and corporate sectors and a scramble to capture the windfall profits created by their transfer. Perhaps most critically, an anticorruption campaign, however flawed, has proved sufficient to prevent corruption from spiraling out of control. Drawing on more than three decades of data from China-as well as examples of the interplay between corruption and growth in South Korea, Taiwan, Equatorial Guinea, and other nations in Africa and the Caribbean-Wedeman cautions that rapid growth requires not only ongoing and improved anticorruption efforts but also consolidated and strengthened property rights.

    eISBN: 978-0-8014-6427-0
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface and Acknowledgments
    (pp. ix-xiv)
    (pp. 1-14)

    The political economy of post-Mao China is a tale of two Chinas. The first China in this tale experienced an economic miracle.¹ Between 1979 and 2010, China’s economy grew at an average rate of 8.75 percent, three full percentage points more than the South Korean economy (5.64 percent) and five times the average of the U.S. economy (1.64 percent).² China’s gross domestic product (GDP) per capita increased thirteenfold according to the International Monetary Fund’s World Economic Outlook.³ By comparison, the South Korean economy managed a net gain of less than half that of China. The U.S. and Japanese economies grew...

    (pp. 15-51)

    Although economists have found a robust and negative correlation between corruption and growth, there are seeming exceptions to the rule, including most prominently Japan, South Korea, and Taiwan where we have evidence of extensive and deep-seated corruption existing alongside rapid economic growth. In fact, the heyday of each country’s “economic miracle” occurred during a period of high levels of political corruption.

    During the 1980s, proponents of the “developmental state” model tended to downplay the importance of corruption in East Asia. Chalmers Johnson, for example, admitted the existence of extensive “structural corruption” (kozo oshoku) in Japan but brushed it aside, arguing...

    (pp. 52-79)

    Because China does not fit the pattern I describe as “developmental corruption,” it would appear that examining the workings of the ruling political machines in South Korea and Taiwan provides little analytical leverage to help solve the second paradox of concurrent high-speed growth and serious predatory corruption; that is, corruption that plunders the economy and is hence a more direct threat to growth. In fact, by more precisely examining why machine politics might be compatible with rapid growth in the abstract, and contrasting the incentives embedded in machine politics with those embedded in other more predatory forms of corruption, we...

    (pp. 80-110)

    Reform did not produce corruption in contemporary China. Corruption existed before reform, albeit mostly in discreet and often petty forms. Reform did, however, lead to a surge in corruption by opening up new opportunities for officials to use their authority to enrich themselves. As reform unfolded, corruption also evolved. In the early years, corruption fed off a combination of rents created by price distortions left over from the prereform period and widespread shortages, which allowed officials to arbitrage between the in-plan prices and market prices. By the early 1990s, shortages had largely been replaced by glut conditions as production of...

    (pp. 111-141)

    Economic reforms not only stimulated economic growth but the take off in growth rates was followed by a surge in corruption. The essence of my argument in chapter 4 was that entrenched corruption was not an a priori barrier to growth, nor were economic reforms subverted to corrupt interests (as was arguably the case with the predatory corruption detailed in chapter 3). Because the surge in corruption followed the upward swing in growth rates, I argued that corruption fed off increased growth and was in a sense a byproduct of the economic boom that followed the adoption of economic reforms...

    (pp. 142-176)

    Now over a quarter-century old, the Chinese Communist Party’s battle against corruption has often been dismissed as either a farce or a failure. To many observers, the CCP’s endless verbal attacks on corruption and its occasional campaigns are little more than carefully scripted and staged political theater designed to create an illusion of a determination to fight the problem but in reality achieving little. Many thus dismiss China’s anticorruption fight as a joke. Others believe that although the top leadership may be sincere in calling for vigorous action, it has consistently shied away from a true war of annihilation. To...

    (pp. 177-198)

    As I argued in the opening paragraphs of this book, there are two distinct images of post-Mao China: one of the economic miracle, the other of corruption gone wild. Neither of these images is false. On the contrary, it is clear that the Chinese economy has grown tremendously. It is also clear that the low-level, almost subterranean corruption of the later Maoist period has morphed into often flagrant high-level corruption. Because economists have argued that there is a negative correlation between corruption and growth rates, the two images appear to be contradictory. If the economists are right, how could the...

  11. Notes
    (pp. 199-252)
  12. Index
    (pp. 253-258)