Access Money Corruption

We Indians think of corruption as something that holds us back as a nation. Strike that. Everyone thinks that eliminating corruption would open the road to so much betterment, not just in India but world-over.

 

Which is why I found Yuen Yuen Ang’s interview about her book on corruption and China, China’s Gilded Age, so interesting. As she says:

“The conventional wisdom is that first we eradicate corruption and get good governance, and then we get economic growth. The point I make in this book is that’s not true – that’s a fairy tale!”

Really? Does she said that because China’s economic growth has happened hand in hand with corruption? But could China be a blip, an exception?

“I would say that China is a blip as much as America in the 19th Century or the UK in the 18th Century are blips. In fact these three major superpowers are very similar – what really happened is that corruption went along with capitalism, and was manageable because corruption evolved into sophisticated transactional forms.”

Whoa! Really?

“If you look at the history of the West, corruption was absolutely not eradicated before there was growth. When America was a developing country it was massively corrupt and had rapid economic growth and many parallels with modern China. So China today is a live demonstration of how history really happens.”

 

Of course, there’s fine-print to all this. She says there are 4 types of corruption, which she splits into a 2 x 2 grid/axis. On one axis, she lists who the corruption involves: the elite or the non-elite? On the other axis, she splits it into what it achieves: theft/extortion or a something-for-something transaction? It’s easier to understand the idea with her own picture, with drugs as the item involved:

The corruption involving only theft are like toxic drugs, i.e., they do no good. But if corruption involves exchange, and involves almost everybody, that’s better but still not good. The “best” form of corruption is if it involves exchange and involves only the elite: she calls it “Access Money corruption” (money for access to something). Examples include “cheap loans, subsidies, state backing”. As she says, even this has its downsides (obviously), but for a long time, when a country is still building systems and infrastructure, the benefits outweigh the bad parts.

 

But why/how does Access Money corruption do any good? For one, it aligns the incentives of the politicians, bureaucrats and businessmen. Second, corruption cannot be eliminated overnight, so the practical approach is to “avoid the most growth-damaging forms of corruption and channel it towards Access Money corruption”. And history tells us that once countries become rich, then they always seem to take measures to allow only Access Money corruption. Yes, Access Money corruption exists today even in the West.

 

As I said, it’s a very different take on the whole topic.