Zhu Rongji


PUBLISHED : Thursday, 07 March, 2002, 12:00am
UPDATED : Thursday, 07 March, 2002, 12:00am

HOW FRUSTRATING IT must be for Premier Zhu Rongji to have built himself a name as an anti-corruption campaigner only to see so little fruit from his efforts that he must rail against graft as much as he has ever done as his career begins to draw to a close.

Although few politicians ever quite achieve what they set out to achieve you cannot help wondering whether Mr Zhu's vehement attacks on wasteful cadres and abusers of power in his fourth report to the National People's Congress mark a tacit admission that public administration has not really become all that much cleaner over his time in office.

I have no criminal statistics on hand to prove it but I also doubt that such statistics could prove anything. More criminal proceedings against graft can tell you either that there is more graft or that the war against graft is being won. By definition of what corruption is you cannot expect to find it tracked in normal economic statistics.

There is certainly evidence of forceful action against corruption. Almost every day this newspaper carries reports of proceedings somewhere in China against corrupt officials. Yet it does not seem to have solved the problem. Go outside official sources by talking to people doing business in China and the impression you get is that corruption is as prevalent as ever.

The lesson may just be that while authorities can take action against individual acts of corruption, a more widespread environment of corruption is impervious to their efforts if the political system in which this corruption exists is conducive to it.

And if you had to pick one system that is conducive to corruption you could not find a better one than a command economy. There is a simple rule here. When A buys from B on C's account keep your eyes open for a kickback from B to A. It is even enshrined in Chinese culture as 'tea money'.

There is no great economic damage done if it is just a little thank you gesture for an order in the normal course of daily business. The danger in a command economy, however, is that you always have A buying from B on C's account, in big deals as well as small, and safety in numbers soon lets the beneficiaries presume that they can also expect relative safety in the scope of what they take. They are mostly right too.

It just does not happen that way in an efficient market economy, in the first place because there is much less buying on C's account. A buys from B and A pays the full shot himself. Why should he bother taking part of it under the table?

Second, where A is working as an employee of a large corporation and does buy on C's account, C is usually a boss who has a very direct interest in seeing the company make money and pays much more attention to whether A's job gives him potential sources of income other than his salary.

Third, margins tend to be much tighter in an efficient market economy. B may wish to give A something extra but he has to incorporate the cost of it in his price to C and that little bit more may just make B's price higher than someone else's and lose him the deal.

The simple fact is that market economies work to limit corruption and command economies to make it thrive. Enacting more laws, hiring more police and delivering fulminating speeches against corruption will never change this.

Your problem, Mr Zhu, is an intractable one for the system to which you are still pledged. The fault lies not in your people, not in your courts, not in your law officers but in the fact that the economic principles you and your immediate colleagues still strive so hard to maintain encourage corruption.

You will not get around it until China has a market economy.