THERE IS AN OLD rule of thumb about business relations in Asia, and most of the rest of the world too I am sure: When A buys from B on C's credit, B shows his appreciation to A with a thank you gift. In many societies it is culturally enshrined. We used to call it tea money here. This is the kind way of phrasing it. Officially, we now call it corruption and legislators everywhere make thundering noises about how damaging it is to economic performance and how they intend this time to stamp it out for good. But think about corruption in the kinder terms. If you are setting up an office in Indonesia, for instance, you may find after you have signed your contract with the telephone company that the telephones are not connected quite as rapidly as you had hoped. To speed up the process you may be asked to pay a little something more. No great economic damage has been wrought if you do. Telephone company workers and their immediate bosses are not paid much. This is their way of topping up their wages to live more comfortably. The extra money is not much and it is widely spread. What is so objectionable here? Of course, it can be more money when a contractor quietly pays the agent of a developer for the privilege of getting a contract or a manufacturer quietly pays a shipping clerk for priority in getting his goods through the docks quickly. But what that contractor and that manufacturer will tell you is that they would never do much business if they did not accede to the payments. It is the way the system works, whatever governments may say, and they are prisoners of the system. What is more, they will tell you, it does not add significantly to the final cost. They wrap it all up in the bill that C finally pays and C usually knows it is happening but tolerates a little of it because A is very good at his job and not easily replaced. C will not sack A for it unless it truly hurts his business or it becomes too public, which would encourage too many of the juniors working for A to do it as well. This is the nature of corruption in the private sector, pervasive where there is room for it but restrained by market forces and not necessarily economically inefficient. At the risk of appearing flippant I shall even cite Biblical authority from the laws of the Old Testament for it - Thou shall not muzzle the ox that treads the corn. The sort of corruption that drags an economy down, however, is to be found in the public sector, not the private one - contracts for highways to nowhere, for convention centres in the jungle or for fancy armaments that no one needs or can use. There are commonly two salient features to such projects. The first is that they are invariably uneconomic, not something you will find in the private sector, and the second that the bribes public officials in many countries ask for awarding them are massive by private sector standards. Here I can cite the evidence of a survey conducted last year by Transparency International, a George Soros sponsored watchdog of corruption. The respondents chose public works as the field in which corruption was most prevalent and light consumer goods manufacture as the one in which it was least. This is not surprising. There is a great deal of fat in public works. Money is no object to people whose source of it is not subject to the discipline of a profit and loss account. But light goods manufacture is a different matter. It is a cut-throat business that operates on narrow margins. Corruption exists where it can find fat to feed on and there is no fat in this one. It is a classic example of how market forces, when least fettered, do better than anything else at restraining corruption. On the front page of this newspaper on Friday we featured yet another of Beijing's thundering reproaches of public officials who waste the national government's money (Attack launched on spendthrift cadres), this time aimed at people who spend too lavishly on investment promotions. Tomorrow it will be aimed at another group of cadres. The specific cause on each occasion hardly matters for a complaint so frequent and so similar each time it is made. Here we have the classic example of what happens in a public sector when market forces are not allowed to operate at all. Did you know, Mr Jiang, that it is not flaws in Marxist theories of dialectical materialism that have done so much to undermine socialism? What has done it is rather plain, unfettered materialism with no dialectical in it at all, the common garden variety that we call corruption and that thrives in command economies as it does nowhere else. You will not solve this problem with calls to action, special police agencies or stiff criminal penalties. Only an efficient market economy can rid you of it. Nothing else will succeed.