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Jake Van Der Kamp

'Mainland leaders cannot be faulted for not trying harder to crack down on corruption - they even ordered the execution of several leading officials, including Chang Kejie, a former deputy chairman of the National People's Congress. However, the end result was that the harder they tried, the more officials became corrupt.'

Wang Xiangwei,

China editor, SCMP

MY COLLEAGUE  TOUCHES on an interesting point here. Why is it that almost every day you can read in this newspaper of another  central government or corporate official who has been sacked or brought up on charges of corruption?

It certainly isn't because Beijing condones it. Leave alone that people have been sentenced to death for it, almost every day you can also read reports of angry denunciations of corruption and of new initiatives to stamp it out. Yet nothing seems to work.

My colleague suggests that the solution lies in political reforms to boost government transparency, uphold the rule of law and ensure an independent judiciary and a free press. He then laments the reluctance at the  centre to push ahead with these reforms.

I am sure that the measures he proposes will go some way to reducing corruption but I think we miss something here about its causes.

Try to find corruption in the business of a manufacturer who produces shoes or toasters or other light consumer goods for export. If there is any at all, it will be slight. There is no room for it in a highly competitive business. Under the table payments go into the cost of goods sold and that means inefficient pricing, lower profits and a risk of going out of business.

But  look at the other end of the scale - public works. There you inevitably find vast corruption and not in the mainland alone. It is a worldwide phenomenon. You don't go out of business when you pay a bribe in a road-building project charged to the public purse. You just charge the public purse more and it pays. It faces no competitive pressures.

This is not just my personal view. It is also what that international corruption watchdog, Transparency International, has found. Its only specific survey on the question is now four years out of date but that survey  showed that public works is the most corrupt business sector around the world and light goods manufacturing the least.

What it comes down to is that corruption is predominantly a public sector phenomenon. It impinges on the private sector because it is mostly the private sector that pays while public officials collect. It mostly happens when the private sector is involved in public sector projects or when public officials intervene in the workings of a private sector market.

I accept that it is often private businessmen who offer the bribes but the point is that they only do so because they believe that they cannot win public sector contracts unless they bribe public officials and because they know they can wrap up the cost of the bribe in the contract payments they charge.

While that makes them as guilty of corruption as the public officials, the fact remains that corruption could only exist in the first place because the public purse has loose purse strings. Public officials know they can take advantage of it to make the private sector enrich them. Corruption in any economic sector exists in inverse proportion to real competition in that sector.

The mainland's plight is that it is caught halfway between a command economy and a market economy. This is the most fertile ground imaginable for corruption, plenty of public sector projects and enterprises where cost is not subject to market discipline and plenty of private entrepreneurs to tap into this indiscipline and quietly steer a share of the proceeds to the public officials who opened the tap for them.

Administrative reforms, speeches and even executions will never solve this. The problem is that no comfortable halfway house can exist between a command economy and a market economy. They simply don't mix well. You take the one or you take the other. If you try to take  both all you get is people on the take.

'Any community group may object to particular government proposals, but no one should seek to deprive other people of the opportunity to express their views on this important subject of tax reform.'

Government spokesman,

August 20

THIS ONE GETS an award for Irony of the Month. The press release containing these words was published to take issue with a Democratic Party legislator who said at a protest march on Sunday that the nine-month consultation period on goods and services tax should be cut short because of public opposition to it.

Less than an hour earlier unknown assailants savagely clubbed senior Democratic Party legislator, Albert Ho Chun-yan, who was eating a snack in a restaurant after having been in the forefront of this march.



Mix of command and market economies a melting pot for corruption