The exchange of wealth and power among the elite, known as access money, was the dominant form of corruption in China during its three decades of fast-paced growth. Interestingly, access money was not always the most significant source of corruption in China. Through the s to early s, petty corruption prevailed. Individuals would attempt to curry favor with officials through gifts or bribes. While it was prevalent, it was not a driver of growth. Petty bribes did enable small businesses and individuals to circumvent unjust local government enforcement of regulations, but only those who could afford it.
The rise of access money began in the s as senior-level officials, who could have taken petty bribes at a local level, took advantage of new reforms.
As influential officials at the county and provincial jurisdictions, they were prime targets for illegal payoffs in exchange for favorable action.
As the event focused on access money, Dr. Both involve theft and exchanges of non-elites, such as local misuse of funds and petty bribery. These results indicate that access money is not the sole issue in pervasive Chinese corruption. Victor Shih , GPS professor and Ho Miu Lam Chair in China and Pacific Relations, who suggested that the opening of the real estate sector, specifically with land sales, resulted in the shift from petty bribery and local misuse of funds to access money.
Or, looking at corruption from an even more positive perspective, why are some countries able to achieve rapid economic growth under rampant corruption? I offer an explanation for this puzzle from the perspective of an informal governance mechanism and the role of trust in the corruption-efficiency relationship. Using the cases of China and the Philippines and multi-country statistical data, I show that, ironically, corruption and trust, two morally opposite behaviors, have become bedfellows in driving economic growth in relation-based societies.
Hands off, no questions asked. Don't ask [the consultant] where the money goes. We know exactly what he was up to, and exactly how successful he would be. According to Takungpao, a Chinese government newspaper, bribers and corrupt officials in China have taken the art of corruption to the next level. One of the new features can be called the "globalization" of bribery.
Bribes are paid not in China, but outside of China, in the form of luxury homes, bank accounts, or gambling trips. Obviously these activities and assets are exchanged outside of China to reduce the risk of being caught. But the geographic and temporal separation of payment and delivery also means that there has to be a high level of trust between the briber and the official.
Perhaps the most innovative feature of corruption in China is that it has taken the form of futures options: The briber and the official often develop a mutual understanding that the incumbent official will help the briber now but will not be paid immediately. Years later, when the official is retired, the briber will pay him in some way. Obviously, this arrangement substantially reduces the risk of being caught.
Again, without such a high level of trust, the corrupt official will not choose this option. The case of the Philippines is very different from that of China. A major type of corruption in the Philippines, at least historically, was that the state head would control entry into an industry or simply monopolize it, and impose a tax or surcharge on all the products of the industry or extract a fee for entering the industry.
The state head would appoint one of his cronies to be in charge of the industry and steal all the collections from the state coffers. To the private sector payers, these taxes, surcharges or fees, are nothing more than robbery, a deadweight loss in the economic sense.
The collecting officials simply impose the fees on the payers, without facilitating or helping any business activities. Furthermore, the victim of the corruption, the payers, would have no evidence with which to turn in the official collector, because the latter is simply carrying out a state order. Several cases of major industries in the Philippines demonstrate such a corruption pattern. The agency in charge of collecting this tax was headed by his close friend Manuel Cojuangco.
Cojuangco then used the extorted money to buy banks, which in turn funded his acquisition of many coconut-oil pressing mills. Then he put all the tax money into a fund and used the fund to subsidize the mills he and Marcos controlled. There is a similar corruption pattern in the cigarette industry. Disini in turn supplied the filter at below-market prices to Fortune Tobacco, a major cigarette maker owned by another Marcos ally, Lucio Tan.
Together they drove the competition out of market and monopolized the cigarette industry. In the sugar industry in , Marcos ordered that all sugar exports be monopolized by the Philippine Exchange Company, which was controlled by his college friend Robert Benidicto. It is often assumed that … Expand. View 3 excerpts, references background. Research on economic growth has exploded in the past decade.
Hundreds of empirical studies on economic growth across countries have highlighted the correlation between growth and a variety of … Expand. View 2 excerpts, references background. An Empirical Approach. There is empirical evidence that investors' confidence is not only adversely affected by corruption but also by the lack of predictability and confidence that accompanies corrupt deals.
However, the … Expand. Government Ownership of Banks. In this paper, we investigate a neglected aspect of financial systems of many countries around the world: government ownership of banks. We assemble data which establish four findings. First, … Expand. View 1 excerpt, references methods. Economic Development Through Bureaucratic Corruption. Among scholars the subject of corruption is nearly taboo. Placing it in a model of developing economy as a developing factor is even worse in some eyes.
No doubt, Nathaniel H. Leff's analysis will be … Expand. Direct investment and indirect portfolio investment require different governance mechanisms for investor protection.
The literature on the effect of the governance environment such as the legal … Expand.
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