Podcast Summary
The rise of Russia's oligarchs and their collusion with political elites: Russia's transition from lawlessness to institutionalized corruption allowed oligarchs to maintain their wealth and power, creating a kleptocracy
The privatization of Russia's economy after the collapse of the Soviet Union led to a small group of individuals, known as oligarchs, amassing enormous wealth. This group, which includes political elites, colluded to maintain their wealth and power, leading to a kleptocracy. Russia's transition from lawlessness to a more conventional form of corruption allowed the oligarchs to keep their wealth by demonstrating loyalty to the government. The conversation with political scientist Yunyun Aung, who studies corruption, also touched upon the complexities of corruption in China. While China is often labeled as a corrupt meritocracy, corruption in Russia and the US during certain historical periods share similarities. Corruption in these countries may not always be of an illegal form and can be institutionalized, making it challenging to label them as corrupt. Aang's research in her book "China's Gilded Age" explores how high levels of corruption have allowed China's economy to grow rapidly. The complexities of corruption in various countries and its impact on their economies are intriguing areas of study.
Comparing the corruption and capitalism in US and China: Both US and China face issues of inequality, cronyism, financial risk, excessive materialism, and ecological crises, with the US exhibiting sophisticated, often legal forms of corruption and China dealing with more overt corruption.
The evolution of corruption and capitalism in the US and China shares similarities, despite differences in political structures. The US, being in a more advanced stage, exhibits sophisticated forms of corruption that are often legal and not labeled as such. Both countries grapple with issues of extreme inequality, cronyism, financial risk, excessive materialism, and ecological crises. Understanding this relationship between the two nations as a clash of gilded ages rather than civilizations sheds new light on their similarities and challenges us to reconsider our assumptions about corruption and its role in shaping their respective identities.
China's Economic Growth and Corruption Paradox: Despite China's impressive economic growth, corruption remains deeply embedded, taking various forms like elegant bribery and the 'naked official'. Researcher Aang Ong proposes a broader definition and typology to understand this complex phenomenon.
The development process, as seen in the transformation of China from a developing country to an economic powerhouse, can lead to a normalization of once spectacular events and the co-existence of economic prosperity and corruption. Researcher Aang Ong highlights this paradox, as China's average annual growth rate of 9% since 1989, significantly higher than the US, has occurred despite deeply embedded corruption. This corruption, which includes forms like elegant bribery and the "naked official," has dominated in the economy, leading to a unique type of corruption that can even be beneficial for business through influence peddling. While the common definition of corruption as the abuse of public power for private gain excludes legal forms of influence politics, Ong proposes a broader definition and a typology of four types of corruption: corruption with theft (petty and grand), and transactional corruption (speed money). This framework helps to understand the complex nature of corruption in different contexts.
Understanding Different Forms of Corruption: Corruption comes in various forms, each with unique consequences. Petty and grand theft harm economies, while speed money acts as a short-term solution. Access money, the steroid of capitalism, leads to extreme inequality, political illegitimacy, and policy distortions.
Corruption in economies comes in different forms, each with unique consequences. Aung Sunny categorizes corruption into four types: petty theft, grand theft, speed money, and access money. Petty and grand theft are harmful like toxic drugs, while speed money acts like painkillers. Access money, however, is the steroid of capitalism, leading to extreme inequality, political illegitimacy, and policy distortions. China's economic boom, driven largely by real estate development, is an example of access money's negative effects. The Evergrande crisis, a potential financial meltdown in China, is a result of this systemic corruption. The US, with its high level of lobbying and bailouts, also exhibits access money's side effects. The Transparency International Corruption Index, while useful, oversimplifies the issue by combining different types of corruption into one score. It is essential to recognize the distinct nature of each form to understand their respective impacts on economies and societies.
Measuring Different Types of Corruption with Ang's Unbundled Corruption Index: Ang's research on corruption revealed that while the US has lower overall corruption than China, they have similar levels of access money. Access money corruption can provide public goods, but determining if the benefits outweigh the costs is challenging.
Ang's research on corruption focused on measuring different types of corruption, including petty theft, grand theft, speed money, and access money, through an Unbundled Corruption Index (UCI). She gathered data from individuals in 15 countries, including China, India, Russia, Nigeria, and the US. The UCI revealed that while the US has lower overall corruption than China, they have similar levels of access money. China lacks an institutionalized lobbying industry due to its personalized power structure, but technology transfers or intellectual property theft are not considered corruption by Ang. She argues that access money corruption can provide public goods, but it's difficult to determine if the benefits outweigh the costs. Ang's work highlights the importance of nuance in understanding corruption and its impact on economic development.
Corruption in US vs China: Different Forms and Impacts: The US and China have different forms and impacts of corruption. US corruption involves financialization and opacity in the banking sector, enabling lobbyists to influence politicians. China has a more diverse economy with less concentration of wealth and power, but has its own forms of corruption like grand embezzlement and speed money.
While corruption exists in various forms in both the US and China, the nature and impact of corruption differ significantly between the two countries. In the US, the high level of financialization and opacity in the banking sector can lead to a lack of accountability and understanding, potentially enabling powerful lobbyists to influence politicians. China, on the other hand, has a more diverse economy with a large number of private businesses that generate innovation and market value, reducing the concentration of wealth and power. However, China also has its own forms of corruption, such as grand embezzlement and speed money, which can be damaging to its economy. Russia, with its high levels of grand theft and speed money, has corruption that is more damaging to its overall economy due to its reliance on oil and gas exports and the concentration of wealth in a small class of oligarchs. Understanding these differences can help us grasp the unique challenges and complexities of addressing corruption in different countries.
China's complex relationship with Russia: Despite ideological alignment, China navigates economic dependence on global capitalism and potential consequences of aiding Russia, while its economic success results from various historical models and corruption allows high-level officials to practice corruption with less scrutiny.
China's relationship with Russia is complex, as China's ideological alignment with Russia clashes with its economic dependence on the global capitalist economy. This puts China in a difficult position, as it tries to navigate between its anti-American sentiments and the potential consequences of providing military assistance or circumventing sanctions for Russia. Meanwhile, China's economic success, often attributed to its authoritarian model, is actually a result of various China models throughout its history, from the centrally planned economy under Mao to the more adaptive and decentralized economy under Deng. It's important to note that China's success does not necessarily endorse authoritarianism as a political system. Additionally, China's corruption levels play a role in maintaining the image of a relatively uncorrupt state, allowing high-level officials to practice corruption with less scrutiny.
China's leaders' personal interest in curbing corruption and its complexities: China's development is a complex ecosystem, not a mechanical process, and understanding it requires nuanced methodological tools.
China's local leaders have a personal interest in curbing predatory corruption to attract businesses and investors, but their ability to do so depends on their government's ability to pay bureaucrats. During the 1990s to early 2000s, more than 75% of a mid or low-level official's compensation came from non-salary forms like bonuses, in-kind benefits, and gifts. This profit-sharing system helped China escape the poverty trap by incentivizing away certain forms of corruption. However, many Western scholars' analysis of China's development may be incomplete as they oversimplify the process into mechanical outcomes. The author argues that social realities are more like complex ecosystems and rejects the assumption that development can be broken down into discrete variables with predictable outcomes. The controversy surrounding the unbundled corruption index highlights the need for more nuanced methodological tools to understand China's development.
Resistance to challenging research: Despite uncomfortable truths and established norms, it's crucial to stay true to convictions and tackle important issues in academia.
The academic world, much like agriculture, can be influenced by the ease of data access and publication norms. This can lead to a disproportionate focus on certain topics at the expense of important but challenging questions. The corruption index discussed in the conversation, which challenges conventional measures and scrutinizes illicit activities among the powerful, faced significant resistance during the peer-review process. This resistance was likely due to the uncomfortable truths it revealed and the established norms it challenged. The speaker's determination to address these issues, despite potential backlash, highlights the importance of staying true to one's convictions and tackling crucial issues, even if they are not conventionally "publication-friendly." Additionally, the analysis of China's anti-corruption efforts under Xi Jinping suggests a complex reality where genuine concerns about corruption coexist with political considerations.
Xi Jinping's views on corruption rooted in personal values: Xi Jinping's firm stance against corruption stems from personal values, and he's taken top-down measures to address it, but US checks on corruption are different and more limited for presidents.
Chinese President Xi Jinping views corruption as a problem rooted in individual morality and values, which he was exposed to at a young age. He has taken a firm stance against corruption through top-down methods, as seen in the Evergrande debt crisis and regulations on debt ratios. If Xi were the President of the United States, he might be critical of the excesses of capitalism and seek to address issues through executive orders, but he would likely be frustrated by the different political system and the limited power of the presidency. In contrast, the US has checks on corruption, such as the progressive era reforms, that are less prominent in China, where politicians hold more power over businesses.
The Progressive Era and China's Gilded Age: The Progressive Era in America addressed issues of corruption and inequality through regulation and transparency. China could benefit from similar reforms, but a top-down approach may not be effective in addressing root causes.
The Progressive Era in America marked the end of the first Gilded Age by introducing more regulation and reducing corruption. Tools like an open press, marketing journalism, independent prosecutors, and elections played a key role. China is experiencing similar issues and could benefit from its own progressive era, but Xi Jinping's top-down approach may not be enough to address the root causes of problems. Living in the US has shown the speaker that even advanced democracies face significant issues like inequality and polarization. The speaker, a political scientist at the University of Michigan, views capitalism as having both advantages and disadvantages. In her book "China's Gilded Age," she explores the importance of understanding the role and purpose of college in society.
Exploring the world of Freakonomics Radio: Freakonomics Radio is a podcast that uncovers the hidden side of everyday life through intriguing stories and fascinating topics, produced by a dedicated team and accessible through any podcast app.
The production of Freakonomics Radio involves a dedicated team of individuals and collaborations with other podcasts, leading to the exploration of intriguing questions and topics. The show is a part of the Freakonomics Radio Network, which includes various podcasts and can be accessed through any podcast app. The team includes producers, composers, and hosts, with special thanks to Michelle Jarabzoff and Kaiser Kuo for their suggestions. The theme song is "Mr. Fortune" by The Hitchhikers, and additional music is composed by Luis Guerra. Transcripts and show notes can be found on Freakonomics.com. The podcast aims to uncover the hidden side of everything.
