China’s Crony Capitalism

Title: China’s Crony Capitalism – The Dynamics of Regime Decay

Author: Minxin Pei

Publisher: Harvard University Press, 2016 (First)

ISBN: 9780674737297

Pages: 365

When Mao died in 1976, China was at a crossroad of her destiny. The Chairman’s politically exhilarating but economically disastrous policies had put the country in a fix. It was Deng Xiaoping who succeeded Mao that put China back on rails and steered her to prosperity by scrapping ideological underpinnings and ushering in capitalist reforms in the 1990s. However, the power to set policy and take crucial decisions was still vested in the hands of a coterie of powerful party bosses. With advancing decentralization that came in the wake of Deng’s economic reforms, party chiefs in the provinces and prefectures wielded unrestrained power and liberal delegation of authority was transferred to them. Transparency of financial transactions and installation of an open market mechanism to channel them were not the priorities of the party elite. Consequently, collusion between the party officials and private businessmen began to have a clinching effect on major economic decisions taken by corrupt officials at all levels. This went on in the party, the government and state-owned enterprises (SOE). Corrosion of the political authority of the party led to regime decay. The degeneration of the administrative apparatus was stemmed in 2012 when Xi Jinping assumed power and immediately ordered a crackdown on corruption. As ordinary Chinese watched in disbelief, hundreds of officials having very high ranks and their accomplices were booked and mercilessly brought to justice. This book analyses the systematic failures that encouraged foul play, the methods by which unscrupulous elements carried on their murky business and the prospects of the communist party which is hampered by the bogey of corruption. Minxin Pei is Tom and Margot Pritzker Professor of Government and Roberts Fellow at Claremont McKenna College in the US.

Crony capitalism is an instrumental union between capitalists and politicians designed to allow the former to acquire wealth, legally or otherwise, and the latter to seek and retain power. Liberal capitalism, with its appendages like democracy and transparency, is anathema to the Chinese Communist Party (CCP) and its cronies. Collusive corruption came to the fore in 1990s, after the Tiananmen Square massacre in which thousands of protesting students were mauled and crushed under the wheels of army tanks driven into the midst of the young people in a bid to clear the square. It was one of the most horrific and brutal acts of oppression by a regime on its citizens. Opening up of the economy reached fever pitch after this incident because the Chinese government was anxious to ensure a speedy improvement in the economic lot of the people and mollify them. But collusive corruption is more destructive than individual corruption because such behaviour destroys the organizational fabric of the state, increases the difficulty of detection and produces greater financial gains for the perpetrators. With the administrative decentralization came the collusion of party chiefs and their subordinates with businessmen. Local chiefs were now powerful enough to appoint and control the career prospects of subordinates. Transfer of state assets to private entrepreneurs put more problems on the table. Reforms on ownership rights under opaque regulations offered more avenues for corruption. Real estate and land transactions, infrastructure and construction, mining and SOE restructuring are the most corruption-prone areas in China. However, the perpetrators of graft appear to yield as soon as they are taken into custody. In a bid to get leniency of sentences, they make a clean breast of it all and disclose the names and deeds of their co-conspirators. Investigation into totally unrelated cases thus leads to exposure in other areas. China’s judiciary is also complicit. Unlike conventional courts of law that strive to uphold the rule of law, Chinese judiciary is just another arm of the Communist party apparatus and functions as an instrument of party autocracy. It is governed by a strict hierarchy of party men who are themselves venal.

Organizational reforms in CCP in 1984 transferred the control of an organizational unit from another unit two levels above it to the immediately superior party committee. This brought in the practice of maiguan maiguan (buying and selling of offices) by which cronies could be inserted at any level in the bureaucracy. Disciplinary inspection committees, which controlled foul play to some extent, were weakened. The affordability of bribes for superior positions posed another dilemma. Local officials were paid low salaries and so couldn’t manage the required kickbacks. Such people sought the help of businessmen and crime bosses who advanced the requisite sums. Usually, funding for buying positions came from embezzled public funds, savings from previous corruption income and money received from public sources. This makes the author claim that institutional flaws of the Leninist party state is the root cause of regime decay rather than moral failings of its individual members.

Pei compares the economic after-effects of East Bloc countries to China’s experiment with the same scope and magnitude, but with the party still in command. Transfer of state assets to individuals spawned a kleptocracy in Russia, but this process was comparatively transparent in Poland, Czech Republic, the Baltic States and Hungary. Appropriation of power and financial wellbeing of the mafia-politician nexus bodes ill for the future of China especially if the party apparatus is suddenly or violently dismantled. The author makes a prescient warning that if a regime transition should come, the initiating event is more likely to be a breakdown of the decaying autocracy, possibly induced by a split among the elites inside the party-state, a devastating economic shock, an Arab Spring-style mass revolt that the authorities fail to crush quickly, a disastrous external adventure, or a combination of such events (p.268).

The book is tiresome to read with its monotonous drawl of repeating data and the author making extensive conclusions from hypothetical evaluation of the actual cases of corruption. The entire analysis is based on a dataset of just 260 cases. Frequent and indiscriminate use of statistical concepts of mean, median and standard deviation in analyzing the amount of wealth illegally acquired, the tenure of prison terms awarded to the culprits and the number of years they could carry on with their trade lends an aura of armchair intellectual exercise to the whole book rather than providing a down to earth picture of the ground reality. However, it must also be remembered that China is not going to allow foreign researchers to interview its convicts in the foreseeable future. Each chapter in the book begins with a quote from President Xi Jinping’s anticorruption speeches made in 2013-14. Detailed appendices showing the data on individual convictions are given, but when Pei repeatedly mention corrupt deals and the names of perpetrators in the main text, it gets a bit tedious for the reader.

The book is recommended.

Rating: 2 Star