Prof. Yuen Yuen Ang of John Hopkins University finds nothing exceptional about China’s crony-capitalist boom, insisting that it follows the US playbook, the 1688 Glorious Revolution in England and the revolutionary war against the British, all of which unseated elites and allowed more opportunities for landowners to exercise political and economic power, only to be kicked out later by the industrial and mercantilist elites.
Yuen, born in Singapore, is the author of “How China Escaped the Poverty Trap” (Cornell University Press, 2016) and “China’s Gilded Age” (Cambridge University Press, 2020.) Western industrialized economies did not achieve unprecedented levels of prosperity only by eradicating corruption, Yuen argues, and a clear-eyed appraisal of US history would show that China follows the same pattern of corruption nurturing crony capitalism. In the late 19th century, it, too, experienced rampant corruption. This cannot be erased from history.
Her argument is that global corruption metrics are wrong for concentrating on the “corruption of the poor,” but not on the “corruption of the rich.” Yuen notes that these partial indicators have obscured a crucial pattern: Capitalist superpowers like the US did not necessarily eliminate corruption; rather, their corruption evolved toward legalized elite exchanges that often precipitate financial bubbles. She adds: “Thus, China appears anomalous only if one takes the idealized West as the benchmark. But once the mythology has been stripped away, it becomes clear that China’s capitalist evolution is more like the Western experience than most people think.”
Since the 1980s, China has undergone a similar evolution, though it is a youngster compared to America. During its own early stages of development, theft, petty bribery, and extortion were common. Capacity-building reforms in the 1990s improved the government’s ability to control malfeasance. However, under Xi Jinping, his faction has controlled the economic destiny of China and failed to address the poverty of at least 300 million peasants and millions more of pensioners who have to work to keep kith and kin together.
“There is a crucial distinction between notoriously predatory states, like Nigeria, and America and China during their respective Gilded Ages. What matters is the quality of corruption. In America and China, corruption evolved over time from thuggery and theft to more sophisticated exchanges of power and profit. Even as governments steadily curbed predatory forms of corruption, such as embezzlement and extortion, “access money” (elites trading favors) exploded, enriching politicians and politically connected capitalists, and thereby increasing inequality and fueling risky business deals,” Yuen stresses.
In a recent essay for Project Syndicate, Yuen said official metrics cannot capture the quality of corruption as they approach it as a one-dimensional problem that can be measured on a 0-100 scale. Thus, she distinguishes four categories of corruption: Petty theft (extortion by street-level officers); grand theft (embezzlement by politicians), speed money (small bribes to overcome bureaucratic hurdles or harassment), and; access money (big payoffs in exchange for exclusive, lucrative privileges such as contracts and bailouts) to strengthen the rentiers. Blaming corruption for the woes of poor nations does not remotely resemble a fillip to the argument.
Petty and grand theft are like toxic drugs and will destroy any economy. Speed money is more like a painkiller: it can help small businesses overcome red tape, but it will not help them grow. Access money, on the other hand, functions like steroids: capitalists lavish politicians with big rewards not just to avoid hindrances, but to buy lucrative privileges and favors. The dealmakers get rich, but dangerous side effects will accumulate over time. Corruption in America has evolved from theft and petty bribery to legalized access money. Scandals during the Gilded Age prompted vigorous administrative reforms during the Progressive Era. Progressives dismantled the political spoils system and replaced it with a professional civil service that no longer needed to collect fees and solicit bribes for income. Transparency and accounting mandates curbed the misuse of public monies. Muckraking journalists exposed abuses of power.
By the early 20th century, historian Rebecca Menes writes, “the most striking aspect of embezzlement was how little it occurred.” Capitalist influence over the government never waned, with the plutocrats resorting to lobbying to protect their interests, hiring groups with friends in Washington, DC to secure subsidies, land grants, and other favors. Between 2015-2023, $46 billion was spent on lobbying at the state and federal levels. A study by economists at the International Monetary Fund (IMF) finds that US banks that lobbied more took more risks and benefited more from bailouts after the 2008 financial crisis.
