Corrupt and competent: A paradox of China’s economic growth

Podcast

Unpacking the relationship between corruption and economic growth in China's Gilded Age.

Illustration by Derek Zheng

The Corruption Perception Index from Transparency International suggests that China is roughly as corrupt as India. If that’s so, then why is it that corruption seems to be so much more of a drag on the Indian economy than on China’s? Indeed, why is it that in the very periods where experts all seem to agree that China’s corruption was particularly egregious, China’s economic growth is still so robust? These and many other mysteries and contradictions of corruption in China have long puzzled not just me, but many others who study China. Thankfully, my guest today has written a book that tackles all this and more, and it’s one of the most eye-opening and insightful works I’ve read in many years. That book is of course China’s Gilded Age: The Paradox of Economic Boom and Vast Corruption, and its author is Yuen Yuen Ang. Yuen Yuen is associate professor of political science at the University of Michigan, and also the author of another influential work on China’s political economy, How China Escaped the Poverty Trap.

China’s Gilded Age is the sequel to that book. It’s built on some really innovative research design and extensive fieldwork, including interviews with more than 400 officials, and on some really useful, compelling, and I think quite clarifying concepts that I suspect are going to enter the lexicon of people who are doing work on corruption in decades to come. I had the pleasure of sharing a stage with Yuen Yuen at a conference a couple of years ago in Camden, Maine, and she completely stole the show. So never miss an opportunity to hear Yuen Yuen lecture because she’s unforgettable. 

Listen to the podcast episode with Yuen Yuen or read a lightly edited transcript of the podcast below:

Kaiser Kuo: Yuen Yuen Ang, welcome to Sinica!

Yuen Yuen Ang: Oh, thank you so much for your kind words. I am so excited to be on your podcast. Thank you, Kaiser.

Kaiser: Not as excited as I am. Yeah, let’s start off by laying out the conventional wisdom about China and corruption. And for you, that centers, I think, on the other claim that China managed extremely fast economic growth, as I said, not just as a percentage of GDP, but actually in absolute dollar terms as well — despite what appears to be quite high levels of corruption during these same periods of high growth. So before we get into the argument that you make, let’s make sure we lay out all the features of this “conventional wisdom” view on the economic impact of corruption broadly speaking, and in China specifically.

Yuen Yuen: The conventional wisdom on corruption is that corruption always impedes growth. It impedes private investment, and so therefore if we look cross-sectionally around the world, the corrupt countries are also the poor countries. So when we look at China, we have a paradox: look, this country, as you pointed out, according to the Corruption Perception Index, it is more corrupt than South Africa. And so if that’s the case then why is it that China has sustained four decades of continuous economic boom? So that is the paradox that we are facing.

Kaiser: Yeah, that is the conventional wisdom. And I mean, I think part of the problem, of course, and this is the main thrust of your book, is that corruption is treated as a monolith. It’s one phenomenon and isn’t broken down, or as you say, unbundled. It’s just hard for me to believe that nobody else before you has really made an attempt to unbundle corruption, at least not beyond a distinction between what they would call extractive and transactional forms of corruption. So why do you suppose that is? I mean, in a conversation I remember really well from I think it was the late 1990s, I was talking with my father about this concept. He was doing business in China and complaining bitterly about his own business dealings in China and corruption. And I asked him, “Why doesn’t it prevent the bridges from being built?” If they contract a bridge out in India or in Russia, the money will be gone, the bridge won’t get built, or it will get built way behind schedule and way over budget. And that is just not the case in China. And my dad didn’t break it down quite as systematically as you do. He didn’t have the nomenclature for it, but he clearly had this idea that there’s corruption and then there’s corruption, and there’s different kinds, and they have different effects, not all of them are entirely deleterious. So can you talk about… I mean, because we need to do this, I think at the very outset, to lay out these basic concepts, these four types of corruption that you taxonomize. And maybe we can go through each of these and maybe deploy what I think it was a really useful comparison that you used in the book with each type of corruption compared to a class of drugs.

Yuen Yuen: Sure. And you’re absolutely right. In fact, scholars have come up with terms to distinguish between types of corruption. So they use the terms petty versus grand corruption, decentralized versus centralized corruption. So the notions that there are different varieties of corruption are definitely out there. And as you correctly pointed out, even lay observers have this intuitive sense that some corruption seems to be different from other types. But what my role is as a scholar is to think about this systematically. And so that’s why the typology and the framework of the four types of corruption is important. And furthermore, I measure these four categories of corruption across a sample of 15 countries. So that measurement allows us to systematically actually see that the structures of corruption vary across country, even if they have the same absolute amount of corruption. So those are the extra steps taken in my research. So let me walk you through, first of all, unbundling corruption and the four types of corruption that I highlight.

So I use the analogy of drugs to help us understand four types of corruption. And the first two types of corruption are what I call corruption with theft, meaning there’s a government official and he’s just stealing public funds and putting them in his own pocket. He’s not giving anyone else a benefit in return. So we can distinguish between petty theft and grand theft. Petty theft would be like a policeman coming to you, shaking you down, basically extorting a hundred dollars out of you. And grand theft would be a high-level government official who siphons billions of dollars out of state bank accounts into Swiss bank accounts. So they are both forms of theft, there is no exchange involved, but the difference lies in the amount of money that is stolen or extorted.

So these two forms of corruption with theft, I call them toxic drugs. So think of cocaine or heroin or meth, there is no benefit. If you take these drugs, you are going to destroy your health and destroy your life. And that’s what we see in economies as well. Countries like Nigeria, which are plagued by embezzlement and extortion, they can’t grow because they’re constantly being robbed and preyed upon by their own government officials. And then the third kind of corruption is corruption with exchange, meaning you pay a bribe and you get something back. So there is an exchange involved. And I distinguish between two types of exchange. The first is called speed money. Speed money means petty bribes that you pay to low or regular officials in exchange for getting over red tape. Or getting over a hurdle or a delay in order to get your passport and license faster. So you are buying speed. I call that painkillers. So you take a painkiller so that you can get rid of a headache, but it doesn’t help you grow muscles fast. This is just a painkiller.

Okay. Then we get to the fourth type, which is the most interesting variety, access money. So access money are privileges paid to powerful officials, not just for speed, but for access, to buy special deals, regulatory exemptions, monopoly rights — privileges that will help a capitalist make a tremendous amount of money. And this type of corruption, access money, is what I’m going to call the steroids of capitalism.

And so, if you think about steroids, right? Steroids is what athletes would take to help them build muscles fast and perform superhuman feats. But if you keep taking them, it’s going to exact a very serious toll on your health. So it definitely has serious side effects. So now we have this typology of what types of corruption with four types of effects.

Kaiser: Yeah. So, that’s fantastic. And I love it. And I think the drug analogies really help to get the point across. And you do point out that prolonged use of steroids is bad for you, but I think before we go much further, let’s head off a possible critique that maybe leaving it just at that claim isn’t sufficient —. I mean, it’s going to stick in the craw I think of a lot of listeners that, who are going to conclude, you’re arguing that rich countries have corruption, but that kind of corruption, access corruption, the kind that exists in these richer countries, is aligned with economic transactions so you can exert more rents because you know you’re growing more. Growth is incentivized, right? But to be clear, you are not arguing that this type of corruption is “good”. So why exactly is it? I mean, besides like steroids, why is that corruption nonetheless ultimately baneful, even if it isn’t entirely crippling?

Yuen Yuen: Oh, thank you so much for stressing that, because you’re right. Let me first state the takeaway of the book. The takeaway is that access money boosted imbalanced risky growth in China. That’s the takeaway.

But usually what happens, as you correctly pointed out, is that people would dumb down the message. They would take out “imbalanced” and “risky,” so it becomes, “access money boosted growth.” And then they would take out “access money” and replace that with “corruption” so that the message becomes “corruption boosted growth.” And when you post that on social media, people go visceral. And even sometimes academics do that as well. They read the book and then they walk away with, “Oh, this is a defense of the wonderful socially beneficial effects of corruption.” And this is absolutely not what I’m saying. And that is precisely why I wanted to use the analogy of drugs, because intuitively we all know drugs have side effects, right? So no corruption is ever good, but we do want to know the different side effects. So in a case like China, and I also compare it with 19th century America, which is the original “gilded age”…

In any of these kinds of gilded ages, their defining type of corruption is access money. And that corruption leads specifically to a form of growth that is imbalanced and high-risk. And that’s exactly what we see in China today with President Xi Jinping saying that we need to strive for common prosperity because we have a serious inequality problem.

Kaiser: Yeah. Or when Wen Jiabao, 2007, started talking about how it’s unbalanced and all that.

Yuen Yuen: Exactly. It’s an old problem. And Chinese leaders have always been aware that growth in China has not come without costs.

Kaiser: And part of the reason for that is just the moral hazard of having this money available to you without the attendant risks or without the demand that it returned, right? This is part of it. And the inequalities is fairly obvious. When you have only the few who have access to those kinds of really large bank loans or to those kinds of government contracts, right? There’s going to be inequality produced therefrom. So, I mean, even just a few chapters into the book, you had me completely convinced that the CPI, the Corruption Perception Index, that’s produced by Transparency International, is really flawed. I wonder whether you’ve had any conversations with them or heard from anybody at Transparency International about maybe incorporating some of your critique into their methodology, in the way that they measure corruption. Because it struck me that they also operate something called the Global Corruption Barometer, same organization. It looks specifically at what you call speed corruption — bribes, and all these things that cut through the red tape as well.

Yuen Yuen: That’s right.

Kaiser: And their surveys already find that there are huge differences in the response of ordinary Chinese versus Indian citizens when they’re asked about this. And yet they continue to aggregate the CPI score and show that India and China are roughly the same year to year. So they surely see that there is a problem, that it isn’t sufficiently granular. I mean, shouldn’t this alert them to something that’s flawed in the CPI?

Yuen Yuen: I think at the outset, to be fair, one has to give credit to Transparency International for creating that index. Because having tried to create one myself for only 15 countries, gosh, I know how much effort and time and money it takes. So it’s incredibly difficult work to create an index.

Kaiser: Well, you’re one person too.

Yuen Yuen: [laughs] And so the fact that they created one has the benefit of bringing attention to corruption. So I wanted to acknowledge that. But on the other hand, I think that when you produce a metric that is flawed, in this sense it reinforces the idea that corruption is a homogenous problem. It profoundly shapes public discourse, even elite discourse about the way people think about corruption. And so, everyone is obsessed with which country is more corrupt, but people are not asking the question of which country has what type of corruption. It’s not a relevant question of all. In regular conversations it just doesn’t come up except with your conversation with your father, which I think is quite exceptional.

And so, I would be very happy if they were open to the idea of having a more nuanced metric. And like you pointed out, actually they have already done some of it. The measures on petty bribery itself already indicates that countries with the same CPI score can have very different levels of petty bribery. But I understand the logistical challenges. And we live in a modern world where people want convenient measures. We want things to be measured in one number, 50 or 87. And we love to rank things, rank China against India. Or the US and so forth. And so when you introduce more nuance, it becomes inconvenient, and you can’t just put China side-by-side with India.

So I think there are a lot of modern tendencies of wishing for convenience that prevent us from having more informative indices. And so that’s why I wanted to provide an alternative, and hopefully someone with more resources than me would take it up.

Kaiser: And so, as you say, you did something truly ambitious, you tried to create your own index. And I think what you came up with is something very illuminating. It’s an unbundled corruption index, what you call a UCI. Run through without going into too much detail of how you measured these for the prevalence of petty or grand theft of speed money and access money in each of the 15 countries or regions that you had. What was the basis for the measurement?

Yuen Yuen: Sure. So I wanted to create an alternative for the CPI, and this index it’s called the unbundled corruption index or the UCI. And I follow a method that the CPI uses as well, which is —  it is an expert survey. So basically I reach out to people who have expertise in particular countries, such as China, Thailand, Indonesia, and I present them with a series of vignettes. So meaning scenarios that describe either speed money or access money or embezzlement. And I ask them to rate the prevalence of this class of corruption. And I combine their perception scores to create a unique score for every country where you can see number one, the overall corruption score, and number two, the unbundled corruption score across the four categories. And this has several advantages over CPI because the CPI is actually not an in-house survey. It is actually combined from multiple existing surveys. So the numbers actually go up and down in ways that may have nothing to do with reality, or even with its own measurement. It just has to do with whatever sources it selected. It also does not present experts with concrete vignettes. So if you look at the sources that they use, they would ask people really generic questions like, “How corrupt do you think the United States is, from zero to 10?” And you’d be like, “Well, I don’t know. How about 7.5?” How do you come up with 7.5? You don’t know, right?

Kaiser: Right.

Yuen Yuen: And so what I did is to add a few measurement precision into this index so we now have a much more unbundled nuanced perspective into the different structures of corruption that exist across countries.

Kaiser: So, give us some examples of the kind of vignettes that you presented the respondents with.

Yuen Yuen: So each category has about five of those. And in access money, one of them that I use is the one from Bo Xilai.

So my vignettes are inspired by real-world events. So the one in Bo Xilai would be, there is a powerful official, and in exchange for your cultivating close connections with him, you have a steady flow of government contracts. How common is this?

I also included vignettes for the types of access money that exists in Western democracies, which is excluded from conventional measures. So I included what is called the “revolving door practices,” which is common in the US.

Where elites move constantly between the public and private sector. I have a vignette for corporate contributions to politicians. And so, the vignettes were able to capture different scenarios of the four types of corruption.

Kaiser: Let’s drill down into that right now, because it’s something that I did want to ask you about. You make this claim and you include this, actually building it into your research, that the kind of corruption that you see in the United States, what we call this infamous revolving door. And Yuen Yuen, you said it broadly, that it’s officials moving between the public and private sector. But even more specifically, it’s where you have regulators who leave office and they actually join K Street lobbying firms that represent the very industries that they were just regulating, or maybe even worse, the other way where regulators are appointed to regulate an industry straight out of the K Street firm where they were lobbying against regulation, right? I mean, we saw that happen, especially during the Trump administration. But I’m curious, have you gotten pushback against that idea that the revolving door and maybe the whole lobbying industrial complex in the United States is the same morally or institutionally as bribery of the kind that you just described with Bo Xilai? Are these the same to most people, or did you get some pushback on that idea, on that claim?

Yuen Yuen: Definitely there was pushback, as you can expect. And I think it’s good to get this pushback, because that was my objective. It would kind of stir up people’s overly comfortable assumptions that, “Oh, here enriched democracies, we are free of corruption.” And I wanted people to question that. And I was like, “What if you have access money that is institutionalized and legalized, where legally nobody has done anything wrong but clearly you have a conflict of interest?” Clearly, someone’s benefiting tremendously from, say, the US financial crisis, and the very same people who benefited the most got away with it.

So, how should we characterize that situation? And I think what happens when we talk about corruption is we just overload, we just ignore this. And it’s much easier rather to talk about corruption in the forms of poor-country corruption, and that’s all man corruption or the Chinese types, the Ji Jianye and Bo Xilai. And so by bringing those legalized and institutionalized access money into my measurement, that is definitely pushback. People will react with, “How could you? How could you include that? That’s not corruption!” And I’ll be like, “Okay, it’s fine, we can debate about that.” But I just included that in my measure. And if you don’t like it, you can come up with a different vignette. But if you exclude that from the vignette, you are making a value judgment. You are saying that that’s not corruption. So I don’t have an answer myself. I’m not trying to impose one, but by my act of measurement, I wanted to bring conversation into this topic that people are not willing to confront.

Kaiser: You may not have an answer, but I absolutely do. It is corruption. Just like Citizens United. Citizens United is basically saying, “Okay, political bribery is completely okay.” But yeah, I’m sure there are some people who had quibbled with it. So let’s talk about comparisons that you were already able to make just after laying out these different types of corruption and showing the relative prevalence in these 15 countries or regions that you look at in this UCI. And you look at China versus Russia, China versus India. What jumps out at you when you look at their unbundled scores? Especially if you look at China versus some of these other countries, what’s the thing that jumps right out at you?

Yuen Yuen: Great question. I think one of my favorite comparisons is China versus India. And I believe actually your podcasts with Yukon Huang also mentioned China versus India.

Kaiser: Yeah, let me just remind people that I did… I think it was in 2017, we recorded a live podcast. I would encourage everyone to go back and look at it because we’ll bring up Yukon again because he makes some very contentious, very controversial claims about corruption that I’ll want to talk about with you Yuen Yuen. So yeah, I did bring that up.

Yuen Yuen: Yes. And we are continuing with that conversation. So when I look at the UCI scores for China and India, what pops up is that these two countries are equally corrupt in terms of total corruption, whether it’s in my score or the Corruption Perception Index, right? But once you unbundle corruption, what you find is that they have different structures of corruption. So in India, the most dominant type of corruption is speed money. Bribes are being paid to overcome red tape. In China, the most dominant type is access money. So bribes are being paid to gain access rather than to avoid harassment. So the objective of graft is different in China versus in India, which you would not notice if you didn’t unbundle the corruption.

Kaiser: Or if you didn’t actually travel between these two countries.

Yuen Yuen: That’s right.

Kaiser: I remember there was this book by this investor named Jim Rogers, who many of you probably are aware of. He wrote a series of books and in one, he talks about how just entering any country you can get a sense for — he doesn’t call it this — but how much speed corruption there is, just in the visa line or in the whole process, the intake process. And then at the airport, how well do they keep the black cabs away from the just-arrived travelers, or is there a good orderly taxi queue. Yeah, it’s interesting. Anyway, so you were saying… I didn’t mean to interrupt you with my own little vignette.

Yuen Yuen: No, actually I wanted to share a quick anecdote building on what you just said, because I completely agree that how you are treated at the point where you enter a country tells you a lot about the corruption regime in the country. I have been to China, India, and Nigeria. And the first time I entered Nigeria, as soon as I walked down from the plane, I was immediately asked to pay a bribe, and I couldn’t pass unless I paid a bribe. And so that was actually my first experience of being openly extorted by government officials. And so, it tells you how corrupt the country is. They just do it openly. And of course I was an easy target. And when I was in India, they were more subtle. The visa officers would say, “How did you like India?” And then I’ll say, “Oh yeah, I love it.” And when I did nothing, he didn’t stamp my passport. And so, I would walk back to the line and I would say, “Oh, but you didn’t stamp it.” And reluctantly, he would stamp it. So he was more subtle, he was not outrightly predatory. And then if you go to Pudong Airport, you know what happens. You just walk through in two minutes and there’s a button that asks you to rate the official. Are you very unhappy to very happy? And usually I’m very happy. And so just passing through customs tells you the vast differences between three emerging economies.

Kaiser: Yeah. Absolutely. So you’ve advanced a really interesting theory about the relationship between economic growth on the one hand and the prevalence of these different forms of corruption on the other. I wonder though, do you have a theory about — or any theories — about why different countries see higher or lower levels of these different types of corruption? Are there structural, or developmental, or even cultural factors common to countries with say high levels of speed corruption, or of access corruption, or petty theft? I mean, what’s the key here? Is it state capacity, is it high levels of social trust or low levels of social trust? I mean, or are these things actually determined by the level of corruption? Did you get a sense — I know it’s not really something you talk about directly in your book, but I’m really curious, that seems to be the thing, the next question in this: what causes these differences between countries?

Yuen Yuen: That’s a deep question. And it’s implicit in my book. And there are several factors that shape the structure of corruption. And one of them is the political regime type, that does matter. And I would go back to the example of China compared to India. So there’s this quote in my book of a high level official in New Delhi. And he says, “If you want me to speed up a file, I can’t do it. But if you want me to stop a file, I can do that immediately.” And so that’s an amusing quote, especially for people who know China, because in China is the opposite. If a Capitalist has connections with the yibashou, the Party Secretary, you don’t have to care about any files. The Party Secretary would just slam the table and make the decision. And so what it tells you is that because India is a fragmented democracy, officials derive their power from the ability to block to veto. They can stop a file if they wanted to.

But if they wanted to speed things up, they can’t, because there are so many other political actors who can also intervene in the process. In China, on the other hand —

Kaiser: Too many vetoes.

Yuen Yuen: Too many veto players. In China, it had powers concentrated in just a few people. So if you find the right people and you have the right connections with them, then you can gain exclusive access to lucrative opportunities.

Kaiser: Absolutely. But then that of course raises the question of, why then are China and the United States, which are quite opposite regime types, why do they exhibit similar patterns in terms of the distribution of types of corruption?

Yuen Yuen: Good question. And that’s because the United States compared to India is not a fragmented democracy. So India is a democracy, but it is also this large sprawling developing country with much, much lower state capacity than in the United States. And in the United States, I know things look dysfunctional in the past year or so, but actually state capacity is still really high in this country. So you have to pay your taxes, for instance. You can’t run away from that. The IRS has tremendous state capacity, right?

Kaiser: Yeah.

Yuen Yuen: And the other thing, the other kinds of state functions and regulations, you can’t not show up in court because the state has tremendous capacity when it wants to enforce its decisions in the United States. So what you see in the United States is that the other kinds of growth-damaging corruption are generally contained. So generally for someone from the middle class, you don’t walk on the street and expect that a police officer will extort you or shake you down, right? Embezzlement is also fairly in control in the United States. But the kind of corruption that dominates in this country is access money. And in particular it comes in a legalized and institutionalized variety that is much more sophisticated than the Chinese version. In fact, I call China a relative newcomer in the process of becoming a capitalist economy.

Kaiser: Yuen Yuen, let’s go back to China and let’s talk about the way that you periodize the reform years and what’s come since under Xi Jinping. Arguably, we’re beyond the end of reform and opening. Carl Minzner argued that. I had him on the show and he made that point very clearly. But what events do you see as punctuating these different periods? What begins and ends these different periods? And what types of corruption do you see rising or falling during these different periods that you demarcate? Because as you note, countries do not, or certainly China does not, exhibit stable patterns of corruption over time.

Yuen Yuen: Right. And I’m glad you emphasized that. When I teach my Chinese politics course, the first thing I teach is that there isn’t just one China but several Chinas since 1949, and even since 1978. And so it’s important not to think that China has always been the same. So we can think about the structure of corruption in China evolving drastically since the 1980s. In the 1980s, China looked like any other typical developing country. It had all kinds of corruption. Petty bribery was rife, and so was bureaucratic extortion. And so if you remember the literature from that period, there was a lot of talk about peasant burdens, arbitrarily extorting farmers for fees and fines. And even MNCs like McDonald’s had to cope with police officers randomly showing up and saying, “You have to pay this fee or fine.” So that was very common throughout the 1980s and up until the 1990s. And then from 1998 onward, you had the Jiang Zemin and Zhu Rongji administration. And Zhu Rongji spearheaded this ambitious scheme to build up modern state capacity in China.

And so this host of institutional reforms that he put into place, all of which were very dry and boring, that successfully build up administrative capacity. So if you look in my book, what happened is after 1998, embezzlement fell, instances of extortion fell, petty bribery fell as well. And it came down to really simple things like, in the past if a Chinese person had to pay a fine, all of that was done in cash. If you pay in cash, of course, it’s very easy to collect a bride and put in your own pocket, right?

Kaiser: Right.

Yuen Yuen: But for the police officer, if he collects your fine in cash, he can just put it in his own pocket. So it was impossible to track financial transactions to control bureaucratic behavior. But from the 1990s onward, China transitioned into non-cash payments of fines and fees. And a simple technical reform like this dramatically reduced instances of extortion.

Kaiser: Oh, that’s very interesting.

Yuen Yuen: So the 1990s up until the 2000s was actually a quiet period of administrative capacity-building in China.

Kaiser: Mm-hmm (affirmative). And then what happens beyond that?

Yuen Yuen: Beyond that, and then we come to 2010, around 2010 China entered into another period, which is, you start to have this infrastructure boom. I would actually push that back. I would say that that begins, I would say, let’s say the  2000s and up until now. China entered into this new political economy where local governments were really starved for funds because as Zhu Rongji built up state capacity, he simultaneously recentralized tax revenue. And as a grand compromise, Beijing allowed local governments to finance themselves by leasing land.

So, that was when the revolution in land-based financing was launched in China. And local governments all of a sudden turned their attention away from manufacturing-based growth into urbanization-based growth. So they happily sold lots and lots of land to private developers. And using that money, they then borrow more from banks and then they build lots and lots of infrastructure. So, if you look at the numbers in China, the impressive glitzy infrastructure that we see in China today is actually quite recent. It started around, I’d say 2010, you start to really see this steep climb. So for those of us who have been to China before 2010, you might actually vaguely recall that, say in the 2000s, the infrastructure was really not that great at all.

And all of a sudden, year by year, year by year, you see this like, “Wow, bridges are showing up, new airports. Wow, glitzy highways,” and so forth. And so this infrastructure boom happened after 2010. Absolutely important for China’s rise. But that was also the hotbed of financial risk, government debt, and high stakes access money, because that’s where government officials and capitalists can make a lot of money by leveraging land use.

Kaiser: So this is visible in the data, especially this period that you described of actually building administrative state capacity after ’98 I think under Zhu Rongji. The emergence of better regulation, this diminution of petty and grand theft, and this diminution of speed money as well, and maybe the more visible rise of access money. It’s in the data. And so, can you talk about what data shows this? Because you looked at a couple of forms of data. One of them is media mentions and textual analysis of media terms. So give us some examples of what kinds of terms you suddenly see being discussed with more frequency that illustrate the kinds of trends and fluctuations that you’re describing.

Yuen Yuen: Sure. So in the book, I look at two types of data. One is official data of the number of corruption cases that were prosecuted. And they were categorized into rough categories of embezzlement versus bribery. And so when you look at the data, you can see that what happens is, yes, on the whole China has always had this persistent corruption problem, but embezzlement actually fell from 2000 onwards, very visibly. Whereas the kind of corruption that really exploded in China was high-stakes bribery. So you see those in cases like the Laì Xiaǒmín (赖小民). He’s an infamous case. He is the head of one of the largest state lenders in China. I can’t remember the outrageous amount of bribes that he collected, but apparently, he stored them in tons of cash in his basement. So those kinds of corruption exploded from the mid-2000s onward because it was intertwined with a new political economy where you have an infrastructure boom and you have land-based financing so all of the stakes were going up. 

The other kind of data that I looked at was also a media mention. So how was the Chinese media talking about corruption, and what types of corruption were they talking about? So if you look at corruption with theft, the words associated with them will be tānpài (摊派). Tanpai in China means something like bureaucratic extortion. I bet people don’t even mention them today, but it used to be heard a lot in the past. And you can see that there is a stark decline as well after the 2000s. Similarly with words like luàn shōufèii (乱收费)  which is arbitrary collection of fees and —

Kaiser: Collection of fines.

Yuen Yuen: Yeah, and all of those things associated with extortion and speed money. And then the interesting thing about the new words that became popular from 2000, I would say the mid-2000s onwards, is things like luǒ guān (裸官), which is naked officials.

Kaiser: Naked officials, yeah.

Yuen Yuen: Doesn’t mean the official who doesn’t wear clothes. It means the officials who looks poor at home and then parks all of his condominiums and assets overseas, right? With his family. So luo guan became really popular. And another word that became popular is yǎhuì (雅贿), which means elegant bribery. So the forms of bribery became more sophisticated over time. One of the methods is to give art instead of cash. Because with art the corrupt official might be able to get away from that by saying, “Oh, that’s not really worth much, it’s just a Zhāng Dàqiān (張大千) painting and it’s subjective.” The worth of which is subjective. And so art became a popular means of bribery. And so there was this particularly interesting case of Wén Qiáng (文強), the corrupt police officer who fell in Chongqing. And when they arrested him, he had a lavish private art museum with works of some of the most famous Chinese artists that you don’t even find in public museums.

Kaiser: And dinosaur eggs.

Yuen Yuen: And dinosaur eggs. And I was like, “Does he really know how to preserve them?”

Kaiser: He doesn’t need to. They’re made of stone already.

Yuen Yuen: Or he’s going to make an omelet out of it.

Kaiser: Yeah. So, in order for this all to work, though, of course the bureaucrats need to be incentivized in another way. Now, it’s not just the financial incentives where they still need to actually do their jobs. So you talk about something, I think it was just really a fascinating chapter, chapter four, profit sharing Chinese style. Can you outline how this works for our listeners? I mean, it’s interesting that two Chinese bureaucrats who you speak to this seems like a no-brainer as though pay and performance obviously ought to be linked.

Yuen Yuen: Yeah.

Kaiser: So I’m curious, maybe explain how this works and talk about whether this is unique to China.

Yuen Yuen: Sure. Well, let me start by explaining the concept of profit sharing. So I described the Chinese bureaucracy as operating under a system of profit sharing. At least I would say in the pre Xi era, because keep in mind that there have been drastic changes since Xi came into office, right? So I’m always talking about the reform period in much of this book. 

So what happened with profit sharing is that government officials from the highest level to the lowest level, they have a direct share in the economic outcomes of their organization. So it could be a city, it could be a county, it could be as small as an agency within a county or even a public school. So they are equity holders in that organization. And so we have to, first of all, make a distinction between high-level profit sharing and low-level profit sharing. So for an official like Bo Xilai, he doesn’t care at all about his salary and bonuses. That’s not where he gets his rents obviously. His rent comes from a different source, from the corporate sponsors who pay his family. So that’s a different kind of profit-sharing capitalist lineup to ingratiate themselves with these officials and pay them bribes. But in that particular chapter you were referring to, I’m talking about rank and file bureaucrats. So the 49 million bureaucrats in China who run the country, but who are not at the level of Bo Xilai were not county party secretaries. So we can think about police officers, the administrators who chop your paperwork, public service providers, millions and millions of these bureaucrats.

I think what’s interesting is that they are also involved in profit sharing, and that was important because the government also wanted them to be involved in the process, to be as financially self independent as possible, to be incentivized to perform. And what I was surprised to find is that the actual compensation of these rank and file bureaucrats is systematically linked to the amount of revenue the organization is able to generate. And this previously is seen by people, including China’s scholars, as corruption. So they’re this mistake, they call it organizational corruption and they see it as an act of deviance, something terrible. And I have a slightly different interpretation. I would say that it actually function more as a set of economic incentives because it’s so systematic. I mean, the numbers actually show you how systematically it is tied to the ability of your local government and agency to generate revenue.

Kaiser: So you look at fringe compensation specifically in Shandong province, which is, as I think you may argue convincingly, a very representative province in many ways. And you demonstrate just as you hypothesize that compensation of these county-level bureaucrats is very much tied to how much revenue they bring in. And it’s also quite transparent. It’s there in the budget numbers that are public, right? You can look at how these officials are compensated. You know what their nominal salary levels are, but you also see what they’re given in kind, allowances for transportation or this or that. It’s really interesting to see. So I’m curious. So obviously they recognize that building a tax basis, as you argue, is better for their long-term wealth than just predatory collection of arbitrary fees and fines, right? I’m wondering whether promotion figures into this as well, that they are more likely to be tapped to move up in the party organization because of bringing in more GDP to their administrative unit.

And I’m curious, yeah, because a mere rent-seeker is not going to look good as a prospect for promotion, but somebody who fostered and nurtured and attracted enterprises and produced actual economic growth, they will look like a good candidate for promotion. But both of them have skimmed. But both of them have benefited whether fringe compensation or petty rent-seeking. And that would seem to me to make the incentive very much on the side of the person who is looking to play more by the rules, and not petty rent seek but rather build business. Is that correct? Is compensation not just the only thing but promotion also a big part of it?

Yuen Yuen: The question about incentives depends on who is the actor in question. So for someone who is a provincial-level leader, like Bo Xilai, the relevant incentive for him is the career incentive.

Kaiser: Okay.

Yuen Yuen: Right? And in fact Bo Xilai is so special because he’s a princeling. I think he doesn’t even care very much about the career incentive. His is a political incentive, he has ambitions, right? To go to the highest level of office, right? So that’s why he staged this dramatic profile for himself in Chongqing, right? So those are the incentives for someone at his level. And then for people who are city and county level party secretaries in China, they are known as the top 1%.

Kaiser: Sure.

Yuen Yuen: Roughly about 500,000 officials at this senior enough rank where they are directly appointed by the party. These individuals do care about career incentives, right? So that’s where we hear a lot about the promotion. But he is a very important qualifier. In fact, if you look at the numbers, the number of seats for upward promotion is very scarce. And this is actually well-documented in the scholarly literature, but not so much talked about in the popular press. And so, I think sometimes the talk about promotion incentives as the cost of Chinese prosperity is overblown.

Kaiser: I see.

Yuen Yuen: Because the number of seats for upward promotion — as you can imagine, I mean, a massive bureaucracy, not everyone can be a mayor. And so there are actually very few seats for moving upward.

Kaiser: That’s interesting.

Yuen Yuen: And so, that means that in addition to career incentives, you need to have other incentives. I’m sorry. Kaiser, go ahead.

Kaiser: No, that’s really interesting. Take that, Daniel Bell! Right? It’s fascinating though. I keep coming back to this question of why is it that these street-level bureaucrats, they somehow know that it’s in their interest not to completely fleece all the local enterprises or business owners. I mean, I keep thinking it’s something beyond just their material compensation. It’s not just the incentive logic. And the fact that there are a few seats for promotion, I mean, that seems to reinforce it. Could it just have something to do with their ideological indoctrination, to the discipline training that they receive in the party, to fear of sanction, to fear of the very powerful coercive apparatus of the party, of shuanggui?

Yuen Yuen: It’s a combination of factors. And you’re right to point it out. What I show in that chapter is the relevance of their financial incentives. But as we know in life, it’s not always about money, right? So it’s money plus other things. And for street-level bureaucrats, the promotion incentive is almost irrelevant, because like I said, what are the chances that a regular keyuan becomes a mayor, right?

Kaiser: Right.

Yuen Yuen: It would be something of a dream really. And so, they’re not that many promotion incentives for that level. And I have also encountered street-level bureaucrats who actually resist promotion because some people feel that, “Hey, I’m better off as a regular employee in this position that pays me a lot of bonuses and I don’t have to take so many responsibilities,” right? So, actually that happens as well. Not everyone wants to move up.

Kaiser: I know the feeling well.

Yuen Yuen: Right. So we can all relate to that.

Kaiser: Oh, yeah.

Yuen Yuen: There are lots of street-level bureaucrats who are like that. They rather be in a bureaucracy that pays well than to move upward to a challenging position.

Kaiser: You don’t want to be department chair, do you?

Yuen Yuen: Exactly, right? So we can understand that. So, it’s not so much career that drives them, financial is an important part because the basic pay in China is below subsistence. And I think a lot of people are not aware of that. The formal salary for public servants in China does not even pay you enough to rent a one room in a slum in Guangzhou. You can’t survive on it. And so you need to have all of these supplemental allowances, bonuses, and perks that are paid by your agency. In addition to financial incentives, the one other incentive that I see and witness is the emotional incentive. I do see that. It’s something really hard to capture, which is this sense of genuine pride that bureaucrats do take in their township or their agency. You can call that an organizational identity, the way people feel proud of their university or their company. You see that of course.

Kaiser: Sure. Yeah.

Yuen Yuen: And so they know that, when my agency does really well, or in particular when my township. And remember that most of these street-level bureaucrats are locals, they’re natives. They grew up in that place. And so they do have a genuine sense of pride, then — of course, we want our township to do well and to excel. And so that kind of emotional concern for the place where they grew up and work, plus financial incentives, work together.

Kaiser: Yeah. I can see how that would work. So then you have this wonderful chapter on crony capitalism in China, and you go with these two fascinating examples. The first, I think to anyone who’s been a listener to this show is going to be somebody who’s very familiar, it’s of course Bo Xilai. And he of course, as you said, he was the son of red royalty. His father was Bo Yibo. And Bo Xilai himself he was the mayor of Dalian, he was the minister of commerce, and then he was most famously party secretary of Chongqing. And there he was the author of this so-called Chongqing model, right? And that’s been much praised. As you point out, at the time, it held up as exemplary. He was the man behind this “sing red and strike black” campaign. As we all remember, he went down in this spectacular blaze when his chief of police, Wang Lijun, showed up at the US consulate in trying to do with evidence that his wife or that Bo’s wife, Kailai had murdered a British citizen named Neil Heywood. You guys all remember that. We talked about it incessantly back in 2012, nine years ago. The other though is probably less well-known and his name is Jì Jiànyè (季建业). He rose to become Yangzhou’s mayor and then Party secretary, and then the mayor of Nanjing. And I thought that was really interesting because his name Jianye is actually one of the ancient names of Nanjing during the Eastern Han and during the Three Kingdoms period. If you look at the ancient ruins of Jianye, it’s within the municipality of Nanjing today. So it’s yuanfen [ED: destiny, fate] that he had that position, but he…

Yuen Yuen: He had the yuanfen to fall in Nanjing.

Kaiser: Yeah, exactly, the fall in Nanjing. So it’s interesting. What do their stories tell us about the nature of crony capitalism in China? And I guess the other thing that I want you to… because I think is the real point of it is how well it illustrates how inter-regional competition is so important in curbing the excesses of corruption. I think that it’s really an interesting point in the book.

Yuen Yuen: Yeah. I personally really enjoy working on that chapter because I learned a lot walking through their life stories. They are like the outsized characters of the Gilded Age. These officials were. And I’m frankly curious why hasn’t someone made a Hollywood movie out of Bo Xilai or any one of these officials because they have such dramatic life stories.

Kaiser: Oh, yeah.

Yuen Yuen: The main point of that chapter, that chapter was actually titled corrupt and competent, which is a paradox because normally we think if you’re corrupt, you are incompetent. But what’s interesting about their life stories is that they demonstrate the paradox of these officials in China who were simultaneously really competent and also corrupt. And I think understanding the profile of these types of officials provides a crucial clue for going back to the original question. And why is it China’s prospect despite corruption, is that people like Bo Xilai, Ji Jianye, they did a lot of things when they were government officials. And before they fell, the media was always full of praise for them, talking about their development, urbanization, the projects that they brought in, how decisive they were. And then as soon as they felt, right? Public media coverage flipped overnight and talked all about their corruption.

Kaiser: Yeah. You have this really great way of illustrating that with both of them, because you have this word cloud, which unfortunately is just in Chinese, but fortunately I read Chinese. So it shows the words that show up in stories about them in the media before and after the fall. And it’s really quite striking, very interesting.

Yuen Yuen: The vagaries of social opinion, which we can all relate to.

Kaiser: Uh-huh. Indeed. Those were fascinating. What about this role of inter-regional competition in curbing corruption? I thought that was something that maybe doesn’t get talked about enough in China. I mean, and it is related in some sense to this idea about how important promotion is, but this is different.

Yuen Yuen: Yes.

Kaiser: And I think people maybe don’t realize how decentralized China is and how much power provincial-level officials actually have.

Yuen Yuen: Right. The paradox in China is that it is a single-party autocracy, but it is hyper-competitive. It’s not just regular competitive, but hyper-competitive. The reason why I picked Bo Xilai and Ji Jianye is that Bo Xilai is exceptional in many ways because he’s a princeling, he had ambitions for the highest office. And so Ji Jianye is more representative of regular officials at the city and county ranks who may or may not have a chance of moving upwards. And so you see in the case of Ji Jianye that as the leader of Yangzhou and later Nanjing, he was constantly competing with many other neighboring cities around him in just Jiangsu province alone, all of which are highly developed, they have great advantages in attracting investors. And so, one of the things that was brilliant about Ji Jianye, when he was in Yangzhou, was that he decided that he had to brand Yangzhou as a heritage site, blending ancient culture and modern civilization, because he realized that Yangzhou couldn’t say compete with the neighboring cities that had a much clearer industrial advantage, because previously he was at Kunshan which is one of the most prosperous industrial zones in China.

Kaiser: Right.

Yuen Yuen: And so you can see that even though he was in the same province, it was just Jiangsu. He had to adapt his development strategies in order to compete for investors.

Kaiser: Right. That was a really great illustration of that phenomenon. There’s so many officials that you could have looked at. There’s one in particular, who I used to be fascinated by, this guy named Qiú Hé (仇和) , who was also in Jiangsu, but in the northern part of Jiangsu, in Suqian. Really fascinating. He also went down in 2015, but was one of these really aggressive privatizers. He was such a poster child for those go-go years of the late 2000s. But anyway, let’s move on though, beyond the real scope of your book to look at this chapter on Xi Jinping and his anti-corruption campaign. And in here, you do something that could’ve stood alone as a research paper, right? That whole chapter, you run another piece of research, basically another whole separately designed experiment to assess whether performance, whether measured in relative contribution to provincial GDP growth, or patronage is ultimately the bigger determinant of a municipal official’s fate under Xi Jinping. And you look at 330 some odd mayors, or I guess city-level officials. I guess I don’t know if they’re municipal party secretaries or mayors, but I think it was at that level, right?

Yuen Yuen: Party secretaries. Yeah.

Kaiser: Party secretaries. Okay. That’s interesting. Today we don’t have enough time to go into all the details, but I would really encourage listeners to look at that research design and the methodology there, because it could be published I think separately as a very interesting paper. Maybe we just go right to the conclusions. So is it performance or is it patronage that ultimately determines the fate of an official?

Yuen Yuen: So that is the final chapter. In the final chapter I turned to the Xi Jinping period. So all of the earlier chapters are mostly about the pre Xi era, so we can call that reform era where you have this highly incentivized entrepreneurial bureaucracy. So of course I had to dedicate one chapter to Xi Jinping because he has drastically changed things in China’s bureaucracy. And one of the things that he brought about was this massive enduring anti-corruption campaign on a scale that has never before been seen in the Party’s history. In that chapter, I wanted to answer the question of what determines the likelihood that a city official would fall, meaning would be investigated for corruption? And so I look at two main factors. Does it have to do with their performance or does it have to do with patronage, meaning who is the boss at the next higher level and is the boss okay or not okay.

And what I find after a series of regressions and analysis is that the answer is performance doesn’t matter. It’s all about patronage. Patronage is the overwhelming factor in the Xi administration that determines the career path. In this case, it’s not actually a career path that determines the life and death of a city first in command. Whether or not you will be investigated for corruption is determined by whether your patron at the next higher level is protected or himself fell.

Kaiser: Right. Yeah, that’s fascinating, but it’s at odds with what Peter Lorentzen concluded in his paper, which I talked to him about a couple of years ago. I would urge people to look at that, listen to that, and check out his paper as well. It’s really interesting. I’d love to get the two of you on to talk about what your findings are and whether they can be squared. That’d be really fascinating. Yuen Yuen, in the last few minutes here, there are still a couple of topics I want to get to, and obviously we should look at the hook in the book’s title, the promise of these parallels between the Gilded Age in the United States and China in the era of reform and opening. I mean, because they go beyond the fact that in both eras you see these high levels of corruption and this specific type of corruption of access money, and the very fast rates of economic growth you’ve seen in that period.

What else, though, do you see in common between these two periods? Because I remember when I first started talking to you about doing this program, I had mentioned that I had done a program with Jeremy and with Evan Osnos, with The New Yorker, just on the eve of his departure from China after many years reporting here. And he had talked about how… If you really want to understand China in the era of reform and opening, the books to read really were Life on the Mississippi and The Gilded Age by Mark Twain. And the idea was that everyone was on the make. Everything was a grift or a hustle. There was just this rampant greed, social trust was low, and these robber barons just bestrode the land. So naturally reading your book, I thought of this. What did you make of that comparison?

Yuen Yuen: So, yeah, when I was reading stories about America’s Gilded Age, it struck me that you can just change the American names to Chinese names and the plot would fit perfectly in contemporary China.

Kaiser: Absolutely.

Yuen Yuen: And so this was really striking to me and that’s why the book it’s called China’s Gilded Age. But of course we want to avoid making flippant parallels and analogies. And that’s why I also emphasize that they are very different. One is democracy and the other is a single-party autocracy.

Kaiser: Sure.

Yuen Yuen: So, the way they deal with the accesses of the Gilded Age are actually opposite as we can see today. I think it’s also worthy to add that the Gilded Age is not just about rapid industrialization, because a country like South Korea also underwent rapid industrialization, but I wouldn’t characterize it as a Gilded Age. I think what makes China and America in the 19th century similar is that they were both periods of economic renewal and hustling after devastation. So the previous social class had already been destroyed. And so, it presents before you this opportunity for creating a new class of rich. And that’s exactly what we saw. You have the rise of J.P. Morgan, Andrew Carnegie in America, titans of new industries of the day. And today you have your Jack Mas, right? And your Pony Mas, who are the new titans of China in the 21st century.

Kaiser: Indeed. I want to ask you, could a country like China have enjoyed that kind of steroidal economic growth without access money? You just pointed to the example of South Korea. It didn’t have a Gilded Age. I mean, it certainly has access money. I’m sure that there’s the chaebols and things like that are probably rife with it. And we always hear horrific news about some chaebol head who commits suicide after being investigated. But I remember some years back, I was talking with Yukon Huang, and we talked about that earlier. And he argues in his book that corruption didn’t just help China, but that it was necessary, the only way. He was very emphatic about this idea that state assets could be transferred only through corruption to the notionally more efficient private sector. Would you agree with him there? I mean, is it possible for a country like China, a big country, to have enjoyed that level of economic growth without the steroid shot of access money?

Yuen Yuen: Well, I would call corruption steroids, or you might think of it as fuel in the sense that it sped up the process. So a process of modernization that might have normally taken say a hundred years, what happen in developing countries like Asia, is that they happen in a very compressed period of time. And access money had a role to play in the sense that number one, it incentivized politicians to pour the efforts in rapid growth. And number two, it also incentivized capitalists to do more business and built more and make more profit. And so it plays the role of steroids. But I would avoid the statement that is the cause of growth, because I think when you say that corruption is a cause of growth, it gives people the wrong impression that that’s the only thing that matters. But the real situation is that it’s one among multiple other factors that had to come into play.

So in China’s case, another crucial factor is trying to open up to international trade. If that had not happened, and you only had access money, it’s not going to work obviously because you don’t have an international market to interact with, right? And so, it’s best to think of it as a fuel. You need to put fuel into a car in order to drive it, but you can’t say that the fuel is the cause of my movement, right?

Kaiser: Right.

Yuen Yuen: The fuel is a contributor to your ability to move from point A to point B. I wouldn’t call it the cars.

Kaiser: But it’s a necessary, not sufficient condition. Still, it’s a necessary condition to move it that way.

Yuen Yuen: Exactly. And also to stress that the… And the outcome is not just growth, the outcome is specifically imbalanced, risky growth.

Kaiser: Very good. I’ve got one final question for you. I mean, and you’ve already flicked at this, but in recent weeks, really, it’s only been in recent weeks that Xi Jinping has started using, with much greater frequency, this phrase, “common prosperity.” How do you suggest that we understand this and what’s coming? Is this the next phase in the reaction against the excesses of China’s Gilded Age? Of course you alluded to this, but the outcome in the United States, we went into this progressive era which had its bad points too, of course. Well, I mean, some people might see this as a regressive era that we’re in now as a result, and that this idea of common prosperity, soak the rich, social leveling, coercive redistribution. How do you think we should look at this?

Yuen Yuen: Well, Xi Jinping is the leader who is overseeing China’s Gilded Age. That makes his mission and his constraints and resources very different from his predecessors. He knows very well that he is the leader of the Gilded Age, but he can not admit that openly. Obviously he cannot say that, “Look, China today, it’s similar to America in the 19th century,” right? That’s a taboo thing to admit. But he knows that China has problems of inequality, of crony capitalism, of financial risk. And these are all of the side effects of the dominance of access money over the past decades. And so, I have this essay in foreign affairs and it’s called, “Can China Survive the Gilded Age?” And the key argument in that essay is that Xi’s mission is to take China out of the Gilded Age into China’s own version of a progressive era, but specifically through commands and campaigns. This is exactly, I think, what we have been seeing in the past months, his crackdown on tech monopolies, crackdown on private tutoring, on high property prices and so forth.

So I think that the Gilded Age is a useful lens to understand the motivations of what Xi’s doing today. It’s also a really interesting and consequential experiment in the sense that I don’t think we’ve ever seen a country that tries to take itself out of crony capitalism through commands

Kaiser: That’s true. I can’t think of one. It’s a fascinating experiment. And I look forward to having you back on to talk about this as it unfolds, because you’re going to be one person whose opinion is immensely valuable to this. Yuen Yuen, what a pleasure it was talking to you about this really important book. I really look forward to having you back on the show again. Let’s move on to recommendations, but first, just a quick reminder that the Sinica Podcast is powered by SupChina. And if you like the work we’re doing with Sinica and with the other shows in the Sinica Network, the best way to support our work is to subscribe to SupChina’s Access newsletter. Not only do you get this excellent roundup drawn from hundreds of different news sources on China, but you also get perquisites like early ad-free release of this show of Sinica, big discounts on our live events when we start doing them again, and if Delta gets under control inshallah, live recordings of the podcast, and what have you. So go to SupChina and hit that subscribe button, which is in the upper right-hand corner. Let’s go on to recommendations. Yuen Yuen, whatcha you got for us? I’m really excited.

Yuen Yuen: So I recommend a documentary called Generation Wealth. And it is about the new Gilded Age in America. So it’s like portraits of excessive luxury, narcissism, and capitalism. And what I like about it is that the producer takes a personal take, and at the end of it she admits that she’s been part of this environment. So, I really enjoy the documentary. And I’m recommending it because I wonder if there is a Chinese equivalent to it. I don’t know if anyone knows of it, but if it doesn’t exist, I think someone should make a Chinese version of Generation Wealth.

Kaiser: Not just Crazy Rich Asians, right?

Yuen Yuen: Not the movie, but a documentary that reflects reality.

Kaiser: Yeah. That would be interesting. I’d love to see it. I think nobody would want to take part in something like that during the Xi era, but —

Yuen Yuen: I bet. So I think that that documentary can not be made. So we might have to wait.

Kaiser: You don’t want to shaifu these days online in China. Definitely not.

Yuen Yuen: Right.

Kaiser: So that’s a wonderful recommendation. I want to recommend two things. First of all, the very funny Netflix mini series, The Chair, starring the amazing Sandra Oh. Have you seen this yet, Yuen Yuen?

Yuen Yuen: I have one and I don’t… It’s like crazy rich Asians to me, and I would like… I’m not sure I want to watch some unrealistic portrayal of a reality. Yeah.

Kaiser: You have to suspend disbelief and just…

Yuen Yuen: But I could be unfair because I haven’t watched that. I just saw pictures of the office. And as soon as I saw it, I’m like, “No, it’s a fantasy land.” But did you like it? But you obviously liked it…

Kaiser: I didn’t just like it, I loved it. I mean, and Yuen, you have to understand that it’s not intended to be a faithful version of academia.

Yuen Yuen: Of course.

Kaiser: But it really does get some of the issues that are… I think in particular what it does well is it really looks at so-called political correctness and campus wokeness on college campuses. And it does poke fun, but it also shows another very important perspective. It’s very empathetic toward why this is happening. I think it strikes that balance as well as anything could be expected to, where you don’t come away feeling that it’s just simply dismissive of it or it’s entirely mocking campus wokeness. So it’s quite good. I really liked it. And I think Sandra Oh is just such a fantastic actor. She really shows her acting chops.

Yuen Yuen: She is.

Kaiser: And yeah, she’s really great. The other thing I want to recommend is the excellent Chinese Whispers podcast by Cindy Yu for The Spectator. she does this out of the UK. It’s fantastic. Anyone who likes Sinica will also like this show. Cindy is a brilliant host and she brings on really good guests. Many of them we’ve had on Sinica, but others who I haven’t gotten to, which I’d love to, there’s a really fantastic interview with David Ownby, for example, who I’ve really been eager to bring onto my program. But it’s a really good podcast. I was talking to Cindy earlier today about the possibility of us doing a crossover show. So look for that if her boss is okay with it.

Yuen Yuen: Okay you changed my mind about The Chair. So I will watch that, following your recommendation.

Kaiser: Yeah, please do. And I’m curious. I’ve talked to a lot of academics who’ve seen it, and a lot of them have the same reaction. It’s like you’re cringing for one reason or the other. Either you’re cringing at the unrealistic portrayal. And then when it hits too close to home, it really hurts because it’s too close to home.

Yuen Yuen: That’s right.

Kaiser: So yeah. Check it out. I loved it. I had a really great time watching it. Well, Yuen Yuen, it was fantastic talking to you. The book was so interesting, and so glad that I had a chance to read it closely in preparation for this.

Yuen Yuen: Thank you so much. I really enjoyed this conversation.

Kaiser: The Sinica Podcast is powered by SupChina and is a proud part of the Sinica Network. Our show is produced and edited by me. Kaiser Kuo. Drop us an email at sinica@supchina.com. Follow us on Twitter or on Facebook at @SupChina news and make sure to check out all the other shows in the Sinica Network. Thanks for listening and see you next week. Take care.

Corrupt and competent: A paradox of China’s economic growth

Podcast

Unpacking the relationship between corruption and economic growth in China's Gilded Age.

Illustration by Derek Zheng

The Corruption Perception Index from Transparency International suggests that China is roughly as corrupt as India. If that’s so, then why is it that corruption seems to be so much more of a drag on the Indian economy than on China’s? Indeed, why is it that in the very periods where experts all seem to agree that China’s corruption was particularly egregious, China’s economic growth is still so robust? These and many other mysteries and contradictions of corruption in China have long puzzled not just me, but many others who study China. Thankfully, my guest today has written a book that tackles all this and more, and it’s one of the most eye-opening and insightful works I’ve read in many years. That book is of course China’s Gilded Age: The Paradox of Economic Boom and Vast Corruption, and its author is Yuen Yuen Ang. Yuen Yuen is associate professor of political science at the University of Michigan, and also the author of another influential work on China’s political economy, How China Escaped the Poverty Trap.

China’s Gilded Age is the sequel to that book. It’s built on some really innovative research design and extensive fieldwork, including interviews with more than 400 officials, and on some really useful, compelling, and I think quite clarifying concepts that I suspect are going to enter the lexicon of people who are doing work on corruption in decades to come. I had the pleasure of sharing a stage with Yuen Yuen at a conference a couple of years ago in Camden, Maine, and she completely stole the show. So never miss an opportunity to hear Yuen Yuen lecture because she’s unforgettable. 

Listen to the podcast episode with Yuen Yuen or read a lightly edited transcript of the podcast below:

Kaiser Kuo: Yuen Yuen Ang, welcome to Sinica!

Yuen Yuen Ang: Oh, thank you so much for your kind words. I am so excited to be on your podcast. Thank you, Kaiser.

Kaiser: Not as excited as I am. Yeah, let’s start off by laying out the conventional wisdom about China and corruption. And for you, that centers, I think, on the other claim that China managed extremely fast economic growth, as I said, not just as a percentage of GDP, but actually in absolute dollar terms as well — despite what appears to be quite high levels of corruption during these same periods of high growth. So before we get into the argument that you make, let’s make sure we lay out all the features of this “conventional wisdom” view on the economic impact of corruption broadly speaking, and in China specifically.

Yuen Yuen: The conventional wisdom on corruption is that corruption always impedes growth. It impedes private investment, and so therefore if we look cross-sectionally around the world, the corrupt countries are also the poor countries. So when we look at China, we have a paradox: look, this country, as you pointed out, according to the Corruption Perception Index, it is more corrupt than South Africa. And so if that’s the case then why is it that China has sustained four decades of continuous economic boom? So that is the paradox that we are facing.

Kaiser: Yeah, that is the conventional wisdom. And I mean, I think part of the problem, of course, and this is the main thrust of your book, is that corruption is treated as a monolith. It’s one phenomenon and isn’t broken down, or as you say, unbundled. It’s just hard for me to believe that nobody else before you has really made an attempt to unbundle corruption, at least not beyond a distinction between what they would call extractive and transactional forms of corruption. So why do you suppose that is? I mean, in a conversation I remember really well from I think it was the late 1990s, I was talking with my father about this concept. He was doing business in China and complaining bitterly about his own business dealings in China and corruption. And I asked him, “Why doesn’t it prevent the bridges from being built?” If they contract a bridge out in India or in Russia, the money will be gone, the bridge won’t get built, or it will get built way behind schedule and way over budget. And that is just not the case in China. And my dad didn’t break it down quite as systematically as you do. He didn’t have the nomenclature for it, but he clearly had this idea that there’s corruption and then there’s corruption, and there’s different kinds, and they have different effects, not all of them are entirely deleterious. So can you talk about… I mean, because we need to do this, I think at the very outset, to lay out these basic concepts, these four types of corruption that you taxonomize. And maybe we can go through each of these and maybe deploy what I think it was a really useful comparison that you used in the book with each type of corruption compared to a class of drugs.

Yuen Yuen: Sure. And you’re absolutely right. In fact, scholars have come up with terms to distinguish between types of corruption. So they use the terms petty versus grand corruption, decentralized versus centralized corruption. So the notions that there are different varieties of corruption are definitely out there. And as you correctly pointed out, even lay observers have this intuitive sense that some corruption seems to be different from other types. But what my role is as a scholar is to think about this systematically. And so that’s why the typology and the framework of the four types of corruption is important. And furthermore, I measure these four categories of corruption across a sample of 15 countries. So that measurement allows us to systematically actually see that the structures of corruption vary across country, even if they have the same absolute amount of corruption. So those are the extra steps taken in my research. So let me walk you through, first of all, unbundling corruption and the four types of corruption that I highlight.

So I use the analogy of drugs to help us understand four types of corruption. And the first two types of corruption are what I call corruption with theft, meaning there’s a government official and he’s just stealing public funds and putting them in his own pocket. He’s not giving anyone else a benefit in return. So we can distinguish between petty theft and grand theft. Petty theft would be like a policeman coming to you, shaking you down, basically extorting a hundred dollars out of you. And grand theft would be a high-level government official who siphons billions of dollars out of state bank accounts into Swiss bank accounts. So they are both forms of theft, there is no exchange involved, but the difference lies in the amount of money that is stolen or extorted.

So these two forms of corruption with theft, I call them toxic drugs. So think of cocaine or heroin or meth, there is no benefit. If you take these drugs, you are going to destroy your health and destroy your life. And that’s what we see in economies as well. Countries like Nigeria, which are plagued by embezzlement and extortion, they can’t grow because they’re constantly being robbed and preyed upon by their own government officials. And then the third kind of corruption is corruption with exchange, meaning you pay a bribe and you get something back. So there is an exchange involved. And I distinguish between two types of exchange. The first is called speed money. Speed money means petty bribes that you pay to low or regular officials in exchange for getting over red tape. Or getting over a hurdle or a delay in order to get your passport and license faster. So you are buying speed. I call that painkillers. So you take a painkiller so that you can get rid of a headache, but it doesn’t help you grow muscles fast. This is just a painkiller.

Okay. Then we get to the fourth type, which is the most interesting variety, access money. So access money are privileges paid to powerful officials, not just for speed, but for access, to buy special deals, regulatory exemptions, monopoly rights — privileges that will help a capitalist make a tremendous amount of money. And this type of corruption, access money, is what I’m going to call the steroids of capitalism.

And so, if you think about steroids, right? Steroids is what athletes would take to help them build muscles fast and perform superhuman feats. But if you keep taking them, it’s going to exact a very serious toll on your health. So it definitely has serious side effects. So now we have this typology of what types of corruption with four types of effects.

Kaiser: Yeah. So, that’s fantastic. And I love it. And I think the drug analogies really help to get the point across. And you do point out that prolonged use of steroids is bad for you, but I think before we go much further, let’s head off a possible critique that maybe leaving it just at that claim isn’t sufficient —. I mean, it’s going to stick in the craw I think of a lot of listeners that, who are going to conclude, you’re arguing that rich countries have corruption, but that kind of corruption, access corruption, the kind that exists in these richer countries, is aligned with economic transactions so you can exert more rents because you know you’re growing more. Growth is incentivized, right? But to be clear, you are not arguing that this type of corruption is “good”. So why exactly is it? I mean, besides like steroids, why is that corruption nonetheless ultimately baneful, even if it isn’t entirely crippling?

Yuen Yuen: Oh, thank you so much for stressing that, because you’re right. Let me first state the takeaway of the book. The takeaway is that access money boosted imbalanced risky growth in China. That’s the takeaway.

But usually what happens, as you correctly pointed out, is that people would dumb down the message. They would take out “imbalanced” and “risky,” so it becomes, “access money boosted growth.” And then they would take out “access money” and replace that with “corruption” so that the message becomes “corruption boosted growth.” And when you post that on social media, people go visceral. And even sometimes academics do that as well. They read the book and then they walk away with, “Oh, this is a defense of the wonderful socially beneficial effects of corruption.” And this is absolutely not what I’m saying. And that is precisely why I wanted to use the analogy of drugs, because intuitively we all know drugs have side effects, right? So no corruption is ever good, but we do want to know the different side effects. So in a case like China, and I also compare it with 19th century America, which is the original “gilded age”…

In any of these kinds of gilded ages, their defining type of corruption is access money. And that corruption leads specifically to a form of growth that is imbalanced and high-risk. And that’s exactly what we see in China today with President Xi Jinping saying that we need to strive for common prosperity because we have a serious inequality problem.

Kaiser: Yeah. Or when Wen Jiabao, 2007, started talking about how it’s unbalanced and all that.

Yuen Yuen: Exactly. It’s an old problem. And Chinese leaders have always been aware that growth in China has not come without costs.

Kaiser: And part of the reason for that is just the moral hazard of having this money available to you without the attendant risks or without the demand that it returned, right? This is part of it. And the inequalities is fairly obvious. When you have only the few who have access to those kinds of really large bank loans or to those kinds of government contracts, right? There’s going to be inequality produced therefrom. So, I mean, even just a few chapters into the book, you had me completely convinced that the CPI, the Corruption Perception Index, that’s produced by Transparency International, is really flawed. I wonder whether you’ve had any conversations with them or heard from anybody at Transparency International about maybe incorporating some of your critique into their methodology, in the way that they measure corruption. Because it struck me that they also operate something called the Global Corruption Barometer, same organization. It looks specifically at what you call speed corruption — bribes, and all these things that cut through the red tape as well.

Yuen Yuen: That’s right.

Kaiser: And their surveys already find that there are huge differences in the response of ordinary Chinese versus Indian citizens when they’re asked about this. And yet they continue to aggregate the CPI score and show that India and China are roughly the same year to year. So they surely see that there is a problem, that it isn’t sufficiently granular. I mean, shouldn’t this alert them to something that’s flawed in the CPI?

Yuen Yuen: I think at the outset, to be fair, one has to give credit to Transparency International for creating that index. Because having tried to create one myself for only 15 countries, gosh, I know how much effort and time and money it takes. So it’s incredibly difficult work to create an index.

Kaiser: Well, you’re one person too.

Yuen Yuen: [laughs] And so the fact that they created one has the benefit of bringing attention to corruption. So I wanted to acknowledge that. But on the other hand, I think that when you produce a metric that is flawed, in this sense it reinforces the idea that corruption is a homogenous problem. It profoundly shapes public discourse, even elite discourse about the way people think about corruption. And so, everyone is obsessed with which country is more corrupt, but people are not asking the question of which country has what type of corruption. It’s not a relevant question of all. In regular conversations it just doesn’t come up except with your conversation with your father, which I think is quite exceptional.

And so, I would be very happy if they were open to the idea of having a more nuanced metric. And like you pointed out, actually they have already done some of it. The measures on petty bribery itself already indicates that countries with the same CPI score can have very different levels of petty bribery. But I understand the logistical challenges. And we live in a modern world where people want convenient measures. We want things to be measured in one number, 50 or 87. And we love to rank things, rank China against India. Or the US and so forth. And so when you introduce more nuance, it becomes inconvenient, and you can’t just put China side-by-side with India.

So I think there are a lot of modern tendencies of wishing for convenience that prevent us from having more informative indices. And so that’s why I wanted to provide an alternative, and hopefully someone with more resources than me would take it up.

Kaiser: And so, as you say, you did something truly ambitious, you tried to create your own index. And I think what you came up with is something very illuminating. It’s an unbundled corruption index, what you call a UCI. Run through without going into too much detail of how you measured these for the prevalence of petty or grand theft of speed money and access money in each of the 15 countries or regions that you had. What was the basis for the measurement?

Yuen Yuen: Sure. So I wanted to create an alternative for the CPI, and this index it’s called the unbundled corruption index or the UCI. And I follow a method that the CPI uses as well, which is —  it is an expert survey. So basically I reach out to people who have expertise in particular countries, such as China, Thailand, Indonesia, and I present them with a series of vignettes. So meaning scenarios that describe either speed money or access money or embezzlement. And I ask them to rate the prevalence of this class of corruption. And I combine their perception scores to create a unique score for every country where you can see number one, the overall corruption score, and number two, the unbundled corruption score across the four categories. And this has several advantages over CPI because the CPI is actually not an in-house survey. It is actually combined from multiple existing surveys. So the numbers actually go up and down in ways that may have nothing to do with reality, or even with its own measurement. It just has to do with whatever sources it selected. It also does not present experts with concrete vignettes. So if you look at the sources that they use, they would ask people really generic questions like, “How corrupt do you think the United States is, from zero to 10?” And you’d be like, “Well, I don’t know. How about 7.5?” How do you come up with 7.5? You don’t know, right?

Kaiser: Right.

Yuen Yuen: And so what I did is to add a few measurement precision into this index so we now have a much more unbundled nuanced perspective into the different structures of corruption that exist across countries.

Kaiser: So, give us some examples of the kind of vignettes that you presented the respondents with.

Yuen Yuen: So each category has about five of those. And in access money, one of them that I use is the one from Bo Xilai.

So my vignettes are inspired by real-world events. So the one in Bo Xilai would be, there is a powerful official, and in exchange for your cultivating close connections with him, you have a steady flow of government contracts. How common is this?

I also included vignettes for the types of access money that exists in Western democracies, which is excluded from conventional measures. So I included what is called the “revolving door practices,” which is common in the US.

Where elites move constantly between the public and private sector. I have a vignette for corporate contributions to politicians. And so, the vignettes were able to capture different scenarios of the four types of corruption.

Kaiser: Let’s drill down into that right now, because it’s something that I did want to ask you about. You make this claim and you include this, actually building it into your research, that the kind of corruption that you see in the United States, what we call this infamous revolving door. And Yuen Yuen, you said it broadly, that it’s officials moving between the public and private sector. But even more specifically, it’s where you have regulators who leave office and they actually join K Street lobbying firms that represent the very industries that they were just regulating, or maybe even worse, the other way where regulators are appointed to regulate an industry straight out of the K Street firm where they were lobbying against regulation, right? I mean, we saw that happen, especially during the Trump administration. But I’m curious, have you gotten pushback against that idea that the revolving door and maybe the whole lobbying industrial complex in the United States is the same morally or institutionally as bribery of the kind that you just described with Bo Xilai? Are these the same to most people, or did you get some pushback on that idea, on that claim?

Yuen Yuen: Definitely there was pushback, as you can expect. And I think it’s good to get this pushback, because that was my objective. It would kind of stir up people’s overly comfortable assumptions that, “Oh, here enriched democracies, we are free of corruption.” And I wanted people to question that. And I was like, “What if you have access money that is institutionalized and legalized, where legally nobody has done anything wrong but clearly you have a conflict of interest?” Clearly, someone’s benefiting tremendously from, say, the US financial crisis, and the very same people who benefited the most got away with it.

So, how should we characterize that situation? And I think what happens when we talk about corruption is we just overload, we just ignore this. And it’s much easier rather to talk about corruption in the forms of poor-country corruption, and that’s all man corruption or the Chinese types, the Ji Jianye and Bo Xilai. And so by bringing those legalized and institutionalized access money into my measurement, that is definitely pushback. People will react with, “How could you? How could you include that? That’s not corruption!” And I’ll be like, “Okay, it’s fine, we can debate about that.” But I just included that in my measure. And if you don’t like it, you can come up with a different vignette. But if you exclude that from the vignette, you are making a value judgment. You are saying that that’s not corruption. So I don’t have an answer myself. I’m not trying to impose one, but by my act of measurement, I wanted to bring conversation into this topic that people are not willing to confront.

Kaiser: You may not have an answer, but I absolutely do. It is corruption. Just like Citizens United. Citizens United is basically saying, “Okay, political bribery is completely okay.” But yeah, I’m sure there are some people who had quibbled with it. So let’s talk about comparisons that you were already able to make just after laying out these different types of corruption and showing the relative prevalence in these 15 countries or regions that you look at in this UCI. And you look at China versus Russia, China versus India. What jumps out at you when you look at their unbundled scores? Especially if you look at China versus some of these other countries, what’s the thing that jumps right out at you?

Yuen Yuen: Great question. I think one of my favorite comparisons is China versus India. And I believe actually your podcasts with Yukon Huang also mentioned China versus India.

Kaiser: Yeah, let me just remind people that I did… I think it was in 2017, we recorded a live podcast. I would encourage everyone to go back and look at it because we’ll bring up Yukon again because he makes some very contentious, very controversial claims about corruption that I’ll want to talk about with you Yuen Yuen. So yeah, I did bring that up.

Yuen Yuen: Yes. And we are continuing with that conversation. So when I look at the UCI scores for China and India, what pops up is that these two countries are equally corrupt in terms of total corruption, whether it’s in my score or the Corruption Perception Index, right? But once you unbundle corruption, what you find is that they have different structures of corruption. So in India, the most dominant type of corruption is speed money. Bribes are being paid to overcome red tape. In China, the most dominant type is access money. So bribes are being paid to gain access rather than to avoid harassment. So the objective of graft is different in China versus in India, which you would not notice if you didn’t unbundle the corruption.

Kaiser: Or if you didn’t actually travel between these two countries.

Yuen Yuen: That’s right.

Kaiser: I remember there was this book by this investor named Jim Rogers, who many of you probably are aware of. He wrote a series of books and in one, he talks about how just entering any country you can get a sense for — he doesn’t call it this — but how much speed corruption there is, just in the visa line or in the whole process, the intake process. And then at the airport, how well do they keep the black cabs away from the just-arrived travelers, or is there a good orderly taxi queue. Yeah, it’s interesting. Anyway, so you were saying… I didn’t mean to interrupt you with my own little vignette.

Yuen Yuen: No, actually I wanted to share a quick anecdote building on what you just said, because I completely agree that how you are treated at the point where you enter a country tells you a lot about the corruption regime in the country. I have been to China, India, and Nigeria. And the first time I entered Nigeria, as soon as I walked down from the plane, I was immediately asked to pay a bribe, and I couldn’t pass unless I paid a bribe. And so that was actually my first experience of being openly extorted by government officials. And so, it tells you how corrupt the country is. They just do it openly. And of course I was an easy target. And when I was in India, they were more subtle. The visa officers would say, “How did you like India?” And then I’ll say, “Oh yeah, I love it.” And when I did nothing, he didn’t stamp my passport. And so, I would walk back to the line and I would say, “Oh, but you didn’t stamp it.” And reluctantly, he would stamp it. So he was more subtle, he was not outrightly predatory. And then if you go to Pudong Airport, you know what happens. You just walk through in two minutes and there’s a button that asks you to rate the official. Are you very unhappy to very happy? And usually I’m very happy. And so just passing through customs tells you the vast differences between three emerging economies.

Kaiser: Yeah. Absolutely. So you’ve advanced a really interesting theory about the relationship between economic growth on the one hand and the prevalence of these different forms of corruption on the other. I wonder though, do you have a theory about — or any theories — about why different countries see higher or lower levels of these different types of corruption? Are there structural, or developmental, or even cultural factors common to countries with say high levels of speed corruption, or of access corruption, or petty theft? I mean, what’s the key here? Is it state capacity, is it high levels of social trust or low levels of social trust? I mean, or are these things actually determined by the level of corruption? Did you get a sense — I know it’s not really something you talk about directly in your book, but I’m really curious, that seems to be the thing, the next question in this: what causes these differences between countries?

Yuen Yuen: That’s a deep question. And it’s implicit in my book. And there are several factors that shape the structure of corruption. And one of them is the political regime type, that does matter. And I would go back to the example of China compared to India. So there’s this quote in my book of a high level official in New Delhi. And he says, “If you want me to speed up a file, I can’t do it. But if you want me to stop a file, I can do that immediately.” And so that’s an amusing quote, especially for people who know China, because in China is the opposite. If a Capitalist has connections with the yibashou, the Party Secretary, you don’t have to care about any files. The Party Secretary would just slam the table and make the decision. And so what it tells you is that because India is a fragmented democracy, officials derive their power from the ability to block to veto. They can stop a file if they wanted to.

But if they wanted to speed things up, they can’t, because there are so many other political actors who can also intervene in the process. In China, on the other hand —

Kaiser: Too many vetoes.

Yuen Yuen: Too many veto players. In China, it had powers concentrated in just a few people. So if you find the right people and you have the right connections with them, then you can gain exclusive access to lucrative opportunities.

Kaiser: Absolutely. But then that of course raises the question of, why then are China and the United States, which are quite opposite regime types, why do they exhibit similar patterns in terms of the distribution of types of corruption?

Yuen Yuen: Good question. And that’s because the United States compared to India is not a fragmented democracy. So India is a democracy, but it is also this large sprawling developing country with much, much lower state capacity than in the United States. And in the United States, I know things look dysfunctional in the past year or so, but actually state capacity is still really high in this country. So you have to pay your taxes, for instance. You can’t run away from that. The IRS has tremendous state capacity, right?

Kaiser: Yeah.

Yuen Yuen: And the other thing, the other kinds of state functions and regulations, you can’t not show up in court because the state has tremendous capacity when it wants to enforce its decisions in the United States. So what you see in the United States is that the other kinds of growth-damaging corruption are generally contained. So generally for someone from the middle class, you don’t walk on the street and expect that a police officer will extort you or shake you down, right? Embezzlement is also fairly in control in the United States. But the kind of corruption that dominates in this country is access money. And in particular it comes in a legalized and institutionalized variety that is much more sophisticated than the Chinese version. In fact, I call China a relative newcomer in the process of becoming a capitalist economy.

Kaiser: Yuen Yuen, let’s go back to China and let’s talk about the way that you periodize the reform years and what’s come since under Xi Jinping. Arguably, we’re beyond the end of reform and opening. Carl Minzner argued that. I had him on the show and he made that point very clearly. But what events do you see as punctuating these different periods? What begins and ends these different periods? And what types of corruption do you see rising or falling during these different periods that you demarcate? Because as you note, countries do not, or certainly China does not, exhibit stable patterns of corruption over time.

Yuen Yuen: Right. And I’m glad you emphasized that. When I teach my Chinese politics course, the first thing I teach is that there isn’t just one China but several Chinas since 1949, and even since 1978. And so it’s important not to think that China has always been the same. So we can think about the structure of corruption in China evolving drastically since the 1980s. In the 1980s, China looked like any other typical developing country. It had all kinds of corruption. Petty bribery was rife, and so was bureaucratic extortion. And so if you remember the literature from that period, there was a lot of talk about peasant burdens, arbitrarily extorting farmers for fees and fines. And even MNCs like McDonald’s had to cope with police officers randomly showing up and saying, “You have to pay this fee or fine.” So that was very common throughout the 1980s and up until the 1990s. And then from 1998 onward, you had the Jiang Zemin and Zhu Rongji administration. And Zhu Rongji spearheaded this ambitious scheme to build up modern state capacity in China.

And so this host of institutional reforms that he put into place, all of which were very dry and boring, that successfully build up administrative capacity. So if you look in my book, what happened is after 1998, embezzlement fell, instances of extortion fell, petty bribery fell as well. And it came down to really simple things like, in the past if a Chinese person had to pay a fine, all of that was done in cash. If you pay in cash, of course, it’s very easy to collect a bride and put in your own pocket, right?

Kaiser: Right.

Yuen Yuen: But for the police officer, if he collects your fine in cash, he can just put it in his own pocket. So it was impossible to track financial transactions to control bureaucratic behavior. But from the 1990s onward, China transitioned into non-cash payments of fines and fees. And a simple technical reform like this dramatically reduced instances of extortion.

Kaiser: Oh, that’s very interesting.

Yuen Yuen: So the 1990s up until the 2000s was actually a quiet period of administrative capacity-building in China.

Kaiser: Mm-hmm (affirmative). And then what happens beyond that?

Yuen Yuen: Beyond that, and then we come to 2010, around 2010 China entered into another period, which is, you start to have this infrastructure boom. I would actually push that back. I would say that that begins, I would say, let’s say the  2000s and up until now. China entered into this new political economy where local governments were really starved for funds because as Zhu Rongji built up state capacity, he simultaneously recentralized tax revenue. And as a grand compromise, Beijing allowed local governments to finance themselves by leasing land.

So, that was when the revolution in land-based financing was launched in China. And local governments all of a sudden turned their attention away from manufacturing-based growth into urbanization-based growth. So they happily sold lots and lots of land to private developers. And using that money, they then borrow more from banks and then they build lots and lots of infrastructure. So, if you look at the numbers in China, the impressive glitzy infrastructure that we see in China today is actually quite recent. It started around, I’d say 2010, you start to really see this steep climb. So for those of us who have been to China before 2010, you might actually vaguely recall that, say in the 2000s, the infrastructure was really not that great at all.

And all of a sudden, year by year, year by year, you see this like, “Wow, bridges are showing up, new airports. Wow, glitzy highways,” and so forth. And so this infrastructure boom happened after 2010. Absolutely important for China’s rise. But that was also the hotbed of financial risk, government debt, and high stakes access money, because that’s where government officials and capitalists can make a lot of money by leveraging land use.

Kaiser: So this is visible in the data, especially this period that you described of actually building administrative state capacity after ’98 I think under Zhu Rongji. The emergence of better regulation, this diminution of petty and grand theft, and this diminution of speed money as well, and maybe the more visible rise of access money. It’s in the data. And so, can you talk about what data shows this? Because you looked at a couple of forms of data. One of them is media mentions and textual analysis of media terms. So give us some examples of what kinds of terms you suddenly see being discussed with more frequency that illustrate the kinds of trends and fluctuations that you’re describing.

Yuen Yuen: Sure. So in the book, I look at two types of data. One is official data of the number of corruption cases that were prosecuted. And they were categorized into rough categories of embezzlement versus bribery. And so when you look at the data, you can see that what happens is, yes, on the whole China has always had this persistent corruption problem, but embezzlement actually fell from 2000 onwards, very visibly. Whereas the kind of corruption that really exploded in China was high-stakes bribery. So you see those in cases like the Laì Xiaǒmín (赖小民). He’s an infamous case. He is the head of one of the largest state lenders in China. I can’t remember the outrageous amount of bribes that he collected, but apparently, he stored them in tons of cash in his basement. So those kinds of corruption exploded from the mid-2000s onward because it was intertwined with a new political economy where you have an infrastructure boom and you have land-based financing so all of the stakes were going up. 

The other kind of data that I looked at was also a media mention. So how was the Chinese media talking about corruption, and what types of corruption were they talking about? So if you look at corruption with theft, the words associated with them will be tānpài (摊派). Tanpai in China means something like bureaucratic extortion. I bet people don’t even mention them today, but it used to be heard a lot in the past. And you can see that there is a stark decline as well after the 2000s. Similarly with words like luàn shōufèii (乱收费)  which is arbitrary collection of fees and —

Kaiser: Collection of fines.

Yuen Yuen: Yeah, and all of those things associated with extortion and speed money. And then the interesting thing about the new words that became popular from 2000, I would say the mid-2000s onwards, is things like luǒ guān (裸官), which is naked officials.

Kaiser: Naked officials, yeah.

Yuen Yuen: Doesn’t mean the official who doesn’t wear clothes. It means the officials who looks poor at home and then parks all of his condominiums and assets overseas, right? With his family. So luo guan became really popular. And another word that became popular is yǎhuì (雅贿), which means elegant bribery. So the forms of bribery became more sophisticated over time. One of the methods is to give art instead of cash. Because with art the corrupt official might be able to get away from that by saying, “Oh, that’s not really worth much, it’s just a Zhāng Dàqiān (張大千) painting and it’s subjective.” The worth of which is subjective. And so art became a popular means of bribery. And so there was this particularly interesting case of Wén Qiáng (文強), the corrupt police officer who fell in Chongqing. And when they arrested him, he had a lavish private art museum with works of some of the most famous Chinese artists that you don’t even find in public museums.

Kaiser: And dinosaur eggs.

Yuen Yuen: And dinosaur eggs. And I was like, “Does he really know how to preserve them?”

Kaiser: He doesn’t need to. They’re made of stone already.

Yuen Yuen: Or he’s going to make an omelet out of it.

Kaiser: Yeah. So, in order for this all to work, though, of course the bureaucrats need to be incentivized in another way. Now, it’s not just the financial incentives where they still need to actually do their jobs. So you talk about something, I think it was just really a fascinating chapter, chapter four, profit sharing Chinese style. Can you outline how this works for our listeners? I mean, it’s interesting that two Chinese bureaucrats who you speak to this seems like a no-brainer as though pay and performance obviously ought to be linked.

Yuen Yuen: Yeah.

Kaiser: So I’m curious, maybe explain how this works and talk about whether this is unique to China.

Yuen Yuen: Sure. Well, let me start by explaining the concept of profit sharing. So I described the Chinese bureaucracy as operating under a system of profit sharing. At least I would say in the pre Xi era, because keep in mind that there have been drastic changes since Xi came into office, right? So I’m always talking about the reform period in much of this book. 

So what happened with profit sharing is that government officials from the highest level to the lowest level, they have a direct share in the economic outcomes of their organization. So it could be a city, it could be a county, it could be as small as an agency within a county or even a public school. So they are equity holders in that organization. And so we have to, first of all, make a distinction between high-level profit sharing and low-level profit sharing. So for an official like Bo Xilai, he doesn’t care at all about his salary and bonuses. That’s not where he gets his rents obviously. His rent comes from a different source, from the corporate sponsors who pay his family. So that’s a different kind of profit-sharing capitalist lineup to ingratiate themselves with these officials and pay them bribes. But in that particular chapter you were referring to, I’m talking about rank and file bureaucrats. So the 49 million bureaucrats in China who run the country, but who are not at the level of Bo Xilai were not county party secretaries. So we can think about police officers, the administrators who chop your paperwork, public service providers, millions and millions of these bureaucrats.

I think what’s interesting is that they are also involved in profit sharing, and that was important because the government also wanted them to be involved in the process, to be as financially self independent as possible, to be incentivized to perform. And what I was surprised to find is that the actual compensation of these rank and file bureaucrats is systematically linked to the amount of revenue the organization is able to generate. And this previously is seen by people, including China’s scholars, as corruption. So they’re this mistake, they call it organizational corruption and they see it as an act of deviance, something terrible. And I have a slightly different interpretation. I would say that it actually function more as a set of economic incentives because it’s so systematic. I mean, the numbers actually show you how systematically it is tied to the ability of your local government and agency to generate revenue.

Kaiser: So you look at fringe compensation specifically in Shandong province, which is, as I think you may argue convincingly, a very representative province in many ways. And you demonstrate just as you hypothesize that compensation of these county-level bureaucrats is very much tied to how much revenue they bring in. And it’s also quite transparent. It’s there in the budget numbers that are public, right? You can look at how these officials are compensated. You know what their nominal salary levels are, but you also see what they’re given in kind, allowances for transportation or this or that. It’s really interesting to see. So I’m curious. So obviously they recognize that building a tax basis, as you argue, is better for their long-term wealth than just predatory collection of arbitrary fees and fines, right? I’m wondering whether promotion figures into this as well, that they are more likely to be tapped to move up in the party organization because of bringing in more GDP to their administrative unit.

And I’m curious, yeah, because a mere rent-seeker is not going to look good as a prospect for promotion, but somebody who fostered and nurtured and attracted enterprises and produced actual economic growth, they will look like a good candidate for promotion. But both of them have skimmed. But both of them have benefited whether fringe compensation or petty rent-seeking. And that would seem to me to make the incentive very much on the side of the person who is looking to play more by the rules, and not petty rent seek but rather build business. Is that correct? Is compensation not just the only thing but promotion also a big part of it?

Yuen Yuen: The question about incentives depends on who is the actor in question. So for someone who is a provincial-level leader, like Bo Xilai, the relevant incentive for him is the career incentive.

Kaiser: Okay.

Yuen Yuen: Right? And in fact Bo Xilai is so special because he’s a princeling. I think he doesn’t even care very much about the career incentive. His is a political incentive, he has ambitions, right? To go to the highest level of office, right? So that’s why he staged this dramatic profile for himself in Chongqing, right? So those are the incentives for someone at his level. And then for people who are city and county level party secretaries in China, they are known as the top 1%.

Kaiser: Sure.

Yuen Yuen: Roughly about 500,000 officials at this senior enough rank where they are directly appointed by the party. These individuals do care about career incentives, right? So that’s where we hear a lot about the promotion. But he is a very important qualifier. In fact, if you look at the numbers, the number of seats for upward promotion is very scarce. And this is actually well-documented in the scholarly literature, but not so much talked about in the popular press. And so, I think sometimes the talk about promotion incentives as the cost of Chinese prosperity is overblown.

Kaiser: I see.

Yuen Yuen: Because the number of seats for upward promotion — as you can imagine, I mean, a massive bureaucracy, not everyone can be a mayor. And so there are actually very few seats for moving upward.

Kaiser: That’s interesting.

Yuen Yuen: And so, that means that in addition to career incentives, you need to have other incentives. I’m sorry. Kaiser, go ahead.

Kaiser: No, that’s really interesting. Take that, Daniel Bell! Right? It’s fascinating though. I keep coming back to this question of why is it that these street-level bureaucrats, they somehow know that it’s in their interest not to completely fleece all the local enterprises or business owners. I mean, I keep thinking it’s something beyond just their material compensation. It’s not just the incentive logic. And the fact that there are a few seats for promotion, I mean, that seems to reinforce it. Could it just have something to do with their ideological indoctrination, to the discipline training that they receive in the party, to fear of sanction, to fear of the very powerful coercive apparatus of the party, of shuanggui?

Yuen Yuen: It’s a combination of factors. And you’re right to point it out. What I show in that chapter is the relevance of their financial incentives. But as we know in life, it’s not always about money, right? So it’s money plus other things. And for street-level bureaucrats, the promotion incentive is almost irrelevant, because like I said, what are the chances that a regular keyuan becomes a mayor, right?

Kaiser: Right.

Yuen Yuen: It would be something of a dream really. And so, they’re not that many promotion incentives for that level. And I have also encountered street-level bureaucrats who actually resist promotion because some people feel that, “Hey, I’m better off as a regular employee in this position that pays me a lot of bonuses and I don’t have to take so many responsibilities,” right? So, actually that happens as well. Not everyone wants to move up.

Kaiser: I know the feeling well.

Yuen Yuen: Right. So we can all relate to that.

Kaiser: Oh, yeah.

Yuen Yuen: There are lots of street-level bureaucrats who are like that. They rather be in a bureaucracy that pays well than to move upward to a challenging position.

Kaiser: You don’t want to be department chair, do you?

Yuen Yuen: Exactly, right? So we can understand that. So, it’s not so much career that drives them, financial is an important part because the basic pay in China is below subsistence. And I think a lot of people are not aware of that. The formal salary for public servants in China does not even pay you enough to rent a one room in a slum in Guangzhou. You can’t survive on it. And so you need to have all of these supplemental allowances, bonuses, and perks that are paid by your agency. In addition to financial incentives, the one other incentive that I see and witness is the emotional incentive. I do see that. It’s something really hard to capture, which is this sense of genuine pride that bureaucrats do take in their township or their agency. You can call that an organizational identity, the way people feel proud of their university or their company. You see that of course.

Kaiser: Sure. Yeah.

Yuen Yuen: And so they know that, when my agency does really well, or in particular when my township. And remember that most of these street-level bureaucrats are locals, they’re natives. They grew up in that place. And so they do have a genuine sense of pride, then — of course, we want our township to do well and to excel. And so that kind of emotional concern for the place where they grew up and work, plus financial incentives, work together.

Kaiser: Yeah. I can see how that would work. So then you have this wonderful chapter on crony capitalism in China, and you go with these two fascinating examples. The first, I think to anyone who’s been a listener to this show is going to be somebody who’s very familiar, it’s of course Bo Xilai. And he of course, as you said, he was the son of red royalty. His father was Bo Yibo. And Bo Xilai himself he was the mayor of Dalian, he was the minister of commerce, and then he was most famously party secretary of Chongqing. And there he was the author of this so-called Chongqing model, right? And that’s been much praised. As you point out, at the time, it held up as exemplary. He was the man behind this “sing red and strike black” campaign. As we all remember, he went down in this spectacular blaze when his chief of police, Wang Lijun, showed up at the US consulate in trying to do with evidence that his wife or that Bo’s wife, Kailai had murdered a British citizen named Neil Heywood. You guys all remember that. We talked about it incessantly back in 2012, nine years ago. The other though is probably less well-known and his name is Jì Jiànyè (季建业). He rose to become Yangzhou’s mayor and then Party secretary, and then the mayor of Nanjing. And I thought that was really interesting because his name Jianye is actually one of the ancient names of Nanjing during the Eastern Han and during the Three Kingdoms period. If you look at the ancient ruins of Jianye, it’s within the municipality of Nanjing today. So it’s yuanfen [ED: destiny, fate] that he had that position, but he…

Yuen Yuen: He had the yuanfen to fall in Nanjing.

Kaiser: Yeah, exactly, the fall in Nanjing. So it’s interesting. What do their stories tell us about the nature of crony capitalism in China? And I guess the other thing that I want you to… because I think is the real point of it is how well it illustrates how inter-regional competition is so important in curbing the excesses of corruption. I think that it’s really an interesting point in the book.

Yuen Yuen: Yeah. I personally really enjoy working on that chapter because I learned a lot walking through their life stories. They are like the outsized characters of the Gilded Age. These officials were. And I’m frankly curious why hasn’t someone made a Hollywood movie out of Bo Xilai or any one of these officials because they have such dramatic life stories.

Kaiser: Oh, yeah.

Yuen Yuen: The main point of that chapter, that chapter was actually titled corrupt and competent, which is a paradox because normally we think if you’re corrupt, you are incompetent. But what’s interesting about their life stories is that they demonstrate the paradox of these officials in China who were simultaneously really competent and also corrupt. And I think understanding the profile of these types of officials provides a crucial clue for going back to the original question. And why is it China’s prospect despite corruption, is that people like Bo Xilai, Ji Jianye, they did a lot of things when they were government officials. And before they fell, the media was always full of praise for them, talking about their development, urbanization, the projects that they brought in, how decisive they were. And then as soon as they felt, right? Public media coverage flipped overnight and talked all about their corruption.

Kaiser: Yeah. You have this really great way of illustrating that with both of them, because you have this word cloud, which unfortunately is just in Chinese, but fortunately I read Chinese. So it shows the words that show up in stories about them in the media before and after the fall. And it’s really quite striking, very interesting.

Yuen Yuen: The vagaries of social opinion, which we can all relate to.

Kaiser: Uh-huh. Indeed. Those were fascinating. What about this role of inter-regional competition in curbing corruption? I thought that was something that maybe doesn’t get talked about enough in China. I mean, and it is related in some sense to this idea about how important promotion is, but this is different.

Yuen Yuen: Yes.

Kaiser: And I think people maybe don’t realize how decentralized China is and how much power provincial-level officials actually have.

Yuen Yuen: Right. The paradox in China is that it is a single-party autocracy, but it is hyper-competitive. It’s not just regular competitive, but hyper-competitive. The reason why I picked Bo Xilai and Ji Jianye is that Bo Xilai is exceptional in many ways because he’s a princeling, he had ambitions for the highest office. And so Ji Jianye is more representative of regular officials at the city and county ranks who may or may not have a chance of moving upwards. And so you see in the case of Ji Jianye that as the leader of Yangzhou and later Nanjing, he was constantly competing with many other neighboring cities around him in just Jiangsu province alone, all of which are highly developed, they have great advantages in attracting investors. And so, one of the things that was brilliant about Ji Jianye, when he was in Yangzhou, was that he decided that he had to brand Yangzhou as a heritage site, blending ancient culture and modern civilization, because he realized that Yangzhou couldn’t say compete with the neighboring cities that had a much clearer industrial advantage, because previously he was at Kunshan which is one of the most prosperous industrial zones in China.

Kaiser: Right.

Yuen Yuen: And so you can see that even though he was in the same province, it was just Jiangsu. He had to adapt his development strategies in order to compete for investors.

Kaiser: Right. That was a really great illustration of that phenomenon. There’s so many officials that you could have looked at. There’s one in particular, who I used to be fascinated by, this guy named Qiú Hé (仇和) , who was also in Jiangsu, but in the northern part of Jiangsu, in Suqian. Really fascinating. He also went down in 2015, but was one of these really aggressive privatizers. He was such a poster child for those go-go years of the late 2000s. But anyway, let’s move on though, beyond the real scope of your book to look at this chapter on Xi Jinping and his anti-corruption campaign. And in here, you do something that could’ve stood alone as a research paper, right? That whole chapter, you run another piece of research, basically another whole separately designed experiment to assess whether performance, whether measured in relative contribution to provincial GDP growth, or patronage is ultimately the bigger determinant of a municipal official’s fate under Xi Jinping. And you look at 330 some odd mayors, or I guess city-level officials. I guess I don’t know if they’re municipal party secretaries or mayors, but I think it was at that level, right?

Yuen Yuen: Party secretaries. Yeah.

Kaiser: Party secretaries. Okay. That’s interesting. Today we don’t have enough time to go into all the details, but I would really encourage listeners to look at that research design and the methodology there, because it could be published I think separately as a very interesting paper. Maybe we just go right to the conclusions. So is it performance or is it patronage that ultimately determines the fate of an official?

Yuen Yuen: So that is the final chapter. In the final chapter I turned to the Xi Jinping period. So all of the earlier chapters are mostly about the pre Xi era, so we can call that reform era where you have this highly incentivized entrepreneurial bureaucracy. So of course I had to dedicate one chapter to Xi Jinping because he has drastically changed things in China’s bureaucracy. And one of the things that he brought about was this massive enduring anti-corruption campaign on a scale that has never before been seen in the Party’s history. In that chapter, I wanted to answer the question of what determines the likelihood that a city official would fall, meaning would be investigated for corruption? And so I look at two main factors. Does it have to do with their performance or does it have to do with patronage, meaning who is the boss at the next higher level and is the boss okay or not okay.

And what I find after a series of regressions and analysis is that the answer is performance doesn’t matter. It’s all about patronage. Patronage is the overwhelming factor in the Xi administration that determines the career path. In this case, it’s not actually a career path that determines the life and death of a city first in command. Whether or not you will be investigated for corruption is determined by whether your patron at the next higher level is protected or himself fell.

Kaiser: Right. Yeah, that’s fascinating, but it’s at odds with what Peter Lorentzen concluded in his paper, which I talked to him about a couple of years ago. I would urge people to look at that, listen to that, and check out his paper as well. It’s really interesting. I’d love to get the two of you on to talk about what your findings are and whether they can be squared. That’d be really fascinating. Yuen Yuen, in the last few minutes here, there are still a couple of topics I want to get to, and obviously we should look at the hook in the book’s title, the promise of these parallels between the Gilded Age in the United States and China in the era of reform and opening. I mean, because they go beyond the fact that in both eras you see these high levels of corruption and this specific type of corruption of access money, and the very fast rates of economic growth you’ve seen in that period.

What else, though, do you see in common between these two periods? Because I remember when I first started talking to you about doing this program, I had mentioned that I had done a program with Jeremy and with Evan Osnos, with The New Yorker, just on the eve of his departure from China after many years reporting here. And he had talked about how… If you really want to understand China in the era of reform and opening, the books to read really were Life on the Mississippi and The Gilded Age by Mark Twain. And the idea was that everyone was on the make. Everything was a grift or a hustle. There was just this rampant greed, social trust was low, and these robber barons just bestrode the land. So naturally reading your book, I thought of this. What did you make of that comparison?

Yuen Yuen: So, yeah, when I was reading stories about America’s Gilded Age, it struck me that you can just change the American names to Chinese names and the plot would fit perfectly in contemporary China.

Kaiser: Absolutely.

Yuen Yuen: And so this was really striking to me and that’s why the book it’s called China’s Gilded Age. But of course we want to avoid making flippant parallels and analogies. And that’s why I also emphasize that they are very different. One is democracy and the other is a single-party autocracy.

Kaiser: Sure.

Yuen Yuen: So, the way they deal with the accesses of the Gilded Age are actually opposite as we can see today. I think it’s also worthy to add that the Gilded Age is not just about rapid industrialization, because a country like South Korea also underwent rapid industrialization, but I wouldn’t characterize it as a Gilded Age. I think what makes China and America in the 19th century similar is that they were both periods of economic renewal and hustling after devastation. So the previous social class had already been destroyed. And so, it presents before you this opportunity for creating a new class of rich. And that’s exactly what we saw. You have the rise of J.P. Morgan, Andrew Carnegie in America, titans of new industries of the day. And today you have your Jack Mas, right? And your Pony Mas, who are the new titans of China in the 21st century.

Kaiser: Indeed. I want to ask you, could a country like China have enjoyed that kind of steroidal economic growth without access money? You just pointed to the example of South Korea. It didn’t have a Gilded Age. I mean, it certainly has access money. I’m sure that there’s the chaebols and things like that are probably rife with it. And we always hear horrific news about some chaebol head who commits suicide after being investigated. But I remember some years back, I was talking with Yukon Huang, and we talked about that earlier. And he argues in his book that corruption didn’t just help China, but that it was necessary, the only way. He was very emphatic about this idea that state assets could be transferred only through corruption to the notionally more efficient private sector. Would you agree with him there? I mean, is it possible for a country like China, a big country, to have enjoyed that level of economic growth without the steroid shot of access money?

Yuen Yuen: Well, I would call corruption steroids, or you might think of it as fuel in the sense that it sped up the process. So a process of modernization that might have normally taken say a hundred years, what happen in developing countries like Asia, is that they happen in a very compressed period of time. And access money had a role to play in the sense that number one, it incentivized politicians to pour the efforts in rapid growth. And number two, it also incentivized capitalists to do more business and built more and make more profit. And so it plays the role of steroids. But I would avoid the statement that is the cause of growth, because I think when you say that corruption is a cause of growth, it gives people the wrong impression that that’s the only thing that matters. But the real situation is that it’s one among multiple other factors that had to come into play.

So in China’s case, another crucial factor is trying to open up to international trade. If that had not happened, and you only had access money, it’s not going to work obviously because you don’t have an international market to interact with, right? And so, it’s best to think of it as a fuel. You need to put fuel into a car in order to drive it, but you can’t say that the fuel is the cause of my movement, right?

Kaiser: Right.

Yuen Yuen: The fuel is a contributor to your ability to move from point A to point B. I wouldn’t call it the cars.

Kaiser: But it’s a necessary, not sufficient condition. Still, it’s a necessary condition to move it that way.

Yuen Yuen: Exactly. And also to stress that the… And the outcome is not just growth, the outcome is specifically imbalanced, risky growth.

Kaiser: Very good. I’ve got one final question for you. I mean, and you’ve already flicked at this, but in recent weeks, really, it’s only been in recent weeks that Xi Jinping has started using, with much greater frequency, this phrase, “common prosperity.” How do you suggest that we understand this and what’s coming? Is this the next phase in the reaction against the excesses of China’s Gilded Age? Of course you alluded to this, but the outcome in the United States, we went into this progressive era which had its bad points too, of course. Well, I mean, some people might see this as a regressive era that we’re in now as a result, and that this idea of common prosperity, soak the rich, social leveling, coercive redistribution. How do you think we should look at this?

Yuen Yuen: Well, Xi Jinping is the leader who is overseeing China’s Gilded Age. That makes his mission and his constraints and resources very different from his predecessors. He knows very well that he is the leader of the Gilded Age, but he can not admit that openly. Obviously he cannot say that, “Look, China today, it’s similar to America in the 19th century,” right? That’s a taboo thing to admit. But he knows that China has problems of inequality, of crony capitalism, of financial risk. And these are all of the side effects of the dominance of access money over the past decades. And so, I have this essay in foreign affairs and it’s called, “Can China Survive the Gilded Age?” And the key argument in that essay is that Xi’s mission is to take China out of the Gilded Age into China’s own version of a progressive era, but specifically through commands and campaigns. This is exactly, I think, what we have been seeing in the past months, his crackdown on tech monopolies, crackdown on private tutoring, on high property prices and so forth.

So I think that the Gilded Age is a useful lens to understand the motivations of what Xi’s doing today. It’s also a really interesting and consequential experiment in the sense that I don’t think we’ve ever seen a country that tries to take itself out of crony capitalism through commands

Kaiser: That’s true. I can’t think of one. It’s a fascinating experiment. And I look forward to having you back on to talk about this as it unfolds, because you’re going to be one person whose opinion is immensely valuable to this. Yuen Yuen, what a pleasure it was talking to you about this really important book. I really look forward to having you back on the show again. Let’s move on to recommendations, but first, just a quick reminder that the Sinica Podcast is powered by SupChina. And if you like the work we’re doing with Sinica and with the other shows in the Sinica Network, the best way to support our work is to subscribe to SupChina’s Access newsletter. Not only do you get this excellent roundup drawn from hundreds of different news sources on China, but you also get perquisites like early ad-free release of this show of Sinica, big discounts on our live events when we start doing them again, and if Delta gets under control inshallah, live recordings of the podcast, and what have you. So go to SupChina and hit that subscribe button, which is in the upper right-hand corner. Let’s go on to recommendations. Yuen Yuen, whatcha you got for us? I’m really excited.

Yuen Yuen: So I recommend a documentary called Generation Wealth. And it is about the new Gilded Age in America. So it’s like portraits of excessive luxury, narcissism, and capitalism. And what I like about it is that the producer takes a personal take, and at the end of it she admits that she’s been part of this environment. So, I really enjoy the documentary. And I’m recommending it because I wonder if there is a Chinese equivalent to it. I don’t know if anyone knows of it, but if it doesn’t exist, I think someone should make a Chinese version of Generation Wealth.

Kaiser: Not just Crazy Rich Asians, right?

Yuen Yuen: Not the movie, but a documentary that reflects reality.

Kaiser: Yeah. That would be interesting. I’d love to see it. I think nobody would want to take part in something like that during the Xi era, but —

Yuen Yuen: I bet. So I think that that documentary can not be made. So we might have to wait.

Kaiser: You don’t want to shaifu these days online in China. Definitely not.

Yuen Yuen: Right.

Kaiser: So that’s a wonderful recommendation. I want to recommend two things. First of all, the very funny Netflix mini series, The Chair, starring the amazing Sandra Oh. Have you seen this yet, Yuen Yuen?

Yuen Yuen: I have one and I don’t… It’s like crazy rich Asians to me, and I would like… I’m not sure I want to watch some unrealistic portrayal of a reality. Yeah.

Kaiser: You have to suspend disbelief and just…

Yuen Yuen: But I could be unfair because I haven’t watched that. I just saw pictures of the office. And as soon as I saw it, I’m like, “No, it’s a fantasy land.” But did you like it? But you obviously liked it…

Kaiser: I didn’t just like it, I loved it. I mean, and Yuen, you have to understand that it’s not intended to be a faithful version of academia.

Yuen Yuen: Of course.

Kaiser: But it really does get some of the issues that are… I think in particular what it does well is it really looks at so-called political correctness and campus wokeness on college campuses. And it does poke fun, but it also shows another very important perspective. It’s very empathetic toward why this is happening. I think it strikes that balance as well as anything could be expected to, where you don’t come away feeling that it’s just simply dismissive of it or it’s entirely mocking campus wokeness. So it’s quite good. I really liked it. And I think Sandra Oh is just such a fantastic actor. She really shows her acting chops.

Yuen Yuen: She is.

Kaiser: And yeah, she’s really great. The other thing I want to recommend is the excellent Chinese Whispers podcast by Cindy Yu for The Spectator. she does this out of the UK. It’s fantastic. Anyone who likes Sinica will also like this show. Cindy is a brilliant host and she brings on really good guests. Many of them we’ve had on Sinica, but others who I haven’t gotten to, which I’d love to, there’s a really fantastic interview with David Ownby, for example, who I’ve really been eager to bring onto my program. But it’s a really good podcast. I was talking to Cindy earlier today about the possibility of us doing a crossover show. So look for that if her boss is okay with it.

Yuen Yuen: Okay you changed my mind about The Chair. So I will watch that, following your recommendation.

Kaiser: Yeah, please do. And I’m curious. I’ve talked to a lot of academics who’ve seen it, and a lot of them have the same reaction. It’s like you’re cringing for one reason or the other. Either you’re cringing at the unrealistic portrayal. And then when it hits too close to home, it really hurts because it’s too close to home.

Yuen Yuen: That’s right.

Kaiser: So yeah. Check it out. I loved it. I had a really great time watching it. Well, Yuen Yuen, it was fantastic talking to you. The book was so interesting, and so glad that I had a chance to read it closely in preparation for this.

Yuen Yuen: Thank you so much. I really enjoyed this conversation.

Kaiser: The Sinica Podcast is powered by SupChina and is a proud part of the Sinica Network. Our show is produced and edited by me. Kaiser Kuo. Drop us an email at sinica@supchina.com. Follow us on Twitter or on Facebook at @SupChina news and make sure to check out all the other shows in the Sinica Network. Thanks for listening and see you next week. Take care.