China’s Gilded Age: The Paradox of Economic Boom and Vast Corruption

Economists often claim that corruption hurts an economy, but it frequently accompanies fast growth, as it did during the American Gilded Age and in China after the death of Mao Zedong. In a book that combines deep insight into how the Chinese system works with innovative research, Ang resolves the paradox by distinguishing between three kinds of corruption that are bad for growth and the one kind that is good. Prominent officials and ordinary bureaucrats stealing directly from the public coffers are two patterns that are bad for growth; so are the payoffs that low-level public servants demand in exchange for routine actions such as granting licenses or providing medical care. The one good kind is what Ang labels “access money,” large bribes or favors given to high-level officials in exchange for land, contracts, or credit. These payoffs push the economy forward at a fast pace, although they also create longer-term problems, including inequality, debt, and excessive risk-taking. China has curtailed the bad kinds of corruption since the 1990s by routinizing payment and accounting methods, prosecuting officials who steal public funds, and rewarding officials for economic growth through fringe benefits paid out of slush funds, so they don’t have to steal to share the benefits of prosperity. But access corruption has persisted, sustained by the pressure Beijing puts on local leaders to promote growth any way they can.