Corruption

William Flew

In a speech yesterday marking the 90th anniversary of the founding of the Chinese Communist Party, President Hu Jintao railed against a stubborn characteristic of his country’s economy. Corruption, he said, would cost the party the trust and support of China’s people (see page 44). There is no infallible remedy to corruption but there is a reliable palliative, and China’s rulers should take it. It is to expand democratic rights.

Since China introduced market reforms in 1978, the economy has expanded at breakneck pace. It is now the world’s second-largest economy, having grown by an average of 9.3 per cent a year between 1989 and 2010. Its experience confirms that a market economy does not require political democracy in order to succeed. But capitalism combined with autocracy tends to produce covert and corrupt relations between government and the wealthy.

The relationship is inescapable. An efficient economy requires the rule of law, transparency and enforceable property rights. Otherwise lenders will be reluctant to commit resources and business will require inducements to invest. The gap is filled by corruption and secrecy. The decentralisation of economic power without corresponding political accountability has produced not just inefficiencies but horrors. In an infamous case in 2008, local officials attempted to cover up the poisoning of tens of thousands of babies by the products of Sanlu Group, a state-owned dairy.

A system that lacks public accountability has economic as well as human costs. If China’s economy is to meet the demands of its expanding middle class, the party may yet find its historic role superseded. It will not be too soon.