unirule-logo
Independent Think Tank - China Market Reform Initiative

Home
Unirule Highlights
About Us
People
Research
Consulting
Biweekly Symposium
Events
Publication
News
Newsletters
Videos
Support Us
Contact Us
中文


You are here:Home>Unirule Highlights



SHENG Hong: Redemption of Government Officials
 
 Author:Unirule  
Time:2014-12-17 15:25:12   Clicks:


Recently, the achievements of The Central Commission for Discipline Inspection of the Communist Party of China (often referred to in Chinese as Zhongjiwei, 中纪委) appear on the news every now and then: one or two provincial or ministerial-level government officials or senior executives of state-owned enterprises are sacked; and the probes of XU Caihou, former vice chairman of China's Central Military Commission, and SU Rong, then vice chairman of the Chinese People's Political Consultative Conference National Committee have pushed the anti-corruption movement to a new height. While celebrating the anti-corruption actions by Zhongjiwei and the courage and resolve of the leadership, we should also recognize that the big number of probed government officials shows that corruption is widespread in China.

For instance, the eight inspection points of Zhongjiwei in 2013 reported that “12,759 people were investigated, among whom there were at least 68 bureau-level officials, and 128 people were transferred to judicial organs”. We can get a sense of the scale of corruption based on these numbers, which were gained by a single round of visits. What we know is, at least, that an average of 1,595 people at every one of the eight inspection points (provincial departments, ministries, or central state-owned enterprise) were suspected of corrupt behaviors, and an average of eight bureau-level officials were among them, which is a pretty high proportion. We can, therefore, conclude that widespread corruption is not a singular phenomenon, but a systematic flaw, which indicates the flaw of the system itself.

The core of the flaw is unfettered and unchecked power. In fact, these sacked government officials did not set off to be corrupted. Except very few of them, most were specialized with technical and managerial talents as well as a certain amount of self-discipline. However, they are ordinary men, too. They are able to pass the moral tests in a common environment, but they are challenged to deal with an abnormal, or even twisted, environment where the flaws of human nature takes the upper hand as there is a lack of limits. Imagine this, when a government official finds that there is no need to publicize his income and wealth, there are no checks on his behaviors, any coverage of corruption is suppressed and blocked, and any one who tries to reveal the corruptive behaviors will be punished, then the mentality of the government official will almost definitely change. When he believes that the cost of getting punished for corruptive behaviors is infinitesimal, and the chance of getting away with it looks high, he will very likely become corrupted.

The second aspect of systematic flaw is the misallocation of power. This is firstly showcased by the misallocation of power to interfere the market and enterprises by government departments. Major corruption cases are mostly seen in government departments entrusted with the power of examination and approval. For example, one of the primary reasons for the sack of LIU Tienan, a former vice chairman of the National Development and Reform Commission, along with a few other officials who used to serve as deputy director of the energy bureaus, is the that they held powers that were not supposed to be held exclusively. Even though multiple reforms have been undertaken in regards with the examination and approval system, as they were undertaken by administrative departments, there are still many unreasonable items for examination and approval. For instance, even in the newly released list of items for examination and approval by the NDRC, the establishment, investment and financing of enterprises are still stipulated on the list, with some targeted on maintaining the monopolies. Nonetheless, we cannot prove whether these officials were driven by self-interest as well. A research on the resource allocation by administrative departments undertaken by Unirule Institute of Economics shows that the government officials who control the allocation of education and medical resources tend to allocate the resources in a way that benefits them. A simple and stunning fact is that 80% of the public spending on health care in China is spent on civil servants, instead of disadvantaged citizens. (“The Embarrassing Public Hospitals”, by ZHOU Qiren, The Economic Observer, February 11th, 2006)

Another area of misallocation of power is the allocation of land resources. In the name of protecting arable land, the amendments of Land Administration Law of 1998 stipulate that construction land shall be state-owned. However, the interpretation and implementation is exaggerated by administrative departments by expropriating land owned by villagers for the use of urbanization. On the other hand, the local governments put the developed land for sale at the market price that is much higher than that of expropriation. The tremendous benefits prevails the moral disciplines of many government officials. For instance, when SU Rong was the Secretary of the provincial party committee of Jiangxi Province, he intervened in land transactions and transferred a piece of land to a businessman at a price that was RMB 1 billion short of the market price. Government officials that were probed for corruption and related to land issues can be found almost everywhere, including Jiangxi, Liaoning, Sichuan, Chongqing, Beijing, Shanghai, Hebei, Henan, Hainan, Hunan, Guangdong, Shandong, Shanxi, … let alone government officials of county level, even township level. These government officials, along with other people who got famous for their excessive ownership of houses, have shown the general corruption of China’s bureaucratic system.

Another type of misallocation of power is the granting of administrative monopoly to enterprises. Monopolistic power is a power instead of right. It can only be established according to law when there is natural monopoly and oligopoly. However, the administrative monopoly is set up by administrative departments when there is no natural monopoly or oligopoly in the banking and telecommunication industry. This is, by all definition, another misallocation of power. According to our research, in 2010, an incomplete estimation of the social welfare loss accumulated to RMB 1,910.4 billion was caused by the administrative monopoly in oil, telecommunication, banking, railway, and table salt industries. The illegitimate income of these industries accounted RMB 1,616.9 billion. This shows that most of the recently sacked officials or executives come from monopolistic enterprises, such as “you know who” and the 45 senior executives of the CNPC, Mr. CAO Guangjing, president of Sanxia Group, Mr. CHEN Fei, general manager of Sanxia Group, Mr. SONG Lin from China Resources, the vice president of Agricultural Bank of China Mr. YANG Kun, State Grid North Division director ZHU Changlin, and so on.

These people caught national attention because of their senior positions. However, the monopolistic power is granted to the enterprises, and senior executives abuse such power on a very wide range. It’s very common that monopolistic behaviors and self-benefit behaviors are widespread in such enterprises. A Mr. QIAO, a new staff of Sinopec accepted a bribe of RMB 60,000 just because he was told that was the “code of conduct”. When he “accidentally” spent this money on his mistress instead of his wife, his father-in-law turned him in out of anger. Stories like this is not rare. This shows that accepting bribery is not a “privilege” of the executives, but also a systematic failure. And such stories come in large numbers.

The third systematic flaw is the employment, selection and promotion of government officials. There is a long way up to the state level deputy positions for people like XU Caihou, BO Xilai, SU Rong, and many provincial and ministerial level positions for people like LIU Zhijun (former minister of railways) and JIANG Jiemin (former chairman of PetroChina and the head of the State-owned Assets Supervision and Administration Commission (Sasac)), and many deputy party secretaries, provincial governors, or vice chairmans of CPPCC of multiple levels. They did not get corrupted after they got to high positions, but they went through a corrupted path to the top. For example, when BO Xilai was selected as the mayor of Dalian in 1999, he was suspected of taking bribes. However, this did not stop him from getting promoted. In retrospect, there is a lack of a healthy institution for selecting government officials. First of all, there are no moral standards or evaluations to follow. A sociological paper entitled Zhong County's Cadre revealed that the most important factors that influence the selection and promotion of government officials are “capabilities as reference, and relations as key”. Such relations spread from relatives, in-law relatives, classmates, secretaries, and supervisors. To put relations first means there is no need for moral standards. Let alone there are also position selling and position seeking behaviors. For example, the main wrong doing of XU Caihou is that he accepted bribes for other people’s promotion. In a way, promotion is a result of corruption.

The fourth systematic flaw is a subculture among the government officials, which features shortsightedness, vulgarity, self-defense, and a lack of values. There are two kinds of rational economic men, one is the shortsighted rational man, and the other is the far-sighted rational man. In the corruption cases revealed, we discovered many officials who resemble the Wolf of Zhongshan (中山狼, Zhongshan Lang, character of a popular Chinese fairy tale that deals with the ingratitude of a creature after being saved.), who shows no gratitude after satisfying his own desires. These officials abuse public power to fulfill their own interest. And they obviously do not care about the consequences. For instance, JI Jianye, who’s nicknamed “Bulldozer Mayor”, was investigated for his corruption of more than RMB 20 million, most of which came from the construction of infrastructures and the real estate industry. Before he was probed, he had been known for starting massive construction in Nanjing and forceful expropriation of citizens’ houses. And what happened to him seems obvious, too. Another “forceful expropriation deputy mayor” of Shulan city in Jilin Province also once made an assertive statement that “No matter how much you try to sue me, I’ve got my protection. And I am not afraid.”

What’s more, these officials might be very powerful and extend their abuse of public power to their families. For example, people like “you know who”, JIANG Jiemin, and GUO Yongxiang not only abused public power, but also extended the power to their descendents ZHOU Bin, JIANG Feng, and GUO Lianxing. They never spared a thought that this would put them in trouble. A glimpse of China’s history will reveal that whoever was the most powerful in a dynasty would be most likely to embrace crises. Those who were powerful were arrogant and their enemies were almost everywhere. And justice will be done. For example, when HUO Guang (a historic figure of Han Dynasty) was entrusted with assisting Hanzhao Emperor, he made great achievements. But he also exclusively enjoyed 20 years of power, which led to the extinction of his whole family after he died. SIMA Guang (a historian of Tang Dynasty) commented “HUO Guang enjoyed too much power without knowing that it’s time to retire from it. Instead, he promoted many of his trusted people in the royal court, which angered the emperor and the citizens alike. When time came, even though he reserved a whole body after death, his family bore the bitter outcome of his wrongful deeds.” Such lessons filled China’s history. They are not transcendent moralities, but just economic judgments of farsighted economic men. However, the corrupted Chinese government officials lack such awareness.

On the contrary, the government officials have nurtured a self-defensive culture. They don’t think their behaviors are illegal, and they find no violation against moralities, either. Many blamed their corruptive behaviors on their friends or the invisible rules of business when they denied their corruptive accusations on the court. If they had any cultural life at all, it was merely a completion of vanity. They compete their fancy cars, beautiful mistresses, and spacious mansions, none of which exceed the material life, such as what was depicted in the rumored “Ferrari Incident.” Another rumor said that when Deputy Director of the National Energy Board Secretary WEI Pengyuan’s stocked cash was being investigated, four money counters were overloaded and got broken. In many case alike, what the corrupted officials had was way more than they, even their children and grandchildren, could ever need. The marginal utility theory reveals to us that when people’s income and wealth exceeds the level of middle class, their zest and craving for wealth will decline. However, in the case of corrupted Chinese officials, we can only assume their extravagant lifestyle is a symptom of an insatiable pursuit of material wealth. To put it in another way, this is a sign of a problematic institutional system, which makes the government officials this way.

Nevertheless, Chinese citizens and the public are the biggest victims of this corrupted group of administrative officials and senior executives of state-owned enterprises. We don’t need to discuss this. What’s worth mentioning is that there are two other victims, namely the corrupted government official themselves, and the ruling party that promoted and trusted them.

In fact, because of the severe institutional flaws, government officials and senior executives of state-owned enterprises have become high-risk jobs, instead of ideal jobs. According to a report of Yangtse Evening Post on January 6th, 2014, the first eleven months of 2013 witnessed the sacking of 36,907 government officials, and adding the number of December, the total number reached about 40,262. Supposing that the average time of service of a government official is 30 years, and supposing there are 7.089 million government officials nationwide, the chance of one getting corrupted is 17%. In another scenario, if an airline company claims that there is a chance of 0.01% that its plane may crash, I don’t think anyone would risk buying its tickets. In this sense and by this comparison, 17% of chance of getting oneself corrupted and one’s family damaged makes it a high-risk type of career to be a government official.

Some might think that if they were government officials, they would have the power to resist corruption, so there is no risk. What’s essential is that one may not be able to have everything under control. It is under this institution where there is unfettered power, that officials form an interest community as they find there are no effective methods to reveal and dismiss those irresponsible and corrupted officials. They support and protect each other, as one gets promoted, everybody benefits. The inferior officials get shelter from their superiors, and the latter rely on the former for further influence. They are mutually reliant. This usually acts as the cause of “a series of criminal cases of the same group”. For example the CNPC case where a group of corrupted officials got investigated and prosecuted with the center being ZHOU Yongkang; and the Jiangxi corruption case centering SU Rong. …

When a newcomer enters such groups, he will be “blackened” before long. At first, even if he takes in bribes, protection will be there as it is just a “minor mistake” and “capable officials should be protected”. However this will do great harm to the newcomer. He might think as long as he gets well with all relevant personnel and the “boss” above him stays in power, and as long as the political group he belongs to stays prevailing, he will weather the storms even though minor mistakes are made. The initial protection will give the young officials a false implication, that is, his mistakes of this kind are acceptable. Further more, when there are many people in the group who have made similar “minor mistakes”, they will wish everybody to be the same. If there is any upright official, the whole group will feel nervous. That’s why a young official will feel pressure and think that he cannot gain the trust of others if he is not corrupted. Over time, more and more officials are corrupted and their behaviors get bolder. Until one day, the corruption is too widespread to ignore.

Therefore, the loss of freedom or life of a government official is not entirely under his control. The key issue is that unfettered power, misallocation of power, and lack of a healthy institution of promotion and selection of officials, combined with the institutional structure of the subculture that caters to corruption, have brought about substantial danger and risks. However, it is a pity that most of the government officials lack the insightfulness of a farsighted rational man. As they fail to see the institutional flaws, in the long run, they will get hurt before they seek even bigger power. For example, many of the corrupted government officials claimed to take their career even one step further; even though monopoly is generally criticized, they still hold on to the monopolistic power granted by Document 38 and Document 72, the issuance of which was illegitimate in the first place. It is such illegitimate expansion of monopolistic enterprises that brought down the oil clan. Another example is that many land administrative departments changed the nature of the land that was returned return forestry from the grain plots to the land that was reduced by the expansion of cities (Please see ZHOU Qiren’s book Urban and Rural China) By doing so, their slogan of “protecting arable lands” has shifted to the weakening and limiting of rural residents’ land property rights, as well as the expansion of land expropriation. The consequence is the biggest trap for thousands of government officials: corruption related to land.

For the ruling party, the sacking of these corrupted government officials adds to its political reputation and legitimacy. However, this is also an enormous loss for the ruling party. These officials, especially those high-level ones, were of great capabilities. But we should also see that the capable are not necessarily of great morality or self-discipline. If there is only an environment that shelters corruption, the officials will be exposed to more chances of criminal deeds. Simply disposing them as disgrace is not only the ruling party’s loss, but also an act of irresponsibility.

During the previous administration, corruption was comparatively tolerated. The intensity of the discipline of party members declined by two thirds compared to that of the 1980s and and by one third compared to the 1990s.

The ratio of the cases of breaching the discipline and the cases where punishment was implemented.

Source: The data from 1987 to 1992 and the data from 1997 to 2002 comes from Sound of the Alarm: A Short History of Chinese Communist Anti-Corruption Movements, WANG Guanxin, Lanzhou University Press, 2005, pp68-69. The average number of party members from 1987 to 1992 was 49 million; the number of party members from 1997 to 2002 was 64.51 million. The data from 2007 to 2012 is from a news piece entitled “HE Guoqiang: No Mercy for Corrupted Officials, and Through Investigation of the BO Xilai Case”, Beijing Times, 2012-10-09. The number of party members from 2007 to 2012 was 75.82 million.

In a more clarified way, a rendition of the figure above is as follows. It can be seen clearly that the ratio of the cases of breaching the discipline and the cases where punishment was implemented from 1987 to 1992 is 100%, and that from 2007 to 2012 is 33%.

The intensity of the discipline of party members

Note: This is a rendition of the previous figure.

In 2011, the chance of officials getting corrupted and caught is 5%, way lower than the 17% right after the 18th CPC National Congress. When discipline is loose, corruption gets widespread as it is not punished. This will send a wrong signal to those who become government officials. They might think corruption was tolerated and manipulated secretly by the central leadership. When government officials base their behaviors on the abovementioned assumptions, they, in fact, are faced with the possibility of 17%. This looks like a strategy of entrapment to the ruling party, but the ruling party is suspected to punish without previous instructions.

 

In turn, the ruling party should be held accountable for corrupted government officials. Therefore, it is obliged to change the institutional structure.

In order to save the government officials before they become corrupted, and in order to redeem the ruling party itself, it is necessary to not only fight against corruption, but also change the institutional environment that bring about corrupted officials.

An institution that entails effective overlook and fettered power should be established; misallocated powers should be canceled, including the power of examination and approval, policies that harm rural residents’ land property rights, and the monopoly of state-owned enterprises; and participation in politics should be open to the public, thereby the selection of officials will not be limited to a small circle of officials; after all this, a healthy environment for government officials will be nurtured.

Reflecting upon this, such measures are the basic content of constitutional reforms. Many talk about constitutional reforms with a fear of being sensitive. Those who feel so belong to interest groups. According to our analysis, we know they are the major force against constitutional reforms, and in fact, they are denying their own interests. What’s pathetic about them is they lack the farsightedness of rational men, and they believe their anti-constitutionalism is beneficial to themselves.

In fact, when we talk about the loose supervision of the previous administration, we are not suggesting certain leaders to be blamed. According to some records, at the beginning of the last administration, there were aspirations of institutional reforms and checks of powers. In 2005, the Political Bureau of the CPC Central Committee publicized the property of the members of the Political Bureau. However, this did not last. Word has it that the resistance in the party was immense. The resistance comes from the group of officials and senior executives who constitute the main body of CPC Central Committee. This resistance seeks to avoid the social supervision in the name of preserving the authority of the ruling party.

Essentially, this is to put the ruling party as a whole to take responsibility for the loss of its legitimacy caused by the corrupted government officials, and to put the honest and upright government officials accountable for the bad reputation as well. As a result, when the threat posed by corruption gets more and more severe, the leadership of the party has to start an anti-corruption movement to bring down the corrupted groups.

And the weird phenomenon we found is that the persecutors of the victims of corruption are the victims themselves.

Hence, what’s critical of saving the officials is the self-redemption of the government officials. How to do this? One way is to be a farsighted rational economic man with insights. Confucius said that, “They are determined to be sincere in what they say, and to carry out what they do. They are obstinate little men. Yet perhaps they may make the next class.” Which means that smart little men can be honest about what they say and be determined about what they do. “The obstinate little men” are far-sighted economic men. To have a far sight will distinguish the disaster from the seemingly good thing.

Going against the Officials Property Publicity System seems to hide the illegal incomes, but in fact will increase the possibility of wrongdoings; going against the external supervision of the public and media seems to escape the disclosure of criminal deeds, but in essence will make the officials serious corrupted officials; going against the misallocated examination and approval power, the expropriation power of land, and the monopolistic power seem to gain the government officials benefits of rent seeking and monopolies, but this will mostly lead to more risks of crimes; going against the cancellation of relation-centered selection institution of officials may seem to benefit the families, relatives or friends of the officials, but it will lead whole families into disaster.

The problem is whether there will be farsighted government officials. And I think the answer is no. Up till now, even though the abovementioned institutional flaws have thrown many officials behind bars, this group of officials still tries to describe corruption as someone else’s story. They never admit the institutional elements behind the institution. Some say the CNPC case has nothing to do with monopoly. What they fail to understand is that when power is placed in an unfettered institutional structure, it is a trap for officials and senior executives of state-owned enterprises. An upright young official gets in the game and a corrupted official comes out. They don’t understand that the limit to their powers and the supervision of their powers means only good will and protection of themselves. Therefore, so far, we haven’t found any groups of officials who could see the bigger picture and give up their monopolistic power. They cannot be the driving force of reforms, either.

To sum up, what the government officials should really redeem are not their lifes and positions, but their souls. They need to redeem their sensitivity first, instead of moralities, which are a higher level. “Sensitivity” is not knowledge. As Master Zhengyan said, knowledge needs sunshine. The sun shines into the dark sky so that people can see. In this case, we attribute the loss of freedom and life of officials to their choices; it depends on them whether they could get the gist of this article and become farsighted rational people. History teaches us that many people do wrong not because they are not benevolent, but because they don’t have a very good sense. “Senselessness” is not because of their lack of intelligence, but because they are blinded by the interest before them. The countless corrupted officials of China today seem to have proved this. I am looking forward to them breaking this evidence. 

July 2nd, 2014

Source: FT Chinese, China-Review




Upcoming Events
Unirule and Fairbank Cent...  
A Seminar on “Tax Burden...  
An Urbanization Salon Hel...  
The Sixth Session of the ...  
Seminar on “Theoretical ...  
The Sixth Session of West...  
The Third Session of Haye...  
The New Economy Salon Ses...  
unirule
        Unirule Institute of Economics
        Floor 6, Zhengren Building, No. 9, Chong Wen Men Wai Street, Dongcheng District, Beijing, 100062, China
        Tel: 8610-52988127 Fax: 8610-52988127