Bernard Keane’s little kitchinette (Crikey, Friday Item 4) — sorry, essayette —  on corruption, capitalism and autocracy took the usual pose of the centrist — the right are nuts, the left are nuts, only the sensible centre really know what’s going on. And surprise surprise, the political system that works best and is objectively “true” is the one the author happens to live under.

Keane is correct to slate the sudden fashionable enthusiasm for the autocracies of Russia, China etc etc, from former neocon crusaders for democracy. But his assessment of the pros and cons of autocracy vis a vis ‘democracy’ seems to me a little unreflective. To wit:

1. Corruption is per se an enemy of economic growth: nonsense. You have to distinguish between functional and dysfunctional corruption. Dysfunctional corruption is the African type of thing, where you have to pay fifteen bribes to get a truck across three countries. Functional corruption is where some level of reasonableness can be presumed – that if you pay your protection etc, you’ll actually get some. Some investors may well be scared away, but if the economy is in a high growth phase there will always be enough people willing to take the risk. Functional corruption is simply a sign that there’s so much economic unevenness and such a high volume of money flying around that some people reach out and take a cut.

2. Corruption distinguishes the autocracies and democracies: Only if you accept a narrow definition of corruption. In the West we have a leaglised form of corruption based around the structure of the limited company and politics – ie people circulate between politics, lobbying, CEO positions and boardrooms, and thus no real law governs their function. Thus we have a housing bubble based on an open slather for the finance industry, in which profits are privatised – because these people take risks doncha know – while losses are socialised – because we can’t afford for bank X or corporation Y to fail. Thus ordinary Australians pay twice – in mortgage fees and taxes – for the same service. Interlocking corporate share ownership makes it impossible for small shareholders to, for example, deny CEOs huge self-awarded bonuses even when a company is tanking. And insider trading is impossible to police, aside from the occasional high profile, careless miscreant.

The result is that we pay more – by orders of magnitude for a whole series of services – telephony, broadband, cable TV, banking services etc – than we really should. Corruption is systemic.

3. Corruption played no part in western economic growth. You’re kidding, right? The British empire was funded by turning the whole of India into a poppy farm and then selling opium to the Chinese at gunpoint. The homegrown british economy was bootstrapped by driving people off land to create a propertyless urban working class. Plus mass land theft in all empires – what could be more corrupt than establishing the rule of property by stealing it? In the US, agribusiness rose by systematically wiping out small farms, the oil industry was corruption liquified, and the advanced industries were created by cosy inflated deals between the military and industry, protected by Congress. Please.

Corruption in the limited sense of the term isn’t really attracting significant protest in China. What’s causing most violence and clashes are land wars – the legalised theft of communal rural land via privatisation, a process identical to point 2 above.

Functional corruption doesn’t hinder economic growth, it simply heightens the risk and brutality of the process. People are driven to make money overwhelmingly byt where they have come from. To a Chinese peasant, an 80 hour a week factory job looks pretty good. What does s/he care if the factory owner greased a few palms to get planning permission? And economic growth has far more to do with the state of an economy’s industrialisation, not its superstructure. China’s coming out of a peasant economy – so its growth, corrupt or otherwise, will continue. Germany’s about as corruption-free a large economy as you could find – and it’s been flatlining for years. That result doesn’t really fit the corruption = economic malaise argument that’s become popular in the west..

Autocracy will become a problem for China’s economy when processes of censorship etc start to clog up economic processes. But Beijing has been canny in slowly letting out the throttle on popular culture, moderate dissent etc, while intervening here and there. The USSR ground to a halt in the 70s because you can’t run an information economy if someone needs a security certificate to have access to a photocopier. If Brezhnev et al had been as flexible as the Chinese, there’s no guarantee the USSR wouldnt be a going concern, as a similar capitalist autocracy.

And, quite possibly, when/if someone blows up London or New York with a dirty bomb the west will effectively enter a post-democratic, post-liberal era, pretty analagous to China’s current set-up. A certain degree of open exchange is necessary to capitalism. Democracy isn’t.

Indeed, if Bernard consulted one of those raving lefties – Karl Marx – he might find the best description of the world as it is now, with a west in post-growth economic stagnation and a rising high capitalist East, adjusting its superstructure to suit its base. It seems to provide a better picture of what’s going on than the somewhat naïve ‘free minds free markets’ mantra that was popular between the end of the cold war and the start of the next hot one.

Peter Fray

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