Is the U.S. Really Less Corrupt Than China? (Update)

Summary

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Freakonomics Radio: "Is the U.S. Really Less Corrupt Than China?" (Update)

Release Date: September 26, 2025
Host: Stephen J. Dubner
Featured Guest: Yuen Yuen Ang, Professor of Political Science, Johns Hopkins University
Main Theme:
This episode revisits and updates a provocative discussion about corruption in the U.S. and China, focusing on the nuanced forms corruption takes in each society. Using political scientist Yuen Yuen Ang’s research, the conversation challenges popular assumptions about American moral superiority and explores how both countries are living through their own "Gilded Ages."

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1. Main Theme and Episode Purpose

The episode probes a thorny question: Is the U.S. truly less corrupt than China, or do both countries simply manifest corruption in different ways? Leveraging Yuen Yuen Ang’s in-depth research—including her novel "Unbundled Corruption Index"—the discussion unmasks how high-level, "sophisticated" forms of legalized corruption in the U.S. compare with more overt, illegal forms in China, especially in the context of outsized economic growth and inequality.

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2. Key Discussion Points & Insights

The Concept of "Corrupt Meritocracy" (01:44)

• Ang defines China's political system:

  “The best way to understand China's political system is that it is a corrupt meritocracy.” (Yuen Yuen Ang, 01:44)

• Corruption in China remains illegal but is pervasive within a merit-based structure.

Different Forms of Corruption: U.S. vs. China (02:01–04:21)

• American corruption has evolved to be legalized and institutionalized through lobbying and influence, making it “hard to say that it's corrupt” in the conventional sense.
• Ang’s core argument:

  “What we see in China today is basically what we would find in the U.S. in the last century, meaning way back in the Gilded Age. But… corruption didn’t just evaporate. … It evolved in structure and form and became more sophisticated.” (03:41–03:57)

The Gilded Age Analogy (05:29)

• Ang draws parallels between today’s China and America’s original Gilded Age, and suggests the U.S. is now in a "Gilded Age 2.0"—more complex, financialized, and technology-driven.

• "We should understand the relationship between China and the US not as a clash of civilizations, but as a clash of two Gilded Ages." (Yuen Yuen Ang, 05:29)

Defining and Measuring Corruption (13:02–14:47)

• Traditional definitions of corruption focus on “abuse of public power for private gain” and exclude legal influence tactics.
• Ang’s broader, more functional definition highlights the murky boundaries of power influence, especially in democratic capitalism.
• To formalize analysis, Ang creates a typology of four corruption types (petty theft, grand theft, speed money, access money), assessed through her own Unbundled Corruption Index (UCI).

The Corruption Typology Explained (16:11)

• Corruption as Drugs Analogy:
  • Petty/grand theft = toxic drugs: unambiguously harmful.
  • Speed money = painkillers: temporarily relieve system ‘headaches’ but do little to foster genuine growth.
  • Access money = steroids: fuel rapid economic growth but generate severe long-term side effects (like inequality, cronyism, systemic risk).

  • “Access money are the steroids of capitalism. …They help you perform superhuman feats, but they come with serious side effects that accumulate over time.” (Yuen Yuen Ang, 16:43–17:16)

Corruption’s Role in Economic Booms and Busts (18:21–19:27)

• China’s real estate-driven growth (e.g., Evergrande crisis) is a vivid example of access money.
• Ang draws a historical parallel to U.S. cycles of financial crisis rooted in similar dynamics.

Critique of Transparency International’s Corruption Index (20:33–21:44)

• Ang critiques existing indices for oversimplification:

  “It basically obscures the fact that corruption comes in different types. You cannot mush them up and reduce them to one score.” (Yuen Yuen Ang, 20:33)

Unbundled Corruption Index (UCI): U.S. vs. China (22:37–23:17)

• On Ang’s UCI, the U.S. scores much lower on petty theft, grand theft, and speed money than China—but both countries have similar high levels of access money.
• In the U.S., access money manifests as lobbying and institutional influence; in China, as direct bribery of individuals:

  “In China, there is no equivalent of the lobbying industry.” (Yuen Yuen Ang, 23:25)

The Dynamics and Incentives of Corruption (34:30–38:14)

• A "successful" autocracy like China curtails low-level (petty) corruption to protect high-level gains.
• Profit-sharing: lower-level officials were long underpaid and thus incentivized to seek off-the-books compensation—a dynamic which shifted as the government began to pay better to reduce petty corruption while allowing high-level access money.

The Challenges of Academic Orthodoxy and Data (39:22–44:45)

• Ang describes professional resistance to her methods, reflecting an academic inertia towards easy-to-measure issues:

  “Data sets that are easily downloaded and plugged into regressions have shaped concepts, theories and policies more profoundly than we'd like to admit.” (Yuen Yuen Ang, 42:28)

Xi Jinping’s Anti-Corruption Efforts and Their Limits (47:26–54:42)

• Xi’s anti-corruption campaigns mix genuine structural concern with political theater.
• Use of state propaganda (like the “Zero Tolerance” documentary) frames corruption as individual moral failing rather than systemic.
• Moves to rein in runaway capitalism (e.g., Evergrande crackdown) are likened to “controlled demolitions.” Xi can wield executive power over markets—something U.S. presidents cannot.

Democracy vs. Autocracy in Combating Corruption (54:50–57:04)

• Key U.S. checks on corruption: open press, independent prosecutors, elections, activism.
• Ang suggests China needs its own “Progressive Era” reforms, but top-down commands may backfire:

  “Commands can only solve the symptoms of problems, but not the roots of problems.” (Yuen Yuen Ang, 56:13)

Capitalism’s Dark and Bright Sides (57:37–60:12)

• Ang positions herself as a scholar, not an activist—and clarifies that capitalist prosperity is a double-edged sword: vast wealth and middle-class gains, but also massive inequality and new forms of societal risk.
• Living in the U.S. gave Ang perspective on developed nations' persistent struggles:

  “Even when you are a so-called first world country, your problems do not end.” (Yuen Yuen Ang, 58:30)

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3. Notable Quotes and Memorable Moments

• On American attitudes:

  “One striking feature is the judgmentalism…a narrative of America being this chosen country to be this beacon of freedom and justice around the world.” (Yuen Yuen Ang, 06:18)

• On the U.S. Gilded Age 2.0:

  “The new tycoons are in the technology sector. The old industries are now being phased out.” (Yuen Yuen Ang, 05:29)

• On access money’s side effects:

  “Extreme inequality, cronyism as an activity that erodes political legitimacy, … policy distortions…like in China, lots of money are being poured into luxury properties and affordable housing is being neglected.” (Yuen Yuen Ang, 17:21)

• On academic resistance:

  “The reviewers were absolutely livid… when I see that, I knew that, oh, I'm doing something that…impinges on something personal to them.” (Yuen Yuen Ang, 41:38)

• On the paradoxes of development:

  “Social realities are not like machines… they are more like forest ecosystems.” (Yuen Yuen Ang, 40:25 paraphrased)

• On life in the U.S. as an outsider:

  “Despite all of the problems that I see in the United States, I can still confidently say that there is no other place in the world where I could have had the opportunities that I've had, where someone like me who is intellectually kind of weird and a misfit…” (Yuen Yuen Ang, 59:35)

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4. Timestamps for Key Segments

• China as a corrupt meritocracy: 01:44–02:01
• Corruption evolution in U.S. and China: 03:41–05:29
• The Gilded Age analogy: 05:29–06:18
• Defining and measuring corruption: 13:02–14:47
• Four types of corruption: 14:47–16:11
• Drug analogy for corruption: 16:11–17:16
• Evergrande crisis & real estate discussion: 18:21–19:27
• Transparency International critique: 20:33–21:44
• Unbundled Corruption Index results: 22:37–23:17
• U.S. lobbying vs China bribery: 23:17–23:56
• Discussion about the China model (Mao to Xi): 32:10–34:30
• Profit sharing and bureaucrat incentives: 36:13–38:14
• Academic resistance to new methodologies: 39:22–44:45
• Xi Jinping’s crackdown analyzed: 47:26–54:42
• Checks on U.S. corruption; Progressive Era: 54:50–55:45
• Prescribing China’s “Progressive Era”: 56:13–57:04
• Scholarship vs. advocacy, and life in the U.S.: 57:37–60:12

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5. Conclusion and Takeaways

Freakonomics Radio’s episode challenges the simplistic view that American democracy is less corrupt than Chinese autocracy by emphasizing the sophistication and legalization of influence in the U.S.—and the trade-offs each system chooses between economic dynamism, equality, and systemic risk. Both nations, Ang argues, have arrived at different points in the evolution of corruption, mirroring each other more than most citizens are willing to admit.

Final reflections:
The episode offers a sobering, nuanced view of global power, prosperity, and the inescapable presence of corruption—in whatever form it takes—across societies. Yet despite this complexity, Ang remains cautiously optimistic about America's capacity for reinvention and openness.

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For listeners seeking more in-depth discussion and thought-provoking analysis, this episode represents Freakonomics Radio at its richest: engaging, skeptical, and deeply relevant.

Transcript

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[Stephen Dubner]

Hey there, it's Stephen Dubner. On last week's episode, I interviewed Dan Wang, an author and close observer of China, about his new book, Breakneck China's Quest to Engineer the Future. That conversation reminded me of another good conversation we had about China a few years back with the political scientist Yuen Yuan Ang. So I thought it might be worth revisiting that episode. It is called Is the US really Less Corrupt than China? We have updated whatever facts or figures needed updating. Once you're finished, let us know what you think. Our email is radioeconomics.com as always, thanks for listening.

[Yuen Yuen Ang]

The best way to understand China's political system is that it is a corrupt meritocracy.

[Stephen Dubner]

If I were to ask you to point to another corrupt meritocracy, maybe it's even one where you and I are both located at the moment, what would you say?

[Yuen Yuen Ang]

I think it's more complicated in this country. Corruption in China is still of an illegal form, but corruption in this country has become so legalized and institutionalized, it's hard to say that it's corrupt. Some people would be really offended by the word.

[Stephen Dubner]

Yuen Yuen Ang is a professor of political science at Johns Hopkins University. In 2020, she published a book called China's Gilded the Paradox of Economic Boom and Vast Corruption. Her analysis is based on prosecutorial data, government compensation figures, news reports, and her own interviews with more than 400 Chinese bureaucrats. She's trying to answer several questions about corruption. The main one is this how has an economy like China's been able to grow so large and so fast with such high levels of corruption. Economists usually point to corruption as an impediment to economic growth. And corruption in China is famously high, at least according to rankings like the one from Transparency International, a German association that collects corruption data around the world. Some scholars argue that corruption poses an existential threat to China, and President Xi Jinping seems to agree. Since he took over in 2012, he he has led a crackdown in which more than 5 million government officials have been disciplined, with thousands sent to prison. The United States, meanwhile, ranks much lower on the Transparency International Corruption Index. But Yunyuan Ang says that it's not so straightforward.

[Yuen Yuen Ang]

So my core argument is what we see in China today is basically what we would find in the US in.

[Stephen Dubner]

The last century, meaning way back in the Gilded Age. But, she argues, corruption didn't just evaporate.

[Yuen Yuen Ang]

In the U.S. there is, I would argue, a historical pattern in the evolution of corruption and capitalism. It's not true that corruption disappeared as countries became richer. Instead, it evolved in structure and form and became more sophisticated. And China is still a newcomer in this process.

[Stephen Dubner]

If you are skeptical about American corruption, consider a few recent headlines from the Wall Street Journal. UnitedHealth is spending big on Trump allies to fix its Washington problems. From the Financial Times, Big tech lobbying surges as companies try to shape Trump's AI policy. Or consider a recent academic analysis which found that when companies spend money on lobbying and political influence, they get a far greater payoff than for the money they spend on research and development. It's enough to make you think back to when America's so called robber barons roamed the land. People like John D. Rockefeller and Cornelius Vanderbilt and Andrew Carnegie were known to use any means necessary to amass incomprehensibly large fortunes. This is the period that came to be called the Gilded Age, a phrase coined by the writer Mark Twain. There is another famous phrase that Twain may have invented. History doesn't repeat itself, but it rhymes. And history today does seem to be rhyming. At least Yuen Yuan Ang think so.

[Yuen Yuen Ang]

We should understand the relationship between China and the US not as a clash of civilizations, but as a clash of two Gilded Ages. China is undergoing the Gilded Age 1.0, but the US we could say it's the Gilded Age 2.0. It's a much more sophisticated financialized economy. The new tycoons are in the technology sector. The old industries are now being phased out.

[Stephen Dubner]

Is one takeaway of your book and your scholarship generally that Americans should not feel too smug about the high level of Chinese corruption, because we have our own forms of very high level corruption, except it's legal and we don't call it corruption.

[Yuen Yuen Ang]

As someone who has lived in this country for some time, I think there are many wonderful things about America. But one striking feature is the judgmentalism. And I think it has to do with a kind of narrative of America being this chosen country to be this beacon of freedom and justice around the world. You know, in other parts of the world, people don't think of their country in these grand chosen terms. This is actually quite unique to the construction of the American identity.

[Stephen Dubner]

A few years ago, we put out a series of episodes about American culture and identity called the US Is Just Different. So let's stop pretending we're not. But Ong's research suggests that at least when it comes to corruption, the US and its biggest rival may not be as different as we think. There are of course, deep cultural, historical and especially political differences between the US and China.

[Yuen Yuen Ang]

So obviously one is a democracy, the other is a single party autocracy.

[Stephen Dubner]

But some of the parallels are hard to deny.

[Yuen Yuen Ang]

They have a similar problem of extreme inequality. They have cronyism, systemic financial risk, excessive materialism, ecological crisis stemming from overconsumption.

[Stephen Dubner]

Today on Freakonomics Radio, is the US a democracy with more than a few Chinese characteristics? And what is corruption and what isn't it? Also, how do you measure something that's meant to be hidden?

[Yuen Yuen Ang]

Well, these are deep questions.

[Stephen Dubner]

Fortunately, Yuen Yuan Aang has most of the answers, starting right after this.

[Freakonomics Radio Narrator]

This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner.

[Stephen Dubner]

Yuen Yuen Ang grew up in Singapore in what she describes as an ordinary middle class family.

[Yuen Yuen Ang]

We were never wealthy, but we were never short of food and shelter, like.

[Stephen Dubner]

Roughly three quarters of the Singapore population. Her family was ethnically Chinese. She didn't grow up thinking she'd become a political scientist.

[Yuen Yuen Ang]

When I was a child, of course, I didn't understand the role of governance in my life.

[Stephen Dubner]

But Singapore's governance was in fact quite extraordinary. Economists like to talk about the Singapore Miracle to describe how a small and poor country with no significant natural resources turned itself into a thriving place with some of the world's best healthcare and education systems and yes, good governance with, we should say, very low levels of corruption.

[Yuen Yuen Ang]

I remember the day when I was a six year old child and the train station opened up near to my home and my whole family dressed up like we were going to church because it was such an event, and I was so blown away. I was like, oh my gosh, this train goes underground and then it comes up again. And. And of course, today nobody talks about the subway system is the most boring thing, you know? So what used to be so spectacular has become normalized. And that is one attribute of development. You kind of take what you have for granted.

[Stephen Dubner]

After high school, Ong moved to the US to attend Colorado College. She went on to get her PhD at Stanford. Having witnessed Singapore evolve from developing country to prosperous country in a relatively short time, she got interested in how that process works. And for someone with that interest, there is no more compelling case study than China. In 1989, China's GDP was $347 billion, while the US GDP was at $5.6 trillion, so 1/16 the size. Since then, China's GDP has grown on average, 9% a year. That's roughly four times the U.S. growth rate. And that's why Chinese GDP now stands at roughly $19 trillion, with the US in shooting distance at roughly $29 trillion. But for a researcher like Ang, there is a puzzling paradox here. How has this runaway growth happened in a country with so much corruption? As I mentioned earlier, that's not supposed to be possible. Corruption in China is so embedded, such a part of the culture that it has generated its own vocabulary. You've got, for example, the naked official.

[Yuen Yuen Ang]

The naked official is a common term in China, and it means an official who has nothing at home in China, looks very poor, but in fact has a great deal of wealth overseas.

[Stephen Dubner]

There's also what's known as elegant bribery.

[Yuen Yuen Ang]

Elegant bribery means forms of bribery that became more elegant and sophisticated in China. So an example is instead of giving cash, to give works of art, because art is valuable, but the value is subjective. And so in the event that a corrupt official is arrested, he could defend himself by saying, well, it's just a useless piece of Van Gogh, right? Or something like that.

[Stephen Dubner]

So, big question. Why has China's economy prospered so much despite such high levels of corruption?

[Yuen Yuen Ang]

The short answer is that it has to do with the type of corruption that came to dominate in the economy growth. Damaging forms of corruption were effectively contained over time, such as embezzlement, petty br. Bribery. If you are talking about corruption in the form of extortion and embezzlement, that could never be good for any economic activity. But if you are talking about influence paddling, well, you know, it might actually be really good for business.

[Stephen Dubner]

I find that when people use a word like Corrupt, it can mean a variety of things. I guess the tight legal ish definition is an illegal act in which you're trying to get something that you shouldn' using the levers of power. But I think a lot of people these days, when they think about corruption, they think of something bordering on moral corruption, which means that something could be legal or allowed, but you know it's not the right thing. I'm curious how you think about corruption generally.

[Yuen Yuen Ang]

What I try to do is to avoid being ideological about it. The common definition of corruption is the abuse of public power for private gain. And that definition usually excludes legal forms of influence politics. My definition would be broader than that. I would say that whenever there is so much power that one is able to influence or dictate the rules of the games, you begin to have the potential for corruption. And that is a gray line. In the context of countries like the United States, advanced capitalist democracies, it's really hard to pin down what are the boundaries of having excessive political influence.

[Stephen Dubner]

So in order to avoid ideology and gray lines and to pin things down a bit more firmly, Ang developed her own system to measure corruption.

[Yuen Yuen Ang]

I propose a typology of four types of corruption divided along two dimensions. First, whether the corruption involves elites or non elites. And second, whether the corruption involves theft or exchange. So this intersection creates first of all corruption with theft, or which I divide into petty theft and grand theft. Petty theft would be like extortion, a police officer who just stops you and robs you of $200. Grand theft would be embezzlement. Nigeria would be a classic case. Billions of dollars siphoned out of a country. And then I distinguish between two types of transactional corruption. The first is what I call speed money, which is bribes paid to low or medium level officials in order to overcome rate tape or delays or harassment. And then I have a fourth category called excess money, which is privileges paid to powerful officials not because you want to overcome rate tape, but because you want to buy special deals from them.

[Stephen Dubner]

In order to assess the effects of these different types of corruption, Ong found it useful to equate each of them to a different class of drugs.

[Yuen Yuen Ang]

I use the analogy of drugs because we know that all drugs are harmful, but they harm in different ways. Petit theft and grand theft are like toxic drugs, where if you take this drug, it's definitely going to damage your health. You get no benefit from it.

[Stephen Dubner]

Well, people who use cocaine would say they get some benefit.

[Yuen Yuen Ang]

Well, maybe I should use it like meth. I'm not a real Life expert on drugs.

[Stephen Dubner]

And so I can tell by the way.

[Yuen Yuen Ang]

Speed money are like pain killers. So they help you to relieve a headache by overcoming rate tape, but they don't help you grow muscles fast. They don't help you to grow your business. And access money are the steroids of capitalism. And steroids, we know, help you grow muscle fast. They help you perform superhuman feats, but they come with serious side effects that accumulate over time, and they only erupt in the event of a meltdown.

[Stephen Dubner]

So the side effects of steroids in terms of access money would be what.

[Yuen Yuen Ang]

We can actually see all of these downsides in China today. So they include extreme inequality, they include cronyism as an activity that erodes political legitimacy. And then you also have policy distortions. For example, in China, lots of money are being poured into luxury properties and affordable housing is being neglected. China's growth model shifted in the 2000s away from manufacturing and toward construction, debt and real estate. And so it is in this context that you have capitalists bribing government officials to have land deals, loans, construction projects. And I think you can see where I'm going today. When we look at the Evergrande crisis, it all makes sense. It has long been in the making.

[Stephen Dubner]

The Evergrande Group was, at one point China's biggest real estate firm, with more than a thousand projects across the country. It's hard to overstate the degree to which real estate development has driven the economic boom in China. Real estate accounts for as much as 30% of Chinese GDP. In the US that number is just 13%. But roughly 20% of China's housing stock sits unoccupied. Evergrande, which was the biggest player in all this, has been delisted from the Hong Kong Stock Exchange after struggling to make their debt payments. The company reportedly owes more than $45 billion and is in the process of being liquidated.

[Yuen Yuen Ang]

It is definitely concerning. It will have broad and deep effects. But I would warn against doomsday predictions, which you now see a lot in the press. The reason is because I take a historical perspective, and if you read American history In the 19th century, America had five of these types of crisis. Five, one every 20 years.

[Stephen Dubner]

And of course, you don't have to go that far back to find American financial meltdowns. As far as the Evergrande crisis, Ong.

[Yuen Yuen Ang]

Says many people are calling it the Lehman Brothers moment.

[Stephen Dubner]

Ang argues that the collapse of the Lehman Brothers investment Bank and the 2007, 2008 financial crisis that triggered the Great Recession were fueled in part by what she calls access money. A research paper by three economists at the International Monetary Fund showed that lobbying in the US from 2000 to 2007 was associated with riskier lending behaviors and higher delinquency rates. The study also found that firms who had lobbied the government were more likely to receive a bailout check after the crash. The researchers called their paper a fistful of Dollars. If you agree that sounds a lot like access Money, you may be surprised to learn where the US Lies on the Transparency International Corruption Index. It is the 28th least corrupt country out of the 180 countries that are ranked. Ang says this ranking can be misleading.

[Yuen Yuen Ang]

It basically obscures the fact that corruption comes in different types. You cannot mush them up and reduce them to one score.

[Stephen Dubner]

And yet that is what the Transparency International Index is. One mushed up score based on data from third party sources who run surveys of experts in countries around the world. Ang is not a fan of their methodology.

[Yuen Yuen Ang]

I can't remember the exact wording, but it goes something along the lines of how corrupt is x country rate on the scale of 0 to 10.

[Stephen Dubner]

What Ang wanted was a way to measure the four different types of corruption. She cared about petty theft, grand theft, speed money, and access money. And she wanted to calculate a separate score for each. She would come to call this an unbundled corruption index, or UCI. She also wanted to improve the survey data used to generate these corruption scores. So she set about to gather the data herself. Because she is one researcher and not a global institution, she focused on just 15 countries. These include China, India, Russia, Nigeria, and the United States.

[Yuen Yuen Ang]

I asked individuals who would have expertise in a particular country, including professors, journalists, business executives with more than 10 years of experience. Instead of asking people to rate corruption using an overly broad question, I described for them a vignette. So an example is so and so is closely connected to a politician, and as a result, he has an abundant flow of construction projects. How common do you think this scenario is in the country that you are raiding?

[Stephen Dubner]

Let's take two countries that we care about a lot, China and the United States. Talk to me about how both those countries ranked in terms of corruption on the index that you created versus the standard index of corruption.

[Yuen Yuen Ang]

So if we compare to the standard index, the similarity that we see is that the United States overall total corruption is much lower than in China. And that's totally expected. But what the UCI is able to add is that it unbundles this total score into four categories. And by doing so, we can see more nuance and we can See that? First of all, in both countries, the United States is much lower on petty theft, grand theft and speed money than in China. But they have roughly the same amount of excess money.

[Stephen Dubner]

So in China it might be a bribe. In the US it might more likely be lobbying or influence peddling of some sort.

[Yuen Yuen Ang]

Yes, yes, we can think of it this way. In China, there is no equivalent of the lobbying industry.

[Stephen Dubner]

Oh, just give them time.

[Yuen Yuen Ang]

Maybe not. Because lobbying is an institutional activity where the focus is on institutions rather than individuals. And my argument is that lobbying would not evolve in China because power is so personalist. It's about bribing a particular super powerful person.

[Stephen Dubner]

So Yuen, one category of what I would consider corruption that you don't discuss in your book is sometimes called technology transfers. Or if we're talking about the US and China, the US would call it intellectual property theft. This has been an ongoing point of contention between the two countries. I'm curious whether you would call that corruption and why did you not include it?

[Yuen Yuen Ang]

I wouldn't consider that as corruption because when I say corruption, I'm talking about political and bureaucratic corruption. So gains that are derived from exploiting power. Technology transfer is a corporate activity and sometimes the state might be behind that, but for the most part it is a corporate activity.

[Stephen Dubner]

If you were to create an index for, let's say, the largest contributory factors to the Chinese economic evolution, where do you think technology transfer or IP theft, whatever we're calling it, might stand right at the bottom?

[Yuen Yuen Ang]

I know that there has been a lot of talk about technology transfer. It is true that there is IPR theft in China. It is true that in the early stages there were imitation goods. I don't deny those facts. But studies have found that levels of IPR theft in China are not significantly higher than countries at its level of development.

[Stephen Dubner]

Could you argue that access money corruption is on balance worth it in that it provides all sorts of public goods and knock on effects that might not otherwise be created. You know, why do I care if the developer who's building a new school has to kick up 10% to the local party official if the kids in this area are getting a new school? Although I guess you could also argue that the 10% kickback would have been better spent on quality construction. And then when there's an earthquake like that terrible 2008 earthquake in Sichuan, that maybe thousands of kids don't die because their school buildings had such shoddy construction.

[Yuen Yuen Ang]

But one could make a counter argument that, you know, without this corruption, the government official is not so invested in this process, you know, so it's really hard to tell, is that a benefit or is that a cause? And I think they're intertwined.

[Stephen Dubner]

You write about the Jack Abramoff lobbying scandal in the U.S. jack Abramoff may.

[Yuen Yuen Ang]

Be the most notorious and crooked lobbyist of our time.

[Stephen Dubner]

And his famous quote that he and his co conspirators basically could get Congress to do everything they, the lobbyists, wanted them to do.

[Scott Hanson]

We own them. Every request from our office, every request of our clients, everything that we want, they're going to do. And not only that, they're going to think of things we can't think of to do.

[Stephen Dubner]

Should we assume the same thing is still going on today in the U.S. i don't know.

[Yuen Yuen Ang]

I don't know. But I would recommend the work of Professor Anat Admati at Stanford Graduate Business School. She points out that the problem in banking is particularly bad because it's exacerbated by opacity. Except for a handful of super experts, nobody really knows how derivatives work. The public doesn't understand it. Even professors like me. Unless you study this for a living, you don't really understand it. I think when a capitalist economy becomes highly financialized, extremely sophisticated, that creates the condition for no accountability, because nobody understands something so technical.

[Stephen Dubner]

If you are an American, you may be starting to feel slightly uneasy by now. You may be feeling that the US is in its own way, irredeemably corrupt and that there's no room for anything but pessimism. Coming up after the break. Yuen Yuan Aang doesn't feel that I.

[Yuen Yuen Ang]

Am not one of the pessimists about America.

[Stephen Dubner]

So how does a country get off the corruption treadmill?

[Yuen Yuen Ang]

This was all possible because of democracy.

[Stephen Dubner]

And if you want to hear the earlier episodes of our series about how the US Is different from other countries, check out the Freakonomics radio archive on any podcast app or go to Freakonomics.com AmericanCulture. I'm Stephen Dubner. We'll be right back.

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[Stephen Dubner]

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[Yuen Yuen Ang]

There is not one, but three different Chinas since 1949. At least three.

[Stephen Dubner]

Yuen yuen ang is a political scientist at Johns Hopkins University and the author of China's Gilded Age. She has been studying China for quite some time. Her first book was called How China Escaped the Poverty Trap. What is the poverty trap? It's the idea that an impoverished country has a hard time becoming prosperous without already having the characteristics and institutions of a prosperous country. Think about it on the individual level. How do you get a good job and enter the middle class without first having access to good education, health care, transportation, and so on? While many countries cannot escape the poverty trap, China has plainly busted out. Data from the World bank shows that since 1979, the explosive growth of the economy has lifted more than 800 hundred million Chinese people out of poverty. But some development scholars are reluctant to give China too much credit. After all, it's an authoritarian country, so endorsing its economic miracle could be seen as an endorsement of authoritarianism as a political system.

[Yuen Yuen Ang]

So that is what makes explaining China so complicated.

[Stephen Dubner]

If I were to ask you to describe the current China model, understanding that the China model changes quite rapidly or at Least has over the past four decades or so. How would you describe the China model? And I'm especially curious to know what you believe the public misunderstands about that model.

[Yuen Yuen Ang]

Oh my gosh, I can't believe you asked me this question because I always have to give lectures about the China model and I could talk two hours about this. I'll try to give a short answer. I would say two things. The first misunderstanding is the assumption that there is one China model. If you look at the facts on the ground, there are multiple China models depending on where and when you look in the country.

[Stephen Dubner]

Consider the era of Mao Zedong, who founded the People's Republic of China and ran the country from 1949 until 1976.

[Yuen Yuen Ang]

China under Mao was a personalist dictatorship where power was concentrated in the hands of Mao along with a personality cult. And the economy was run as a centrally planned economy using top down commands. And we know that that period was a complete disaster. And then secondly, you have China under Deng, which is a very different China.

[Stephen Dubner]

Deng Xiaoping ran the country from 1978 to 1989.

[Yuen Yuen Ang]

Deng shifted the role of the central government from a dictator to a director. The reality is that it's best understood as an adaptive authoritarian government that is in fact very decentralized. The most common misunderstanding is that China's development success is a celebration of the merits of authoritarianism and of top down control. And it is actually not true. But one very important qualifier is that after Xi Jinping became president in 2012, China has taken an authoritarian turn.

[Stephen Dubner]

So one way that I interpreted your data, and I'd like you to tell me if I'm right or wrong on this, is that high levels of access corruption and low levels of what you call speed, corruption and petty theft makes a lot of sense for a more autocratic country and would signify a successful autocracy for at least two reasons. One is the more small corruption there is at the bottom, the less there is for me at the top. Now that may be a small factor, but the more important one I'm thinking is if I'm a high level official, I don't want low level officials being too greedy or corrupt, in part because that type of corruption is quite visible and it will present this image of a corrupt state. If I can curtail those forms of corruption, I can help create the image of a relatively uncorrupt state, which makes it easier for someone like me to practice my higher level corruption with less scrutiny. I'm curious if that reading is at all accurate.

[Yuen Yuen Ang]

It Is it is exactly correct. The leaders of various cities and counties in China have a personal interest in curtailing predatory corruption because they want to attract businesses and investors. And that kind of corruption does not benefit them at all. It hurts their goals, it hurts their career. However, the ability of these local leaders to curtail low level predatory corruption is also premise on the ability of this local government to pay its bureaucrats.

[Stephen Dubner]

One of the facts that I found most astonishing in your book was what you call, with a bit of a wink, profit sharing. This idea that roughly 70% of a mid or low level official's pay might come in non salary form and gifts and meals and things like that. Can you talk about that? First of all, when that was and how it worked?

[Yuen Yuen Ang]

That was from the 1990s to the early 2000s. The way bureaucrats are paid in China is similar to developing countries elsewhere, which is that the official salary is actually very low and in many instances below subsistence. For example, in one county that I visited, the entry pay was less than US$80 a month. Economists call that capitulation wages, which means that you pay so little salary that the implicit expectation is that you make up for it using bribes or extortion or by stealing.

[Stephen Dubner]

I see. You want to pay real salaries so that your underlings will be satisfied enough to not worry so much about your higher level corruption.

[Yuen Yuen Ang]

Exactly. If these low level bureaucrats are not paid enough to survive, you cannot feasibly stop them from trying to steal extra. I was surprised to discover that in fact, on top of the official salary, more than 75% of their actual compensation comes from this highly variable fringe component. Things like bonuses over time, various in kind benefits including food baskets, free vacations, and it's systematically packed to the ability of a local local government in generating revenue. That's why it's called profit sharing. It's sharing in the profits of the government.

[Stephen Dubner]

Ang argues that this profit sharing system is one of the reasons China was able to escape the poverty trap, while other developing countries struggle to weed out low level corruption, the toxic drug type of corruption that limits growth. China basically incentivized away those forms of corruption, but allowed the steroid form of corruption like access money, which tends to operate at higher levels and behind closed doors. So Yuan, you argue that a lot of western scholars who write about China, including academic authors, have gotten their analysis at least partially wrong. So in the current book you critique some of the literature on corruption and in your first book you critiqued the poverty reduction analysis of quite esteemed economists like Jeff Sachs and Daron Acemoglu so why should we be more persuaded by your analysis of China than theirs? Is there something fundamental that they are missing because they don't understand China the way you do?

[Yuen Yuen Ang]

In one professional letter describing my work, it was said that this person has the nerves to challenge luminaries in the field. I think it's meant to be a compliment, but I didn't quite see it that way. I think that is a statement about the structural inequality in the profession. Because if we live in a world where every academic is truly equal, then it doesn't matter if I'm challenging Sacks or Ase Moklu or any person in particular is just about the findings. I would hope that in an ideal world, readers would just look at the argument itself. And my critique is that many social scientists reduce the process of development into a mechanical outcome. Everyone wants to give kind of a short, secret recipe that is like either one thing or the other. And I wanted to tell a different story that does not dumb down the reality. Conventional social science has a fundamental assumption which is that you can take development and break it down into discrete variables and you can apply an intervention and get a predictable outcome. That's a very core assumption. It's an assumption about the nature of things. And it is so fundamental that nobody talks about it. It's like assuming that water is wet. And so what I did in my work, and it is the philosophical foundation for all of my work, is that I reject this paradigm. I reject this mechanical worldview because it's artificial. That's not how social realities function. Social realities are not like machines. They are more. More like forest ecosystems. They are multi dimensional, constantly changing, adapting to one another. So we need to have a different set of methodological tools. You know, people were so angry at the Unbundled Corruption Index.

[Stephen Dubner]

Why?

[Yuen Yuen Ang]

So I can't get the Unbundled Corruption Index published as a journal article. It could appear in the book because a book is peer reviewed as a whole and not in parts. But the reviewers were absolutely livid about the Unbundled Corruption Index. And we know that reviewers are critical, so that's very normal. But they were more than critical. They were personally angry and they tried to throw out every reason thinkable to block it. So when I see that, I knew that, oh, I'm doing something that, you know, impinges on something personal to them. And perhaps they have been using these conventional measures, perhaps they have made arguments on the basis of these measures. And of course they do not want this to be challenged.

[Stephen Dubner]

You write in the book that quote, data sets that are easily downloaded and plugged into regressions have shaped concepts, theories and policies more profoundly than we'd like to admit. So that sounds like a somewhat polite way of saying that academics and then perhaps policymakers talk about the things that are based on data that's easy to find. And if it's not so easy to find, we either forget about it or pretend it doesn't exist. And to me, that would describe a lot of the corruption that you're talking about. It's very hard to measure anything illicit, but especially illicit in the hands of the powerful because they have the means to prevent scrutiny. So to me, that's where you are unorthodox.

[Yuen Yuen Ang]

It's true that it's much easier to condemn corruption among the poor, very difficult to talk about influence politics among the rich. It's a topic that people do not generally like to touch upon. I see this practical reality that people will pick agendas that are easy. The analogy I would use is have you heard of the term machine friendly crops?

[Stephen Dubner]

I have not.

[Yuen Yuen Ang]

So there are certain crops that are easily harvested by machine. And so farmers would choose these crops simply because they can be easily mechanized. And I think that in the knowledge industry we sometimes or maybe often see a similar dynamic. And I would call it a publication friendly agenda. And so the incentives of the profession will lead people to overwhelmingly and disproportionately study certain kinds of topics in certain ways at the expense of truly important questions that frankly, very few people want to touch. I hope that doesn't get me into too much trouble.

[Stephen Dubner]

I hope it does. I hope it does the right kind of trouble.

[Yuen Yuen Ang]

I hope that it's the right kind of trouble.

[Stephen Dubner]

I sense you are a bit of a troublemaker. Yes.

[Yuen Yuen Ang]

I don't mean to. That's really not my intention. I'm not a troublemaker. I'm not a rebel. I'm not looking to offend anyone. The reason why I am pushing back against these big issues is that I don't want to regret my choice. Being an academic, I don't want to dedicate my life to doing this and realizing that all the time. I'm just trying to please a convention or please a norm. And I don't want to waste my life in this way. And so I realized that when I speak certain truths, it will get some people really angry with me.

[Stephen Dubner]

Coming up after the break, how is China trying to limit corruption and how successful will they be? I'm Stephen Dubner and this is Freakonomics Radio.

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[Stephen Dubner]

You've described how Xi Jinping, who's been running China since 2012, has put the country back onto more of an authoritarian track. Do you think Xi is aware of your work? And assuming he's not, no offense, but assuming he's not, he's got a lot going on. What do you think he'd make of your analysis?

[Yuen Yuen Ang]

I would like to think that he would agree with my use of the term China's Gilded Age, because I think that is exactly what he is dealing.

[Stephen Dubner]

With when he calls to crack down on corruption, which leaders everywhere have done throughout history. It's something that the public likes to hear. But what's the evidence that he a really means it and b that when there are crackdowns on corruption in China under Xi, that they're not primarily political ploys intended to weaken the opposition?

[Yuen Yuen Ang]

There are many people who ask me, you know, is the anti corruption campaign a genuine reform or is it Just an instrument that Xi uses to eradicate his enemies. And the answer is that, well, it's a mixture of both. He has real concerns about corruption as a structural problem, and so wanting to tackle that is necessary both to save the party as well as to save himself.

[Stephen Dubner]

If you are looking for evidence that Xi Jinping anti corruption crusade is more than just political posturing, consider a recent TV documentary series produced by Chinese State.

[Yuen Yuen Ang]

Television, translated into English is called Zero Tolerance. It features a number of in depth profiles and interviews with corrupt officials. One of the corrupt officials who was profiled was described as succumbing to corruption because of his family's influence. And the conclusion is that from the beginning, when this official was young, he was already inculcated with the wrong values. And this take on corruption is consistent with the ideologically driven anti corruption campaign which presents corruption as a problem of individuals losing their morality, losing their idealism and their loyalty to the party.

[Stephen Dubner]

The TV series is part of a broader effort to revive the the anti corruption campaign that Xi began 10 years ago.

[Yuen Yuen Ang]

In the fall of 2022, the president will be taking on his third term. So this is a year to remind the party and the country that he's a president who fights corruption.

[Stephen Dubner]

Another piece of evidence that Xi Jinping really does see corruption as a problem is in fact the Evergrande debt crisis we mentioned earlier. The crisis was sparked by new regulations issued by the Chinese Communist Party on the acceptable levels of debt ratios a company is allowed to carry. This move has been characterized by one expert as a controlled demolition deliberately triggered by the regime. In Ang's corruption taxonomy, you might call this a crackdown on access money and a sign that runaway capitalism makes.

[Yuen Yuen Ang]

In the last two months, he stepped on the accelerator and all of a sudden everyone realized, oh my gosh, Xi is a real socialist. And people are shocked about that. But if you look at his signature policies from the time he took office, he has already made very clear that he's serious about socialism.

[Stephen Dubner]

Pretend for a moment that the Xi that you're describing were the President of the United States. How do you think he would assess our current political economic system? And what do you think he would prescribe for its betterment?

[Yuen Yuen Ang]

Xi does not like the excesses of capitalism and he has expressed that many times in his speeches. So this is not speculation. But in China he could use top down methods and that is what he has been doing. He basically gives commands, right? Like private tutoring. Not good. Ban that.

[Stephen Dubner]

Video games?

[Yuen Yuen Ang]

Yeah, video games. Not good. Ban that. You know, big tech Companies too big, stop them. And so I think if he had an exchange when he came to this country, he probably will see the similar problems and he might be disgusted at them. But I think one of the things he will soon learn is that in a democracy, you can't just order problems away.

[Stephen Dubner]

On the other hand, the President of the United States has executive orders at his or her disposal. And you could imagine that you could do a lot to cut back on the influence of lobbyists, for instance, in a relatively short time. Do you think that's a target that he might look at?

[Yuen Yuen Ang]

He might, but I'm not sure that he would know how to do that because the system in America is very different from that of China. When we think of President Biden's build back better, his method is having to convince enough people in Congress to pass his bills to invest in public infrastructure in China. Xi does not have to do that.

[Stephen Dubner]

He would have built 100 bridges in the time that we've even been talking about the infrastructure bill. Right.

[Yuen Yuen Ang]

And he just says, you know what, rich people, you should donate. And look at the amount that Alibaba and Tencent gave away the next day. It's not a matter of choice. You could never do that in America. Can you imagine President Biden telling the top five companies, you guys should donate, and they would give away 5% of their wealth.

[Stephen Dubner]

Right. He can't even get them to pay their taxes. So, yeah, I don't think that would be very successful.

[Yuen Yuen Ang]

That's right. So I think that's just one of the clear stark differences. I think he will be really frustrated having his hands tied. If you look at state business relations in China, no matter how rich a businessman is, he is always subordinated to the politician. And that is actually almost the reverse in this country. The capitalists arguably have more power than officeholders. And so I think if Xi comes here, he would be really shocked by that and Mal adapted to this reality.

[Stephen Dubner]

What would you say are the biggest checks on US corruption, especially the ones that are not prominent in China.

[Yuen Yuen Ang]

We actually saw that in the Progressive Era in the earlier 20th century.

[Stephen Dubner]

The progressive Era marked the end of America's Gilded Age. Its first Gilded Age, that is. The general sentiment was that the US Needed more regulation and less corruption to prevent a continuing cycle of robber barons and their outsized fortunes. Economists have since argued that the Progressive Era did succeed in making corruption riskier and more costly. So what were the tools of that era?

[Yuen Yuen Ang]

An open press, Marketing, journalism, Independent prosecutors. Elections definitely played a key role as well. There were electoral reforms to break up political machines, political activism, labor movements and more. And this was all possible because of democracy.

[Stephen Dubner]

It makes sense on the one hand that that's all possible because of democracy. But one could see certain elements of that progressive era taking root in China, whether it's whistleblowers or maybe institutional self policing. It sounds as though you are prescribing that China adopt fairly soon its own version of a Progressive era. Is that the case? And if so, what would that actually look like?

[Yuen Yuen Ang]

I've argued Xi's mission is to end the Gilded Age and take China into its own version of the Progressive Era. And what distinguishes his methods from the American version is that he prefers to use top down commands and campaigns. But I think that commands backfire commands can only solve the symptoms of problems, but not the roots of problems. And so if he wants to succeed, he will need to take a moderate approach. His commands are already shaking business confidence. He has this very tricky challenge of how do you maintain prosperity and deliver equality and justice at the same time?

[Stephen Dubner]

Do you see yourself as an anti corruption crusader or more of an academic political scientist, coolly assessing the reality and telling us what you've learned?

[Yuen Yuen Ang]

Oh my gosh, nobody has ever asked me that question.

[Stephen Dubner]

I mean, in your heart of hearts, do you do this because you think it's wrong and it needs to be fixed, or do you do it because it's interesting and you have a. A career where you get to research interesting things?

[Yuen Yuen Ang]

I do it first and foremost as a scholar, that's for sure. I also think that sometimes advocacy can get in the way of explaining things. I am much more passionate about getting people to think about whether capitalist prosperity has been as good as we think it is. And my answer is, you know, actually it's a two sided story. On the one hand, it created a great deal of wealth, a strong middle class, improved the quality of life for people like me. But on the other hand, it comes with other social problems particular to a capitalist economy. Things like extreme inequality, cronyism, climate change.

[Stephen Dubner]

I'm curious how that view has been shaped by your living in the US the last several years.

[Yuen Yuen Ang]

One of the insights that I got from living in America is that I came to the understanding that even when you are a so called first world country, in fact your problems do not end. I know that for Americans maybe that's like, yeah, of course. But for someone who comes from a developing country, it's a revelation because we were always taught that if you just become first world, you've made it you know, that's it, you graduated, your mission is done. And I think living in this world made me understand that even with high income, even with an advanced democracy, things can break down. There is tremendous inequality, polarization, populism. And I am not one of the pessimist about America. Despite all of the problems that I see in the United States, I can still confidently say that there is no other place in the world where I could have had the opportunities that I've had, where someone like me who is intellectually kind of weird and a misfit, I really couldn't be accepted. And in most places, and so I can see kind of both sides, the dark sides of capitalism in this country at the same time, I still feel tremendously confident and hopeful about the openness that provides people with opportunity.

[Stephen Dubner]

If Yuen Yu and Ang really is, as she puts it, intellectually weird, well, she's my kind of weird once again. Her book is called China's Gilded Age and she is a political scientist at Johns Hopkins University. Coming up next time on Freakonomics Radio. In the US There is a big problem with professional sports. Since you're guaranteed to be back in the same league the next year, there is no real penalty for fielding a terrible team. And there is a problem with big time college sports too.

[Scott Hanson]

That amateurism pillar crumbled like one of the old Greek temples that couldn't withstand the earthquake.

[Stephen Dubner]

Well, we have got a concept that could solve both those problems at once. I don't have a problem with it as a concept. I think crazy doesn't mean bad. Lots of the best ideas are quite crazy. Is our idea bad crazy? Or maybe crazy good? You will be the judge. That's next time on Freakonomics Radio. Until then, take care of yourself and if you can, someone else too.

[Freakonomics Radio Narrator]

Freakonomics Radio is produced by Stitcher and Renbud Radio. You can find our entire archive on any podcast app. [e-mail] where we publish complete transcripts and show notes. This episode was produced by Zach Lipinski. It was mixed with by Eleanor Osborne. The Freakonomics Radio Network staff includes Alina Coleman, Augusta Chapman, Dalvin Abuaji, Ellen Frankman, Elsa Hernandez, Gabriel Roth, Greg Rippon, Jasmine Klinger, Jeremy Johnston, Morgan Levy, Sarah Lilly and Teo Jacobs. Our theme song is Mr. Fortune by the Hitchhikers and our composer is Louise Guerra.

[Yuen Yuen Ang]

You are like a therapist, Stephen.

[Stephen Dubner]

You'll get the bill later.

[Freakonomics Radio Narrator]

The Freakonomics Radio Network the Hidden side of Everything.

[Yuen Yuen Ang]

Stitcher.

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