Slate Money: China’s Gilded Age (October 10, 2020)

Host: Felix Salmon (Axios)
Co-hosts: Emily Peck (HuffPost), Anna Shymansky (Breakingviews)
Guest: Prof. Yuen Yuen Ang (University of Michigan, author of "China’s Gilded Age")

Episode Overview

This episode centers on Prof. Yuen Yuen Ang’s groundbreaking work on the relationship between corruption and capitalism in China, drawing instructive parallels with America’s Gilded Age. The panel explores differing types of corruption, how some forms can paradoxically foster economic growth, and contrasts China’s experience with those of the U.S., India, Brazil, and Russia. The discussion also covers the shifting U.S.-China dynamic, the technology race, and lessons from economic history.

Main Topics and Key Insights

1. Unbundling Corruption: Four Types and Their Effects

([02:35] – [10:19])

• Corruption is not monolithic: Prof. Ang contends that lumping all corruption together is misleading. Instead, she uses a "drug" analogy to categorize corruption:

  • Petty Theft: “Think about a police officer coming to shake you down for protection money.” (Prof. Ang, [03:12])
  • Grand Theft: Embezzlement from public accounts. Both forms are likened to toxic drugs (e.g., cocaine) that are unambiguously harmful.
  • Speed Money: Bribes to low-level officials to speed up processes, comparable to painkillers—sometimes palliative, but harmful if abused.
  • Access Money: Bribes to high-ranking officials for privileged deals, which Prof. Ang calls the "steroids of capitalism”—they fuel rapid growth but come with long-term side effects.

• Quote:
  "Corruption is like drugs. All drugs are harmful, but they have different types of harm."
  — Prof. Ang, [02:39]

• In rich countries: The dominant form is access money (influence peddling), not eliminated but evolved from cruder forms.

• In public discourse: The U.S. uses euphemisms ("money politics," "buying influence") instead of the word "corruption."

  • "I think in American discourse, we use every single word except corruption ... there's this normative feeling that corruption is something that happens to poor people ... rich, wealthy democracies are above corruption." — Prof. Ang, [06:32]

2. Corruption, Competence, and Economic Growth

([07:38] – [10:19])

• Corruption and competence can coexist: In China, corrupt officials often deliver significant infrastructure and economic growth.

  • “You can be both corrupt and extremely competent. Because we don't see that as much here in the US…” — Emily Peck, [07:38]

• *Access corruption can “boost growth” (like steroids), but with side effects that "do not show up directly on GDP numbers.” — Prof. Ang, [08:13]

• Double standards in anti-corruption discourse:

  • "The history of capitalism is not that we eradicated corruption and then had economic growth. The history of capitalism is that the structure of corruption went from thuggery, embezzlement and theft and evolved into influence peddling." — Prof. Ang, [06:32]

3. Explaining China's Bureaucratic Incentives & ‘Profit Sharing’

([10:19] – [16:37])

• Profit Sharing System: In China, bureaucrats’ financial and career incentives are tied to economic outcomes—unusual in a communist system.

  • "Everyone is just feverishly promoting growth. So that's the good part that Felix is talking about." — Prof. Ang, [12:48]

• Civil servants’ base salaries are extremely low, necessitating “fringe compensation” (allowances, perks) tied to local government income.

  • "[President] Xi Jinping gets US$825 a month. ... entry level civil servant in 2006 ... US$45 a month." — Prof. Ang, [13:16]

• Comparison to U.S. Gilded Age: Historically, U.S. bureaucrats were underpaid, too, leading to “messy” evolution over decades toward professionalization.

  • "Because we have already gone through the historical reform to have a modern bureaucracy today, we have forgotten about the messy process ..." — Prof. Ang, [15:23]

4. Paths to Reform: Bottom-Up vs. Top-Down

([16:37] – [22:34])

• American Progressive Era: Bottom-up reforms—muckraking journalism, independent prosecutors, electoral reforms.

• China’s Case:

  • Administrative reforms (1998) targeted petty theft and embezzlement, but grand bribery “exploded” with economic growth.
  • "All of these administrative reforms can only control low level ... but they have no leverage over transactional grand corruption." — Prof. Ang, [19:24]

• Crony capitalism as a “reward system” in the CCP: Delay in anti-corruption efforts was partly to keep officials incentivized.

  • "It was ... part of the reward system for the CCP to get communist officials to embrace capitalism." — Prof. Ang, [20:25]

5. Comparing BRIC Countries and Structures of Corruption

([24:11] – [31:43])

• Prof. Ang’s Survey:

  • China’s dominant corruption: “Access money.”
  • India’s: “Speed money.”
    • “In India, officials are extracting bribes from their ability to stop you ... In China, officials are collecting bribes for their ability to help you do business. And that is a mile of difference.” — Prof. Ang, [26:45]
  • Russia: “Wrong kind” of corruption; Brazil: Structural issues exposed by “Car Wash” scandal.

• Memorable Quote:
  “If you want me to speed up a file, I can't do that. But if you want me to stop a file immediately, I can do it.” — New Delhi official (via Prof. Ang), [27:30]

• U.S. "Legalized" corruption: Despite high anti-corruption rankings, many forms of influence are effectively legal.

  • “The scandal isn't what's illegal, the scandal is what's legal.” — Felix Salmon, [30:39]

6. Why China’s Growth Was Different

([31:43] – [35:02])

• Key difference: China undertook rigorous administrative reforms, dramatically reducing “growth-damaging” petty corruption.

  • Transparency International’s Bribe Payers Index shows China does far better than India, Cambodia, Vietnam on petty bribery.

• Caution: Prof. Ang warns against concluding “corruption is good”—the form and context are crucial.

7. U.S.-China Trade, Technology, and Perceptions

([35:02] – [46:28])

• Trade and Tech War as Access Corruption: The TikTok/WeChat episode, involving Larry Ellison and Donald Trump, is cited as an example of U.S. "access money" corruption.

  • “...the only reason that this seems to pass muster is that Oracle is run by this guy, Larry Ellison. ... this seems to me to be an absolutely prime example of exactly the kind of corruption that you're talking about.” — Felix Salmon, [35:02]

• Difference between Chinese and American tech ecosystems:

  • U.S.: Innovation in basic science and “cutting-edge” tech.
  • China: Excellent at rapid, large-scale “commercial application” and business innovation (e.g., TikTok).
    • “China’s advantage ... is in the commercial application of technology. Its innovation takes the form of business innovation.” — Prof. Ang, [41:09]

• Room for Cooperation: The different strengths mean synergy is possible, especially on shared challenges like clean energy.

  • “If the US and China could stop like having fights about TikTok and tariffs, there could actually be productive research and ... scale to solve like a global problem.” — Emily Peck, [44:15]

8. The Nature of the U.S.-China Relationship

([46:28] – [48:20])

• Are they adversaries? Competitors? Frenemies?
  • “The US and China are not enemies. There is so much to be gained from cooperation and mutual understanding.” — Prof. Ang, [46:50]
  • “I believe that China and the US are frenemies ... friends, but it's very tense ...” — Emily Peck, [48:20]

Notable Quotes & Moments

• “Corruption is like drugs. All drugs are harmful, but they have different types of harm.” — Prof. Ang, [02:39]
• “In India, officials are extracting bribes from their ability to stop you ... In China, officials are collecting bribes for their ability to help you do business.” — Prof. Ang, [26:45]
• “The scandal isn't what's illegal, the scandal is what's legal.” — Felix Salmon, [30:39]
• “Access corruption can boost growth ... but these side effects ... do not show up directly on GDP numbers.” — Prof. Ang, [08:13]
• “U.S. and China are not enemies. … If the two countries decide that they are going to treat each other as enemies and go to war, it is a global catastrophe.” — Prof. Ang, [46:50]

Important Timestamps

• 02:35: Prof. Ang introduces her “corruption as drugs” analogy and four types of corruption.
• 10:39: Discussion on Chinese bureaucratic “profit sharing” and its paradoxes.
• 19:24: Comparison of American and Chinese reform paths.
• 25:04: Breakdown of corruption structures in China, India, Brazil, Russia.
• 35:02: Oracle/TikTok/Trump as a modern U.S. access corruption case.
• 41:09: Comparative tech innovation strengths: U.S. vs. China.
• 46:50: Prof. Ang’s nuanced view of the U.S.–China relationship.

Numbers Round

• 1.5 million: Chinese officials disciplined under anti-corruption campaign (Prof. Ang, [48:36])
• 865,000: Number of women who left the U.S. labor force in September ([49:34])
• $50 million: Square’s Bitcoin investment ([51:07])
• $400 million: Citigroup’s regulatory fine ([52:21])

Conclusion

This episode presents a deeply informed, nuanced look at corruption as a complex phenomenon—with types that evolve alongside economies, sometimes even facilitating growth. While China’s “access money” mafia shares parallels with America’s past, Prof. Ang cautions against simplistic takeaways: what fosters growth in one era may have dire consequences later. The podcast closes on the note that U.S. and China, despite tensions, have much to gain from mutual understanding and collaboration.

Recommended Reading:

• "China’s Gilded Age: The Paradox of Economic Boom and Vast Corruption" — Prof. Yuen Yuen Ang
• “The Hypocrisy Trap” — Kathryn Weaver