Degrees of Influence Peddling in China and US

[Commentary] In every modern society, the people who hold the levers of state power control the deployment of vast riches; every decision about a change in the tax code or the issuance of oil drilling licenses is worth billions to someone.

The potential beneficiaries of those policies have every incentive in the world to try to influence the decisions.

Influence peddling is the mechanism by which those hoping to sway politicians ultimately reward those politicians. Whether it is ethical or unethical, legal or illegal, depends on what particular compromises a given country has come to accept.

China has had a system in which the understanding is that legal authorities will take a don’t-ask-don’t-tell approach to family members of high political officials making vast sums. The prosecution of Zhou’s family is a frontal assault on that understanding of what is official corruption.

In the United States, the basic compact has been this: If you take financial benefits from a private interest that seeks to influence policy while in office, it is probably illegal. It’s the same if a close family member does it.

The influence games are different in Washington and Beijing, of course. And not all corruption is created equal; it matters whether a particular variety of official corruption drags down a country’s economy. At the worst extreme, a country where public officials at all levels demand constant bribes as a matter of course will not be a very hospitable environment for business.

But as the Columbia economist Ray Fisman has argued, so long as corruption is predictable and manageable, it can coexist with speedy economic growth (Indonesia under Suharto and China over the last few decades are prime examples). And China has greater state control over more of the economy, and little transparency around who is profiting from that control and why. That is a breeding ground for potential corruption on a scale unknown in the United States.