There Is No “East Asian Paradox” of Corruption and Development

Imagine that you’re talking to a friend, and you mention that smoking shortens average life expectancy, and that smokers should therefore be encouraged to quit. Suppose your friend replies, “Well, but my uncle Fred smoked every day, and he lived into his 80s.” If your friend means this either (a) as a serious challenge to your empirical claim that smoking is bad for you, or (b) as a critique of your prescriptive argument that smokers should therefore be encouraged to quit, then you would probably find his response absurd on its face. And if your friend were to say that he has posed a serious conceptual conundrum—say he calls it the “Uncle Fred Paradox”—you would probably laugh at him. His argument might seem marginally less ridiculous if he pointed not to his Uncle Fred but to, say, France—which has relatively high smoking rates and relatively high life expectancy—but we probably still wouldn’t view this as a serious challenge to the view that smoking is bad for you, nor would we spend a lot of time wringing our hands worrying about the “France Paradox” in the smoking-health relationship.

Yet for some reason, in serious discussions about the relationship between corruption and economic development, people seem to make precisely this sort of specious argument, and the argument gets taken very seriously by people who should know better. The form the argument takes in this context goes something like this: “It may be true that high corruption seems to be correlated with lower levels of economic development on average. However, many countries in East and Southeast Asia—such as China, South Korea, Japan, Taiwan, Thailand, and Indonesia—either achieved or currently are achieving impressively rapid economic growth despite widespread corruption.” This is the so-called “East Asian Paradox” (a term coined, as far as I know, by Professor Andrew Wedeman — see also his recent book). The somewhat more sophisticated version of the argument, developed most prominently in an article by Professor Michael Rock and Heidi Bonnett, notes that although perceived corruption has a negative relationship with growth and investment in most countries (especially small developing countries), this relationship becomes positive in a subsample consisting of five large, newly-industrializing Asian countries (China, Indonesia, South Korea, Thailand, and Japan), using data drawn from the early 1980s through the mid-1990s.

One encounters more-or-less sophisticated versions of the “East Asian Paradox” argument all the time when talking about the adverse impact of corruption on development. When someone says something like, “Corruption is a major threat to economic development,” someone almost invariably responds with something like, “But what about China? It has achieved impressive economic growth despite widespread corruption.” As far as I’m concerned, this is equivalent to saying, “But what about my Uncle Fred, the lifelong smoker who lived into his 80s?” But in case this is not completely obvious, let me explain why I think the “East Asian Paradox” argument, at least in its usual crude form, is mostly bogus. Continue reading

Crony Capitalism, the Asian Financial Crisis, and the Anticorruption Movement: What Are the Connections?

A couple of weeks ago, I posted a minor diatribe responding to the related claims – which I had perceived in a number of recent blog commentaries – (1) that corruption is not really that big a problem for economic development, and (2) that the emphasis on corruption had more to do with the desire of Western countries to feel superior to the allegedly misgoverned countries in the so-called Global South. One of the targets of my critique, Michael Dowdle, has posted an interesting response that deserves careful consideration.

Dowdle explains that his original post did not claim “that everyone involved in the anticorruption movement is infected by” the impulse to claim moral superiority, did not claim that this impulse “is the only or even the predominant motor behind the global anticorruption movement,” and indeed did not claim that this impulse is “a distinctly Western mindset.” After making these helpful clarifications, Dowdle explains the root of his concern that the desire to claim moral superiority may (partly) explain (some of) the global anticorruption movement: the invocation of a particular kind of corruption – “crony capitalism” – to explain the failures of the neoliberal model of global capitalism, most prominently in the 1997 Asian Financial Crisis.

In a nutshell, Dowdle’s argument goes something like this (and I apologize in advance for what I’m sure will be a bit of an oversimplification, but I think this is basically faithful): (1) the rapid growth of the Asian economies in the 1980s and 1990s, with their allegedly distinctive approach to government involvement in the market, posed a challenge to the purported superiority of American capitalism; (2) the Asian Financial Crisis delegitimized this alleged alternative model of capitalism, and so was greeted “with a clear degree of glee” from many American commentators; (3) commentators (mostly Western) claimed that a root cause of the crisis was “crony capitalism” – the alleged tendency to make loans based on political or social connections rather than expected returns – as part of an emerging narrative about how the “Asian Alternative” had failed; (4) in fact, however, crony capitalism had nothing to do with the crisis; and (5) the global anticorruption movement more generally “was strongly catalyzed by the discourse of corruption that American observers used to describe and explain” the Asian Financial Crisis.

For the moment, let me put aside that last point about the alleged causal relationship between the discourse of crony capitalism in the context of the 1997 crisis and the emergence of the global anticorruption efforts more generally – except to say that I’m skeptical that this was more than a minor factor. (Certainly Dowdle doesn’t point to any evidence, beyond the timing, that would substantiate this claim.) I want to focus instead on his intriguing and provocative arguments (A) that crony capitalism had nothing to do with the 1997 Asian Financial Crisis, but (B) that the emphasis on crony capitalism in some quarters reflected a desire to delegitimize a perceived Asian challenge to American/Western capitalism. I find this narrower version of Dowdle’s hypothesis much more plausible than the much broader version I (mis)understood him to be advancing in his original post. But I still find myself somewhat skeptical, so in the interests of continuing what at least for me has been a very stimulating exchange, let me push back against certain aspects of Dowdle’s argument here.

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