Tag Archives: China

Crowdsourcing the Fight Against Fake Drugs

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Producing and selling falsified medicines—fake drugs deliberately labeled as real and sold to consumers—has been described by the Institute of Medicine as “the perfect crime.” The industry tops $200 billion annually and in Africa alone is responsible for 100,000 deaths each year. The WHO identifies corruption as one of the biggest challenges to keeping these drugs off the market, but the number of access points all along the supply chain—at the point of manufacturer, in customs offices, at distribution centers or individual pharmacies—make reining in corruption a gargantuan task. Governments may squeeze one area—say stricter regulation of customs offices—only to find distribution centers being turned into drug swap shops.

We may, however, be witnessing a shift in how governments approach these issues, moving from confronting corruption head on—which has met with mixed results—to simply circumventing it. The Nigerian experience is noteworthy. Nigeria’s National Agency for Food and Drug Administration (NAFDAC) has teamed up with Sproxil, a product verification company, to allow consumers to individually verify the authenticity of their drugs. NAFDAC is effectively crowdsourcing its falsified medicines anti-corruption efforts, and with some very positive results. Continue reading →

Transparency International Makes Its Data Less Transparent: Why TI Should Be Ashamed of Its 2014 CPI Report

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For all its flaws, I’ve long been of the view that Transparency International’s annual Corruption Perceptions Index (CPI) has, on balance, made a positive contribution to our understanding of corruption, and the fight against it. (A couple of my sympathetic treatments can be found here and here.) Although some in the media (and, depressingly, some in academic and policy circles) misuse the index, TI has generally been quite clear about what the CPI numbers do and do not tell us.  And to its great credit, TI has proven remarkably receptive to criticism: each year TI’s annual CPI report has become better, clearer, more nuanced, and more transparent in its limitations.

Until this year. The 2014 CPI came out yesterday, and I’m disappointed at how TI has taken a big step backward, making the meaning of its scores less transparent, and choosing to play for catchy headlines rather than to deepen understanding. Continue reading →

Guest Post: Hosting Proceeds Down Under — Australia and the G20 Anticorruption Agenda

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Professor Jason Sharman of Griffith University, Australia, contributes the following guest post:

On November 15th–two days from now–the latest G20 leaders’ summit kicks off in my home town of Brisbane, Australia, with anticorruption once again on the agenda. Though the G20 Anti-Corruption Working Group has made some important progress, many of the member states have been letting down the side. Specifically, Australia tends to receive less critical scrutiny than it should when it comes to international action against corruption, particularly in terms of hosting stolen assets from other countries in the region. And the G20 leaders’ summit is as good a time as any for the international community to press Australia for its many failures to deal with its status as a regional haven for money laundering in the Asia-Pacific. Continue reading →

The Impact of Corruption on Social Mobility

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In a post for the Brookings Institution, David Dollar laments China’s problematically low social mobility, and offers three factors preventing China from becoming a true land of opportunity: (1) the hukou residential registration system (which restricts labor mobility); (2) locally-funded education (which disadvantages poorer rural communities); and (3) growing corruption–because, as Dollar argues, it is “easier for elite families to pass on status and income to their children when there aren’t clear rules and fair competition.” . However, although the view that corruption inhibits social mobility is widespread, and Dollar’s point is partly correct, in reality the picture is more complex. Continue reading →

Looking Where They Shouldn’t: China’s Crackdown on Due Diligence Investigators

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As Meng suggested in a recent post, there is something admirable about Chinese President Xi Jinping’s anticorruption crusade. With nearly 182,000 party members reprimanded during his first 18 months in office, President Xi’s program appears both more ambitious and enduring than those of his predecessors. Unfortunately, though, the core of corruption surrounding China’s senior leadership remains largely untouchable. Even as China cracks down on the abusive practices of low-level officials, billions of dollars in “suspicious” funds sit in the foreign accounts of that nation’s “princelings,” protected by the fact that, as Matthew notes, discussion of the corruption of China’s senior leaders remains “absolutely taboo.” After all, shedding too much light on the misbehavior of the nation’s elite threatens to defeat the leadership’s paramount concern: maintaining the legitimacy that undergirds China’s political stability. And this leads to what it is that positive accounts of President Xi’s battle against corruption often overlook: the contemporaneous willingness of China’s senior leaders to crack down on anticorruption efforts whenever those efforts threaten to step on the wrong political toes.

One of the best examples of this phenomenon is the Chinese government’s recent crackdown on investigative companies who perform due diligence. Continue reading →

Putin’s “Power Vertical”: Blanchard and Shleifer Revisited

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In 2000, Olivier Blanchard and Andrei Shleifer wrote a seminal paper comparing the impact of federalism on economic development in Russia and China. Blanchard and Shleifer aimed to solve the puzzle of why federalism–and, in particular, inter-jurisdictional competition–fostered economic growth in China but hampered it in Russia. Simplifying somewhat, their key conclusion was that the absence of political centralization in Russia was the culprit. With no strong national government to act as a disciplinarian, Russian localities were prone to a particular form of corruption–capture by local special interests–and localities competed for rents instead of competing for firms by making improvements we associate with open governments and economies. In Meng’s recent post about political decentralization in China, she endorses Blanchard & Shleifer’s analysis, and advises against granting Chinese regional and local governments more autonomy from the center. Implicitly, her post is a caution against moves that would make China in 2014 look like Russia looked in 2000.

But what about Russia? Fourteen years after Blanchard & Shleifer wrote their paper, political centralization is a reality in Russia — in terms of the strength of the ruling party, Russia resembles China much more closely now than it did in 2000.  So one might expect, if Blanchard & Shleifer’s analysis were correct, that local corruption in Russia should have abated, and competition between Russia’s different regions should now be growth-promoting rather than growth-retarding.  Alas, Russia’s experience over the past 14 years suggests that this has not come to pass.

Continue reading →

Is China’s Anticorruption Crackdown Really a Crackdown on Anticorruption Activists?

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In my last post I noted that political decentralization, and the inter-jurisdictional competition it fostered, could potentially suppress local corruption and promote economic growth. My enthusiasm was fanned by the Chinese Communist Party’s (CCP’s) aggressive anticorruption campaign. Since President Xi Jinping took power, there has been a wave of anticorruption purges against powerful military and government officials. The very public purge of Zhou Yongkang, a retired official described as “the most powerful man in China,” seems to be an indication that Xi is fulfilling his promise of zero tolerance against “tigers” and “flies.”

However, my optimism has been tempered by recent news that two more anticorruption activists have gone on trial in China. The fact that the two activists from New Citizens Movement—Ding Jiaxi and Li Wei—campaigned for officials to disclose their assets, a cause that echoed CCP’s official aspiration (see here and here) only made the arrests more perplexing.

This seems like a glaring contradiction.  Why does the Chinese leadership continue to trumpet on about anticorruption and simultaneously arrest anticorruption activists?

Continue reading →

Can Federalism Curb Corruption in China?

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Many commentators have credited China’s political decentralization, and the inter-jurisdictional competition it fosters, with suppressing local corruption and promoting economic growth. Other commentators have been similarly enthusiastic about the prospects for Chinese “federalism” to improve both economic and government performance, and urge China to go even further in embracing a federalist model.  For instance, an op-ed in the New York Times a few months back suggests that “[I]f China’s leaders want to ensure their country’s peace and prosperity over the long run, they would do well to chart a course toward a federal future.”

The main argument for why political decentralization, and the associated inter-jurisdictional competition, can improve governance and growth is straightforward: Local officials compete for mobile capital and labor, and this competition disciplines government officials because bad behavior (such as corruption) can cause voters and firms to move to another jurisdiction. The greater the mobility of firms and citizens, the stronger the disciplining effect. And there’s some rigorous recent academic research substantiating the hypothesis that political competition can improve governance, including an excellent recent paper that examines recent data from Vietnam and finds that economic growth, coupled with political decentralization and competition, has indeed reduced local government corruption.

So does this mean that China’s best hope for improving its governance performance is to decentralize even further, granting provinces and municipalities greater autonomy in setting policy within their jurisdictions?

The short answer is likely to be no.

Continue reading →

Let’s Create Sub-National Corruption Perception Indexes for the BRICS

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For all their flaws, the major cross-country corruption indexes—Transparency International’s Corruption Perceptions Index (CPI), the World Bank Institute’s Worldwide Governance Indicators (WGI), and the like—have been quite useful, both for research (at least when used appropriately) and for advocacy.  But one important limitation of these datasets is that by focusing on corruption (or perceived corruption) at the country level, they may obscure the fact that there can be substantial within-country variation in the level of (perceived) corruption.  This variation may occur across government institutions—the same country may have quite different degrees of corruption in the health sector, the police force, the judiciary, customs, etc.  More pertinent here, there may also be significant heterogeneity across regions, particularly in large countries with substantial political decentralization.  Indeed, numerous studies have exploited within-country regional variation in corruption levels to test various hypotheses about corruption’s causes and consequences; such studies include research on Italy, Russia, China, the Philippines, and the United States, among others.  But these studies typically make use of particular data sets that are not reproduced year-to-year.

As we’re starting to see rapidly diminishing returns from the major cross-country corruption datasets, it is high time for those organizations with the resources and capacity to compile information on corruption perceptions on an ongoing basis to turn their focus to within-country regional variation in corruption.  I propose the creation of a sub-national corruption perceptions index (snCPI), starting with the so-called BRICS countries (Brazil, Russia, India, China, and South Africa), which would gather and compile data (primarily perception-based data, perhaps supplemented with more objective data when available) on perceived corruption levels within the major sub-national units (states/provinces, autonomous regions, and municipalities) within each of those countries.

Continue reading →

The New Chinese-Backed Infrastructure Bank: Will it Tame the Corruption Dragon?

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Asian governments are welcoming China’s recent decision to establish a bank to finance infrastructure across Asia.  As Devex reported June 2, China plans to capitalize it with an initial $50 billion with the possibility of increasing it by an additional $100 billion.  For China, the bank is one more way to assert leadership in the Asian region.  For Asian states leery of relying on the Western-led World Bank and Asian Development Bank for financing public works, the bank is a chance to diversify.  For both the lender and borrowers alike, the bank offers the chance to profit from Asia’s economic dynamism.

The Chinese-led bank will have to overcome many challenges to realize these objectives, the most difficult of which may well be preventing corruption from infecting the projects it finances.  Infrastructure corruption produces half-built roads, dilapidated ports, and white elephants of all kinds.  It leaves borrowing governments indebted for under-performing, over-priced assets while stirring a backlash against the lender.  Will the new bank and its principal backer be able to keep the corruption dragon at bay?   There are at least three reasons to worry that it won’t.  Continue reading →