Crony capitalism does not always lead to catastrophe

Corruption takes many forms, with some worse than others because it disproportionately affects the least wealthy and those without powerful friends.

The annual release of Transparency International's corruption index, revealed last week, is an occasion for much tut-tutting over who's slipped in the scale, and who's skidded even further. Indeed, one can do no wrong lamenting the scourge of corruption (newspaper writers love "scourge"). It's also a safe subject to rant against, since no country is immune from corruption and every single government – even North Korea, if one can believe it – is in one way or another engaged in a battle against this, er, scourge.

The problem is that because corruption is such an easy target, much of the opinionating fails to appreciate any nuance. Yes, corruption is bad. But there is also corruption that is – one hesitates to say “good” – less bad than the really, really bad corruption. It comes down to a question of who benefits and how.

By coincidence, two films exhibited during the Abu Dhabi Film Festival illustrate this dichotomy. From China, there was the recently released A Touch of Sin. The other is the 1987 film The Catastrophe, by the Indian director Jahnu Barua.

The Catastrophe charts farmer Rakheswar’s spiral into deepest destitution as his small piece of land is claimed by the village’s rich man, who says Rakheswar’s father never repaid a loan for which was pledged the tiny paddy plot. Although certain that the debt had been made good, Rakheswar has no proof.

He is advised to make an official appeal. Each step along the way, he meets petty officials who promise success so long as he makes the necessary goodwill payment. Towards this, he expends every bit of the family’s meagre savings, then is forced to hock his buffalo, and finally takes his precocious young son out of school and indentures him to another local grandee for a small loan.

The appeal, of course, fails. Everyone except Rakheswar understood this from the start. Nevertheless, he does finally get his land back – not through the law, but instead some strong persuasion by an idealistic young district officer who takes pity. Rakheswar’s elation is short-lived, however, as he quickly realises he has no buffalo to pull his plough, his son remains indentured, and he has no money to return both to farm and home. The family is doomed.

What The Catastrophe reveals is the worst form of rent seeking. It creates no real economic value. The bribe payer simply has been the victim of a robbery. He gains no net benefit from his transactions.

In another screening room later in the week of the festival, A Touch of Sin charts the path of four working-class protagonists who have been psychologically wounded by the violence and criminality encouraged by corruption. But more interesting is its subtext: how China’s powerful have undermined equity, and yet the business empires that result from this have also trickled down benefits to those for whom they provide a livelihood.

Corruption, in this case, turns out to be an enabler of economics. Without condoning the practice, it is nonetheless clear that China’s stunning wealth creation over the past 30 years has been helped in some measure by a habit of crony capitalism.

For in the absence of clarity over rules and regulations – even, sometimes, the total lack of law – it is those with smarts, raw power, and connections who are going to get things done. And because this is a business model, all parties register a gain. So victims of crony capitalism also receive a net economic benefit – a job, for instance, in a town that previously had no work to spare. In such a way, value is created.

Indeed, because of the economic benefit, crony capitalism isn’t always seen as outright corruption by its victims. Some Chinese might even not begrudge the tycoons their wealth. Maybe with a little perseverance, some hard graft, and a dab of fortune they too can become fair copies of the rich men. In a way, this is aspirational corruption.

So then, one might be tempted to think that China – and for that matter the eastern fringes of Europe, too – should be excused for the overflow of greed it needs to pull it out of its overlong feudal slumber. (Into what? Well, something. One shudders to call it capitalism.) That maybe it isn't so bad after all. For unlike farmer Rakheswar, almost everyone gets something out of it.

Yet, of course, it’s bad, just not as bad as outright thievery. For who knows what China’s energetic peasants and inventive urban folks might have accomplished, and what greater value they would have created, without a tax on opportunity and a levy on hope.

Aristotle taught us there is no one good. Instead, the virtues exist on a scale of hierarchies. The same might be said of the vices, that there is an ordering of the bad. But without an appreciation of the hierarchy of humanity’s dark souls, we risk just calling it all a scourge without shedding any light.

Tion Kwa is Assistant Editor of The National