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Here are some lessons I have learned about Chinese corruption from our small water project:

The corruption requires a marriage between a criminal gang (to intimidate) and a network of corrupt local officials (to manipulate a weak legal system) — The criminal gang, by itself, only intimidates. It’s in the retail corruption business. The criminal gang can only get the scale with the collusion of corrupt public officials. These officials provide the leverage to pull off large-scale schemes.

The corruption generates huge profits to feed and reinforce the networks.– In Lantian county, the main scheme involves converting industrial land into residential development without 1) going through the legal procedures for changing the use of the land and 2) paying the County any fees. So far the total is about 250 million RMB, not chump change (that’s about $40 million in an economy where senior level administrators are paid about $12,000 a year.) Meanwhile, the County cannot find the money to pay the full pensions of its health care workers (about $200-$300 a month)

The corruption requires relatively small steps by individuals operating within the network.– In the United States, public corruption usually involves relatively simple transactions. In China, public corruption involves networks that both execute an illegal scheme and subsequently protect members of the network. Each member of the network takes a relatively small step, but taken together the corruption impacts are relatively large (a perverse network effect).

The court system offfers no protection; judges can easily be corrupted.– Given the amount of money flowing through these corruption networks, the court system doesn’t stand a chance.

The Communist Party does not have an effective way to supervise and discipline corrupt local officials.– When we went to the Lantian Bureau of Supervision and Discipline, we learned that Yang, the head of this office, is a close friend of Suen, the gangster who controls the county. Yang encouraged us to meet with Suen and his representatives. He had no interest in investigating anything. Rather, he was trying to find a way to diffuse a situation that could run out of control (and ultimately disrupt the network).

The entire focus of Communist Party intervention is to contain the controversy.– There is no effort to investigate, to vindicate legal rights, or to punish clearly illegal activity by public officials. The reason is simple. These networks stretch far and wide. They are self reinforcing. They are closed. If they can contain the controversy, nobody will get hurt (except, of course the pensioners).

Learning how corruption works in China requires penetrating deeply complex and hidden networks.– The only way I was able to identify corrupt acts by local officials was through my own trusted networks that I have developed over the past twelve years. There are a lot of good people in Lantian who want too be free of this evil.

You can learn more by visiting the web site I built last week: http://lantiancorruption.net

Last 5 posts by Ed Morrison

• Signing off - February 3rd, 2012
• "The current global development model is unsustainable" - February 1st, 2012
• Market opportunities for developing Chicago's green economy - January 29th, 2012
• Plain Dealer flubs its explanation for firing Tony Grossi - January 27th, 2012
• Linking and leveraging university assets to strengthen regional economies - January 27th, 2012

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