„Free market economy – Quo vadis?“ was one of the central questions debated upon at the „China Workshop“ held in Beijing by the German Friedrich-Naumann Foundation together with the American Atlas Foundation in April 1995. Participants from Europe and the United States had ample opportunity to talk with Chinese scientists.
The Chinese adopted their traditionally polite, reserved manner during the plenary discussions; however, criticism as well as self-criticism was poignantly expressed. Nonetheless, European participants, accustomed to polemic discussions on a free basis, were unable to shake off the impression that a high percentage of the criticism and self-criticism was officially authorised opinion. The official statement is that it is the government which is exe¬cuting a planned „change in the system“ of economic politics, somewhat like when a gas oven is replaced by an electrical one in a domestic household. The „new economic political system“ (which is by no means to be mistaken for a change in the system as a whole but should be considered a „modernisation“ or an „opening up“) is moving from centrally, or de-centrally, controlled state-owned companies to form a Socialist market economy. This is attributable to the competitive non-state companies, where the participation of „public services“ (respectively entire branches of state departments such as energy or the military) is predominant. Whereas it is not always easy, even in our system here, to differentiate between private and nationalised companies where mixed economic relationships exist, in such a close-knit and interlocked situation as in China, it is virtually impossible. On the other hand, there are many encouraging market-economic aspects to be observed where a natural growth of small companies and even smaller entrepreneurs is flourishing as a result of deregulated self-employment. Hopefully, this tolerated minority may soon come to support the „change“. Unfortunately, however, in a mixed market economy inherited with any amount of genetic errors, the threat of insidious corruption filtering down from the highest levels may sooner or later endanger the real free-market competitive spirit of private enterprise companies, which in China are growing from below, via a new form of interventionism and protectionism. The present totalitarian political structures, carefully exempted from the „change“ or „opening“, allow such steps to be considered as a „protection“ of the Socialist market economy. This may, for the moment and in their own interest, be considered all well and good by foreign investors. From the point of view of a healthy long-term market economic development, however, it sould be noted that the involvement of foreign investors is turning place in this context of restrictive interventionism and that our political and industrial „China pilgrims“ – yet again – are shaking hands with the wrong people while making promises of credit …
„Out of control“
In academic circles virtually no opposition is voiced against official government policy on economic reform and on the „opening“ which refers to trade, but on politically delicate areas for example there is significant restraint as far as the electronic media is concerned. At most, the tempo and breakdown of Chinese culture in the face of MacDonaldisation is criticised. From the outside looking in, the observer can’t help having the impression that the process of transformation, at least to a certain extent, is taking place as if due to some chaotic natural energy; somewhat like that of the bursting of a dam or an erupting volcano, although both comparisons are of course too negative since the streams which are now forging their way anew generally point toward a curative effect. The Socialist nomenclature is no longer capable of exerting an omnipresent grip on co-ordination or manipulation. Out of this predicament a virtue is made in that the chaos is referred to as the „desired opening“ and the arising economic opportunities are praised as political success, whilst on the other hand as much personal financial profit as possible is being made out of it.
Nevertheless, comparisons do tend to be quite lame: the present economic policy can be compared with the well-nigh tragi-comic efforts of the Chinese traffic police which one can observe at the great cross-roads in Beijing or Shanghai. They try to regulate the traffic. An actual change-phase does not occur in the zigzag confusion of the pulsating, at times hopelessly blocked, flow of traffic. Yet all the same – the congestions are dispersed time and again and the traffic flows freely once more – whether despite, or because of, the fumbling, whistling uniformed bodies is irrelevant. Their attitude appears to express: „Look here, all this functions thanks to us because, after all, we would have the power to block everything“.
The „old burden“ of corruption
A huge grievance is bemoaned: corruption. It can’t be hidden, and everyone knows and can recount dozens of examples of it. It is said that the only remedy is penal law with draconian preventative measures, here also in accordance with the government, which can appeal to Confuscional virtues. As unspeakable as it may sound, the argument that this, in all probability, would mean that merely the level of corruption would change and the ante be raised, is, considering the background of a magnitude of historical experiences, not refutable.
In abundance, one is confronted with the conclusion that corruption is a necessary concomitance of market economy, so to speak, the price one has to pay for freedom. When, therefore, everything becomes buyable and sellable, one can no longer maintain traditional morality …
In all the short lectures and discussions of opinion which I was able to hold in various academic circles, arranged by the organisers, I tried to prove that corruption is precisely not a concomitance of the market, but rather the counterpart of a politically controlled, respectively regulated market economy. Corruption is the purchase of political interventionist influence, the „ransom“ paid to be freed from political control over economic activities; the exchange of money for privileges. In a transitional economic phase, it may appear to be the „lesser evil“ due to the fact that – for money – certain necessary free room for manoeuvre can be obtained.
Morally it is always evil and a society which is infected by this virus is therefore economically burdened. The only effective remedy with which to counter corruption is economic and social order, in which sufficient scope is guaranteed for all and therefore a quid pro quo service in money becomes superfluous. He who has the right to practice private autonomous enterprise does not need to buy his privileges via bribery. Where negligible state influence exists, there is therefore less to be purchased or sold via corruption, and, where the state apparatus as a matter of principle does not interfere with business procedure, there exists no motive to warrant bribery. Corruption may well not completely disappear from the face of such a system, but its significance diminishes because those privileges which are purchasable compared to that which everyone is anyway allowed to do, obviously become secondary. There are always corruptible people everywhere, but there are systems (totalitarian and interventionist), in which success is dependent on bribery and others (free enterprise) in which achievement and the spontaneous utilisation of numerous permutations are the determining factors.
Corruption flourishes considerably where interventionism and protectionism „re-shuffle the cards“ of the declining old system, and a breakthrough to a genuine „independent-of-the state“ market economy has little chance. It is a typical „old burden“ problem of systems not having a free market and a unavoidable side-effect of all forms of interventionism. There is the general misunderstanding here too, that this typical „old burden“ of a non-market economic order, or to be more precise, sick market economy is, of all things, interpreted as the necessary bedfellow of a market economy.
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PS: On the flight back from China, I sat next to a young businessman from Switzerland – a so-called China-expert. He praised the headway made by the „opening“ and the „entrepreneurial spirit“ of the Chinese ex-Communist bureau¬crats. But there again, he said, along with the market economy, corruption will more than likely be unavoidable. There’s nothing one can do about it …