Gangster Economy

Essentially an entire economy run like a mob operation, it can make certain leaders, and officials, incredibly wealthy.  This should also explain why so much Chinese money is knowing flowing into the US and European countries for investment visas and permanent residency. Now our politicians certainly make use of their power to accrue wealth and help elevate their relatives, this happens in business as well, however there are two major differences.

One is that outright profiteering is rather rare, rather, connections are used to open doors and avenues that allow one to create wealth for themselves. The second is that, considering the differing and more mild nature of nepotism and cronyism in the west, it is unlikely that minor officials will be thrown under the bus.  This does not exist in China, and as the case of Bo Xilai shows, even major party officials are now open to being ousted if they fall on the wrong side of the political battlefield.

This isn't to to say that there isn't corruption in America, or that it hasn't gotten worse, as I blogged in parts one and two of what makes a nation prosperous corruption plays a very big roll, perhaps an even bigger roll than democracy; though the two are generally correlated.  But by all accounts of various groups, and by many who travel, the US is a far less corrupt place than China.  Corrupt regimes, be they democratic or authoritarian, are far less stable than uncorrupted ones.

What will happen to China, if at one point, the leadership, or strongest faction within the leadership, starts to go after a political individual that won't go down quietly? Or what if that person happens to be very influential with the PRC military? Ever heard the phrase crossing the Rubicon? It means to go past the point of no return; it refers to Julius Caesars march to Rome were he used his military might to install himself as a dictator.

Caesar had done this for two reasons, one, he had acquired a lot of debt from very influential friends and he needed another pro consulship so that he could commit the tacitly approved of, within reason, grafting. And the other was that he had made a lot of enemies in a lot of high places, and he had broken a lot of laws, and the consulship provided legal immunities to his person.  When his political opponents, who in fact were just as guilty as Caesar of malfeasance, used legality to deny him his pro consulship and order him to return to Rome; where he would be tried for breaking various laws.

Now how do we expect this to go down? A man who conquered modern day France and defeated a foe that had beset Rome since its founding is simply going to disband his army and return to Rome in disgrace? Hardly.  The same could very well happen in China, or even America if we continue on our current path, and nothing destroys wealth and prosperity like a civil war.  The best case scenario in this instance would be a return to the warlord days of the early 20th century and a divided and weak China.

So mule this over for the rest of the day. How stable can a country be when an elected leaders family can use its influence to not just get wealth, but fantastic amounts of wealth on the order of billions of dollars, when almost 600 million Chinese live in abject poverty? And an economy that is at best stagnating, or worse in recession? I think the answer is pretty apparent; not very.