The Cost Of Corruption
Nearly a decade ago, Liu Zhijun became China’s railway minister with dreams of leapfrogging ahead of the world by building a vast, glittering network of high-speed trains. The project became his trophy, earning him the moniker “Great Leap Liu.” Yet last February, Liu was sacked for alleged graft, reportedly pocketing $120 million in bribes. And five months later, when a bullet train crashed near Wenzhou in eastern China, killing 40 people and injuring at least 190, Liu became a lightning rod for anger over the country’s rail system, its inadequate safety testing, and the excessive speed of the trains. Since then, the trains have been ordered to slow down, but rail investment has declined and “Great Leap Liu” has become a symbol of the public’s plummeting trust in government.
Liu’s saga is just one of many examples of how corruption has steadily proliferated in post-Mao China. But what is its true cost? Five years ago a study by the U.S.-based Carnegie Endowment for International Peace estimated that corruption knocked some 3 percent off China’s gross domestic product. That means the direct cost of corruption in 2003 was $86 billion; applied to today’s GDP, it’s a whopping $200 billion. At various times, the Chinese government has put forth its own estimates, though never very consistently. Last year, a report by the People’s Bank of China estimated that since the mid-1990s, some 16,000 officials had spirited away roughly $125 billion. The report was initially posted online, but quickly taken down. The government’s most recent estimate came last month, as China’s National Audit Office (NAO) said Chinese officials had embezzled nearly $471 million earmarked for government-subsidized housing. Several years ago, the NAO reported that an estimated $35 billion worth of government funds had been misused or embezzled in 2005 alone. But the agency hasn’t announced any updates to that figure. “It’s too sensitive,” says Zhu Lijia, a professor of public policy at Beijing’s Chinese Academy of Governance. Government malfeasance dates back through Chinese history (or the history of any nation for that matter). But Zhu and other analysts say that crooked practices have become so embedded within today’s bureaucracy that bribery opportunities, which often come with senior-level jobs, are considered powerful recruiting tools. “In the past we had one emperor at a time,” says Zhu. “Now we have tens of thousands of emperors, everywhere.”