CORRUPTION Syndromes of Corruption

Official Moguls 161
moonlighting, speculation, taking gifts, and bribery. Judicial institutions
were reconstructed, but became politicized and unaccountable (Gong,
1994), as did lending and credit. Autonomous business, trade, labor, and
consumer organizations – which in other systems defend important
values and impose sanctions of their own – still do not exist. Victims of
shady deals, and political demands reflecting both the success and difficulties
of economic transformation, lack legitimate political outlets. State
bureaucratic capacity lags far behind the spread of markets, and the party
has entered a phase of organizational deterioration. Market forces
abound, but institutionalization and national integration of the economy –
admittedly immense challenges – have lagged far behind. Officials were
able to contrive corrupt monopolies in all manner of places and
economic niches (Gong, 1997: 285; Wedeman, 1997b; Lü, 2000: 193;
Cheng, 2004).
The early results were impressive, as annual growth approaching 10
percent became the norm, but not surprisingly they were uneven. Pei
(1999: 95) points out that reform created winners early while deferring
losses (layoffs, closure of unprofitable state-owned enterprises, and so
forth), thus winning considerable support within the party and bureaucracy.
But a two-track price system in place for the first fifteen years of
reform created incentives to buy coal, steel, and other commodities at
artificially low planned prices and resell them at market prices several
times higher. Production under the plan was unprofitable while the
market was lucrative; many managers overstated or simply skipped
planned production and moved directly to the market. Such dealings
could be covered up by cutting bureaucrats in on a share of the profits.
Bureaucrats went into business, often at their desks in state offices.
Teachers compelled students to buy books and supplies from them, railway
workers traded in scarce freight and passenger space, and military
officers sold fuel, supplies, and special license plates allowing purchasers
to avoid inspections, tolls, and fees (Dryer, 1994: 268; Johnston and Hao,
1995; Hao and Johnston, 2002).
Decentralization created pockets of impunity, often in a growing gray
area between state and markets (Johnston and Hao, 1995). Managers in
the state-owned sectors could tap into the cash-generating activities of
their enterprises and enrich themselves with little risk of punishment
(Cheng, 2004). Party cadres and bureaucratic administrators raised their
own salaries, spent public funds on housing and extravagant banquets,
speculated in foreign exchange, and earned black-market fortunes.
City officials might wink at local manufacturers’ tax obligations while
levying special fees upon goods from other areas (Wedeman, 1997b:
807). Calling former grants ‘‘loans’’ did not, in the absence of a capital