Unintended Consequences

In my six decades of life I have concluded that the most often overlooked but potentially hazardous law of nature is the Law of Unintended Consequence (LUC). Every action leads to a reaction. But not all reactions are the ones we want.

The LUC is alive and well in China today and it threatens to stall the well-intended reforms of the new administration that took office in 2012. Instead of reform the country is experiencing, in many cases, government paralysis. And when a country or a business or a personal life needs reform, doing nothing is usually the worst alternative.

The opening paragraph of an article that appeared in China Daily, the government’s English language mouthpiece, on February 10th of this year read as follows:

“Premier Li Keqiang has asked local government officials to sign a written pledge to carry out major economic and social policies faithfully, saying that dereliction of duty has set back central government economic growth measures.”

For a government that has historically been reluctant to criticize its own on such a broad scale, this is both unusual and unusually harsh.

There appear to be two primary reasons for this paralysis, the first of which is undoubtedly the least impactful. Some government officials, no doubt, disagree with some of the reforms being offered by Beijing and are simply waiting it out in the hope that the reforms will go away.

I say ‘the least impactful’ for the simple reason that unless you are living in total isolation virtually no one believes that will happen. The reforms are necessary. The current administration is committed to them. And the current administration has consolidated its power more quickly and more effectively than any administration in recent history. President Xi Jinping enjoys a 95% approval rating and no ranking official is in a position to challenge him at the moment.

The far bigger cause of the “dereliction of duty”, as Li referred to it, is the ongoing and robust anti-corruption campaign being carried out by the Communist Party of China’s Central Commission for Discipline Inspection.

The need to fight corruption is self-evident. It leads to an inefficient allocation of resources. And the cause which is at the heart of the current campaign, it allows government officials to insulate themselves financially from the citizenry. They can easily acquire enormous wealth, undermining the Party’s legitimacy to govern. President Xi and Premier Li, in fact, view the fight against corruption to be a matter of life-or-death for the Party in the future.

And the campaign appears to be working. Luxury goods companies and entertaining venues have experienced a sharp decline in revenues; business at the private rooms reserved for high rollers at the casinos of Macau has dwindled dramatically; and millions in ill-gotten assets are being re-possessed.

So why the paralysis? As long as a government official approves a clean deal why not move ahead for the benefit of your constituents and the economy overall?

The reason is rather simple. Clean or not, deals that could be corrupt will attract the attention of corruption sleuths. And even if this deal is clean they are likely to look at past deals executed by the official if they have any suspicion of potential wrongdoing. Better, in other words, not to draw any attention.

In the end the extent of the paralysis truly underscores the extent to which the anti-corruption campaign has really changed the rules of the game of governance and economic development. Corruption, as we define it in the West, was not isolated. It was an integral part of the system. It was more than accepted. It was a vital part of how the economy functioned.

And the issue is not limited to government officials. Private corruption is arguably a far bigger problem simply due to the scope of the private sector. Company buyers don’t have to ask suppliers for financial compensation. ‘Commissions’ are expected to be paid and many suppliers consider them to be in their own financial interest. (Studies have shown that bribery is typically a very good investment financially speaking.)

Professions of noble pursuit are also involved. Many nurses, doctors, and schoolteachers rely on ‘gifts’ from patients and parents to attain even a modest standard of living. How will these socially important professions be staffed if professionals cannot make enough money to support their family?

Even the payers, in one sense, don’t want to see it end. When a Chinese colleague recently gave sizeable gifts to the doctors and nurses treating her mother in the hospital she at least had the security of knowing that her mother would be well taken care of. Parents who provide gifts for teachers have the comfort of knowing that their children will be looked after.

But this, of course, is an inductive perspective. To the deductive Westerner, who believes in the infallibility of cause and effect and the absolute ideals that empowers, right is right and wrong is wrong.

The world is not so orderly in the minds of the Chinese. And that is a point, perhaps, of some anxiety. It is, however, also a source of some confidence and calm. Whether good or bad the system is at least widely understood by everyone. There is, you might even say, much greater transparency in the Chinese way.

There is no need to guess. There is no need to ponder. Results are predictable.  Things are what they are, not what politicians and business people say they are.

It’s really another example of the LUC. What is, to the deductive thinker, trickery, is, to the holistic thinker, more transparent, practical, and convenient, all of which, we must admit, are important elements of fairness in the end.

Think about it.

Fair is an absolute ideal. Fairness is a result. But results can be misleading if we know not how they are achieved.

Note: The author also writes novels under the pen name of Avam Hale. You can find them in the Amazon Kindle store and they can be read on any mobile device loaded with the free Kindle App, available for all operating systems.

Copyright © 2015 Glassmaker in China

Notice:  The views expressed in this post are strictly those of the writer acting in a personal capacity.  They are not in any way endorsed or sanctioned by his employer or any other individual with which he may be personally or professionally affiliated.