Why Capital Is Fleeing China: The Crushing Costs of Systemic Corruption

Who are you going to complain to? The government? Good luck.
Who are you going to complain to? The government? Good luck.

People don’t want to do business where the whole system is rigged. Sure lots of legal graft can be tolerated if the location for whatever reason is especially good. California comes to mind. But eventually capital, human and otherwise, leaves. People are only going to be jacked for so long.

One of the ways people can be stolen from is through externalities like pollution. As Charles Hugh Smith explains, pollution in China is dumped on the people because the polluters – which are in partnership with the government in many cases, if not all cases – can do whatever they want. There is no market mechanism, no social market mechanism, no real property rights, to address the problem. The state has decided it will pollute and so it will. (Of course the state can screw up the other way too. Just ask anyone in West Virginia.)

The only choice then is to leave. If one can.

(From Of Two Minds)

Environmental clean-up costs have been avoided due to corruption. Filters are taken off at night, when the smoke is less visible. If local residents complain too loudly, local squads of goons attack them.

The Chinese state exists to enforce the privileges enjoyed by the few at the expense of the many. Paying pollution-remediation costs slash profits–indeed, in many cases, these external costs completely wipe out profits.

Dissenters and anyone daring to question the corruption must be suppressed by whatever means are available, and the central and local governments in China have been liberally deploying every tool of repression.

This systemic repression is the direct consequence and cost of corruption. So by all means, poison the nation and its non-privileged citizens to benefit the few at the top of the heap, and arrest, beat up or silence critics and dissenters.

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