Institutionalized Amnesty of Senior Officials and the Culture of Corruption

At the time of this writing, Zhou Yongkang (former member of the Politburo Standing Committee of the Communist Party of China) is still under investigation for corruption. It is widely speculated that such investigation will eventually lead to criminal prosecution. Such a criminal prosecution, if it happens, will break a long-lasting, widely-believed-to- exist since 1992, norm of xing bu shang chang wei, which can be roughly translated into “institutionalized amnesty for senior officials” (IASO).

How to evaluate the significance of IASO, or the breaking of it?

One view is that IASO plays a positive role in China’s smooth power transition and strong economic performance in recent decades. Not only that it assures the safety of retirement for senior officials, it also encourages these retiring seniors to promote the best successors. According to this view, we will see the repercussion of the breaking of IASO in a few years, when the current Chinese leaders are supposed to retire. Either power transition will no longer be as peaceful, or the promotion criteria will no longer be as merit-based, as before, or both.

The opposite view is that IASO not only breeds corruption at the top of the govern- ment, it also contaminates China’s celebrated merit-based promotion system, in the sense that many bureaucrats who work hard to get promoted are actually patient crooks who wait for the opportunities to abuse absolute power at the top of the government. Accord- ing to this view, the breaking of IASO is a reason to celebrate.

How to reconcile these opposite views? Are they describing different effects which take place at the same time? Or different (mutually exclusive) equilibrium outcomes in the same economy? Or different steady states of the same equilibrium? Or different economies with different parameters (if so, what are the relevant parameters)?

The objective of this project is to reconcile these opposite views with a unified the- ory. This PI is especially suitable for this task because he is one of the pioneers of a new analytical framework (called “overlapping principal-agent problems”) that is specifically designed to study a Chinese-style political system (which is neither democratic nor dicta- torial, and is characterized by today’s leaders selecting tomorrow’s leaders out of today’s bureaucrats).

The long-term significance of this project is that it will enhance our ability to make predictions on China’s political stability and economic performance. It will also deepen our understanding of the Chinese-style political system.