Yesterday I talked about the importance of democracy and inclusive political institutions to ensure inclusive economic institutions and prevent the adoption of policies that only benefit a narrow elite. These days one cannot pick up a government-owned newspaper or turn on the TV without  being told that PAP’s goal is to build an inclusive society.  However we will find it difficult to build an inclusive society whilst we continue to have non-democratic and non-inclusive political institutions.

The last few weeks we have been treated to tantalizing revelations about how important dynasties and family relationships are in China. In today’s FT there is an article about the downfall of Bo Xilai (Bo’s Downfall Sheds Light on Nepotism, http://www.ft.com/intl/cms/s/0/6be8993e-8962-11e1-bed0-00144feab49a.html#axzz1sUTm09iB). Both Bo Xilai and Gu Kailai are children of revolutionary generals and Bo’s father, Bo Yibo, was one of the “eight immortals” who ruled China behind the scenes in the 1980s and 1990s. Their other siblings all hold important posts in state-owned companies or have control companies that do business with the Chinese government. While Bo Xilai was the General Secretary of Chongqing his wife was a lawyer who set up and benefited from a number of business ventures both inside and outside China. In fact it was the threat that her financial dealings were to be exposed that allegedly led Gu Kailai to kill the British businessman Neil Hayward.

It is ironic that the Chinese Communist Party, which like the Soviet Communist Party, seized power with the tacit consent of the majority by promising to raise the masses out of poverty and eliminate inequality should be captured by a group of elite family dynasties.  Recently Bloomberg reported that the 70 richest delegates to China’s National People’s Congress were worth an aggregate of $89.8 billion, or more than a billion dollars each.

“In other countries children of politicians often get opportunities that others don’t but the problem in China is there is absolutely no transparency and there is also a strong sense of entitlement, that this money is their birthright,”   said one person with close ties to top political families in China.

“The problem for the Party is that exposing the Bo family businesses makes people realize that this is how it works for everyone.” (FT)

The importance in business of having family ties to or friendships with politicians is of course not a phenomenon that is confined to China. In Africa, Uhuru Kenyatta is reported by Forbes to be owner of Kenya’s biggest dairy company and one of Africa’s 40 richest residents. He served as deputy prime minister of Kenya and is the son of Kenya’s first president, Jomo Kenyatta. In the Mideast, the Bin Laden family made its riches through construction contracts for the Saudi government derived from the close relationship of Mohammed bin Laden and his sons with the Saudi royal family.* The former President of Egypt Hosni Mubarak’s family are reported to have accumulated a fortune of US$80 billion.  The family of the deposed Tunisian strongman are estimated by Al-Jazeera to have taken US$17 billion with them when they left the country while the Gadhafi family wealth is estimated at a seemingly implausible $200 billion by the new regime.

However one should not be surprised at this. After all non-democratic political institutions tend to be extractive and frequently serve just to maintain the power and privileges of an elite, whether a group of families as in China or a hereditary aristocracy as in Europe. A vicious circle develops in which dominance of  political power helps the elite to increase their economic power which in turn reinforces their political power. They have some interest in economic growth as long as it raises their wealth and they have to keep living standards for the masses either rising or not deteriorating enough to pose a threat to their rule. In this North Korea appears to be an exception, as the Kim dynasty is now into its third generation despite having reduced the bulk of the people to starvation and absolute destitution.

Here in Singapore “Inclusivity” will remain just another buzzword without  full democratic institutions to back it up.  As a former colony there was already a history of extractive political institutions.  The struggle to build new democratic ones was not helped by one party walking out and handing a walkover to the other so early in our post-independence history.

Our new buzzword should be transparency. While we have a Code of Conduct for Ministers that requires them to disclose their income, assets and liabilities to the PM upon taking up office – this does not go far enough. I propose that we need to  move to full annual public disclosure including the property and incomes of spouses and dependents. The same rules should be extended to senior civil servants, judges and senior management and directors of GLCs. This would only bring us in line with what public servants are required to do in democratic countries. For instance in the US, the Ethics Act requires annual disclosure of financial information by the president, vice president, members of  Congress, federal judges, presidential appointees, and other officials and employees earning at or above a specified pay-scale or with policymaking responsibilities. There are similar laws in Canada and many European countries while the UK has announced plans to make public ministers’ tax returns.

* http://dealbook.nytimes.com/2012/04/04/to-do-deals-nothing-helps-like-friends-in-high-places/

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam