[Market Economy Guide] Rule of Law and Corruption

The more government regulation there is, the worse corruption becomes

…Corruption is less likely under the rule of law, not the rule of man

Laozi, the founder of Chinese Taoist philosophy, believed that when human conduct is governed by artificial or contrived political or cultural systems, it becomes skewed in a particular direction or produces imbalances by following the flow of desire, thereby causing oppression and conflict. For this reason, he argued that the best politics is non-action government, in which society operates naturally and spontaneously according to human autonomy, like nature itself.

Laozi’s Thought and Unwritten Rules

Laozi’s non-action government does not mean doing nothing at all and simply leaving everything alone unconditionally. Rather, it means setting only minimal basic guidelines and entrusting the rest to human beings’ natural disposition. This is similar to the negative legal system of Anglo-American continental or maritime countries, in which everything is permitted except for unwritten rules or taboos, and it stands in contrast to rule by man.

Rule by man is governance through people, a norm for maintaining society by relying on the arbitrary judgment or morality of individual leaders. The term itself may somehow evoke an impression of being humane, tolerant, and natural. As a result, it can also create the prejudice that a country governed by man would be cleaner and more livable than one governed by law. In reality, however, corruption is more severe in countries where rule by man is applied more strongly than the rule of law. In short, there is leader risk. A country governed by man may have a benevolent and outstanding leader, but it may also produce a dictatorial ruler. That is because rule by man is not based on principles; it can become extremely arbitrary and autocratic depending on the ruler’s interests or convenience, the situation, or private emotions. This is why corruption occurs more frequently in societies governed by man than in societies governed by law.

The Laws of Shang Yang of Qin

Shang Yang, a Legalist thinker of the Qin dynasty, also pointed out the harmful effects of rule by man. He argued that if a monarch appoints officials based not on legal standards but on personal knowledge and ability, people will try to read the monarch’s mind and flatter him; as a result, government offices will lose all proper order and the state will fall into disorder. For this reason, Shang Yang opposed appointments being made through rule by man by the monarch rather than through rule by law.

Countries where government intervention and regulation are strong in the name of public interest and social stability also tend to suffer from severe corruption. Excessive regulation not only leads to regulatory evasion such as illegal transactions, illegal strikes, and bribery, but also suppresses individual freedom and brings about side effects such as riots and looting. Accordingly, countries widely regarded around the world as among the most corrupt all share one thing in common: strong government regulation and control, along with severe human rights abuses. Somalia, North Korea, Afghanistan, Sudan, Myanmar, Uzbekistan, Turkmenistan, Iraq, Venezuela, and Haiti are such countries.

China, too, where government control was long severe under the communist regime, has corruption so pervasive in society—bribery, embezzlement, blackmail, smuggling, and cronyism, among others—that it is almost beyond imagination. For example, according to an investigation by the Chinese authorities, not only did various military supplies that should have been in arsenals across China differ significantly from the figures in the ledgers, but it was also revealed that large numbers of tanks and armored vehicles had been dismantled and smuggled.

A Free Market Economy Increases Transparency

Of course, there is probably not a single country in the world entirely free of corruption. But the fact that corruption exists in every society must not make us insensitive to it. Corruption not only weakens government and causes it to lose the people’s trust, but also significantly damages a country’s international credibility, harming economic growth and even severely shaking the very survival of the state. However, efforts to eradicate corruption must not take the form of strengthening government intervention even further or pushing greater control and regulation. Just as running water is cleaner than water that is shut in, we should strive to protect individual freedom and rights under the rule of law rather than through regulation. We should note that it is no mere coincidence that the countries ranking highly on Transparency International’s Corruption Perceptions Index are those with well-developed free market economies under the rule of law.

■ Please remember

“Just as running water is cleaner than water that is shut in, we should strive to protect individual freedom and rights under the rule of law rather than through regulation. We should note that it is no mere coincidence that the countries ranking highly on Transparency International’s Corruption Perceptions Index are those with well-developed free market economies under the rule of law.”

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: [시장경제 길라잡이] 법치와 부패

Author: Sung-no Choi

Date: 2020-06-29

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=7&idx=22873