Thursday, June 22, 2006

The Politics of Fourth Grade: Kickbacks and Corruption

My wife is one of a group of mothers who volunteers at the school. Today they found themselves processing the results of a large donation to the library....

In many local communities the school and its relationships and experiences continue to govern subsequent adult relations. Taiwanese, especially in small towns, sometimes stay in or close to one place their whole lives. The mothers that my wife volunteers with all went to that elementary school together, and forty years later they still volunteer there together. I should add that this has not appeared to affect their acceptance of my wife and daughter; the community has had no trouble welcoming us and my daughter and wife both have a raft of friends. Everyone treats me very well too.

Like all small towns, rampant moral hypocrisy is the order of the day in Taiwanese communities. Last year a former school student who has neither wife nor kids of his own donated NT$100,000 to the school PTA. He has often given sums of money, and comes by to help take care of the school. How did the PTA react to this display of generosity? Well, it seems the money was tainted because the man in question was living in sin with a woman not his wife. The PTA thus balked at taking it. Our PTA is not actually a PTA, but a GTA -- frequently grandparents represent the family rather than parents, resulting in very enlightened discussions like the one above, all in Taiwanese because the oldsters speak no Mandarin, and all involving men because the oldsters don't take female opinions seriously. Everyone in my wife's generation was absolutely disgusted with the PTA's attitude, but in the end the PTA refused the cash, and it was handed over to the library, which has a separate donation route.

Let's test your auditing skills. Today the library got the books and the receipts. The receipts matched perfectly, a book with a cover price of $250 was indeed charged at $250 on the receipt, and the final sums all worked out. Naturally, my wife and one of her fellow volunteers immediately cried Foul! to each other. Clearly there had been kickbacks involved, and someone somewhere in the system was pocketing a portion of the donation.* They raised the issue with the principal but he seemed reluctant to intervene. After that, the group resolved that future donations would be handled by them alone.

I was reading a paper on guanxi networks, SMEs, and the China market today, and reflected on this incident in light of what the paper observed. In Taiwan guanxi networks between officials and favored companies handle all such transactions. One of the interesting clashes between Westerners and Chinese is over this issue. My Western self immediately cried Corruption!, as did the mothers at the library. Certainly whoever did it knew it was against the law and procedure. But on the other hand, such networks require feeding and watering to sustain them. Hence, in the West, where the concept of civil society governs relations between organizations and individuals, such feeding and watering -- exchanges of kickbacks -- is viewed as a violation of civic norms and is condemned. But in Confucian society, such guanxi -- relationship -- networks are seen more positively. In purchasing books for the school from a particular agent, a set of reciprocal favors have been done, and these require appropriate exchanges of gifts, that have to be skimmed off the transaction. Thus a major clash between scholars with Western ethical orientations and Confucian ethical orientations is over the ethical nature of guanxi relationships. Whereas Western scholars are likely to see them as the nexus of under-the-table dealing, scholars working out of Confucian Chinese frameworks are more likely to view the construction of guanxi as an ethically positive act. To a certain extent, the problem of "corruption" in Taiwan is actually a problem of clashing sociocultural readings of relations between individuals and organizations.

*How did the mothers know? Ok, Encyclopedia Brown, I know you can figure it out!

10 comments:

mark said...

This is a terrific post, but forgive me, I am no accountant, where was the graft?

Ed en Vadrouille said...

Excellent post on another very strange particularity of our environment.

I guess this is just part of the "offering culture" in which teacher get "lubricated" as well. I have been given most kind of food so far (can't say this was unpleasant), and been treated to dinner in some nice places by the few people i am helping :D

But i have as well seen teachers pocketing a scooter, a set of golf clubs, some holiday with a family...

So when does it become too much?

In the same fashion, i was amazed at the amount of people trying to borrow money from my "in-laws" as they are seen as kind of wealthy by the local community.
The worst is that most of the time it is a real pain to get back the money loaned, and it ends up equaling most of the time a gift of dizains of thousands of NT$.
Any experience with that Mickael?

I have to add that corruption is to be experienced nearly everywhere as you all know.
I recently had an american trade agent asking me a 0.5% kickback on a 30 000MT of steel deal, or have often been paying indian policemen to go though a roadcheck... i got to hate it when it truly equate to racket as in the policement situation.

Karl said...

Because the school is buying books wholesale, not at cover price?

Michael Turton said...

Karl is right. What's the first thing they say when you walk into a bookstore and say you're from a school?

"Oh, we give a 10% discount to school purchases."

Clearly the bookseller has a discount for school and bulk purchases, that's SOP. Assuming that there was only a 10% discount -- then somewhere in the chain, a buyer and seller have split $10,000. Or else the buyer was totally incompetent, and despite working for a school, didn't know that booksellers routinely give discounts to bulk purchases.

Don't think I buy the latter theory, though.

Michael

Scott Sommers said...

Michael, I'm not certain how much this says about "Western ethical orientations and Confucian ethical orientations". While the people in your wife's group may have never moved from the place they were born, this certainly does not reflect the norm in Taiwan society. In fact, the exodus from rural areas to find work is one of the dilemnas of contemporary Taiwan goverance. The life styles of the women involved in your wife's group may be common, but it is certainly not the statistical norm.

In addition, it may very well be that what you seeing as Guanxi is an adaptation to modern conditions that Taiwanese culture has no traditional way to handle. A sinilar example often cited as an eample of corruption and guanxi networks is the cash pay offs associated with elections. This is a relatively recent innovation in Taiwan voting patterns, developed by your friends and mine in the KMT during Martial Law. Vote buying became endemic not because it has historially occurred in Taiwan elections - since it has not - but because the cost of running campaigns during Martial Law became prohibitive and the KMT say this system as an effective way to control outcomes.

For more information on this, see Shelley Rigger, Politics in Taiwan: Voting for Democracy

Michael Turton said...

n addition, it may very well be that what you seeing as Guanxi is an adaptation to modern conditions that Taiwanese culture has no traditional way to handle.

That's pretty much what I'm saying, no?


Michael

Michael Turton said...

In fact, the exodus from rural areas to find work is one of the dilemnas of contemporary Taiwan goverance. The life styles of the women involved in your wife's group may be common, but it is certainly not the statistical norm.

I guess I implied that it was more common than it is. I'll rewrite it.

Michael

Scott Sommers said...

Scott Sommers wrote: In addition, it may very well be that what you seeing as Guanxi is an adaptation to modern conditions that Taiwanese culture has no traditional way to handle.

Michael Turton wrote: That's pretty much what I'm saying, no?

In your statement, "a major clash between scholars with Western ethical orientations and Confucian ethical orientations is over the ethical nature of guanxi relationships" the implication seems to be that there is something inherent about Confucian society that would make Guanxi acceptable in a way that it would not be to Western thinkers. I assume that the term 'Confucian society' must be referring to a society with some historical connection to past events. This society would share properties with others that also trace their roots back to this common history.

While the story itself is really cool, the interpretation of the events falls into a trap laid by the KMT. Explanations of everyday events are invariably derived from explanations a Taiwan society rooted in 'Chineseness' or "Confucianism and fail to take into account the way in which modern life was formed during KMT and Japanese colonialism.

Michael Turton said...

Explanations of everyday events are invariably derived from explanations a Taiwan society rooted in 'Chineseness' or "Confucianism and fail to take into account the way in which modern life was formed during KMT and Japanese colonialism.

Actually, I was referring to scholars with two differing ethical orientations. I wasn't making an argument from history. The perspectives are all modern.

Red A said...

The whole problem started with the Legalists in ancient China who created a socirty so horrible that Confucius rebelled at the thought of law being useful...instead it's all relationships and if the emperor faces South all will be well.

Cool phrases ill-remembered:

legalist philosphy was "make peacetime so hard, the people rejoice to go to war."

Confucian era saying: "Teach a peasant to read and he becomes a lawyer." (as in DO NOT teach them to read.)


BTW, my mom compared my 11 person company's fed ex rates with those of the State of California. Guess who got the better deal on freight?