The slow rise of transparency in China

FINANCE AND ECONOMICS: “Cultural revolution: New accounting rules have replaced the Little Red Book as China’s guide to self-improvement. Can the state handle the truth?” Economist, 13 January 2007, p. 63.

ARTICLE: “Blackmailing by Journalists In China Seen As ‘Frequent,’” by Edward Cody, Washington Post, 25 January 2007, p. A1.

Chinese businesses have long kept multiple books: one each for the government, the record, for foreigners, and for actually keeping track of what’s really going on. Naturally, these competing truths are never allowed to bump into one another.

Now China’s leadership proposes that one standard be used, that of the International Financial Reporting Standards. Certain exceptions are allowed (big surprise), and adherence is “voluntary,” a phrase with too many meanings in Chinese to count.

Still, this is a big deal in a country where, as the article’s opening para notes, accountants were once considered so dangerous that they were all summarily rounded up and sent to re-education camps. Now, there is such a shortage of accountants in China that acquiring them has become a mania in business circles.

In the end, though, accountants are just one edge of the transparency sword. The other is a free press. You can’t send in the bean counters in many instances until the lies are revealed, and that’s the job of journalists in any reasonably free system. In China, that function remains both promising (exposure of corruption is encouraged by the Party, so long as the Party itself remains untouched, save those dicey moments when those on top want to do some house-cleaning, usually defined in generational terms) and depressing (the same corruption so widespread in the Party is none too surprising replicated throughout the press, where bribe-taking to avoid muckraking is commonplace).

Following my usual analytic practice, the question is, how far back in U.S. history do we travel to find similar dynamics? As often is the case, one’s mind turns to the period at the turn of the last century, or the age of high corruption segueing to Progressivism (basically corresponding to the adult life/career of Teddy Roosevelt).

A long slow journey, no doubt. But once begun, very hard to undo.