Moral Economy of Corruption - Guanxi Networks in China's Courts

Abstract

In this article, I offer an economic analysis of the characteristics that are associated with corruption when it is facilitated through social exchange or “guanxi” as it is called in China. To that end, I challenge the framework applied in classic social exchange theories and contend that social exchange shall be distinguished from market exchange based on whether the intention to exchange is concealed and not on the exchanging parties’ subjective reflections on the nature and outlook of their exchange relationship. I also identify that corruption participants rely on a self-executable operating mechanism to facilitate negotiation and enforcement of exchange terms instead of the informal reputational system that is used in ordinary social exchange. In addition, I explain how the involvement of professional brokers democratizes guanxi-based corruption and extends the otherwise privileged exchange opportunities to those beyond the guanxi networks with lowered cost.

Keywords: guanxi, gift, social exchange, corruption, bribery, moral economy, gift economy, judicial corruption, brokers, lawyer, transactional costs, social networks