Regular readers will know that China has been going after billionaires hard. So much so, in fact, that the number of billionaires is dropping in China.
Back after the financial collapse executives did very very well. They had been lying repeatedly, had engaged in wide-scale fraud and to the extent that there was any punishment it was fines on the companies involved.
Not only were the fines less than the companies had made, but even in the rare case that the company went bankrupt, the executives involved still got to keep all the money they had made. Dick Fuld, CEO of Lehman Brothers wound up with a net worth of over 500 million — after his company was bankrupt.
The saying at the time when bad deals were made was IBGYBG. “I”ll be gone, you’ll be gone.”
So if you want to dis-incentivize bad executive behaviour, you have to really go after the execs. Here’s an example of China doing it the right way:
Xu Jiayin (许家印), founder of China Evergrande Group and former China’s richest man, was sentenced to life in prison by a Shenzhen court today.
He was convicted of fundraising fraud, illegal deposit-taking, securities fraud and embezzlement.
Evergrande Group was fined RMB… pic.twitter.com/wSnbzJaSER
— Tong Bingxue 仝冰雪 (@tongbingxue) August 20, 2026
Notice that all his personal assets were seized. I’d also track down any family member he made rich and take that money away.
The only way to restrain capitalists is real prison sentences or execution (Vietnam is fond of executing corrupt execs) and taking their money, and thus power, away. The idea of corporations being used to shield decision makers and beneficiaries of illegal or evil behaviour from liability has to go away. Corporate personhood has to end, as well, or they have to be given the disadvantages of personhood. “Committed a serious crime? OK, the corporation is dissolved.”
Psychologically the most important thing here is for government officials to not identify with business leaders. Chinese CCP bureaucrats do not think of themselves as part of the same class as executives at companies. Organizationally there can be no revolving door between business and government. You can move from biz to government, but not vice versa. There can be no route for payoffs, including the old “I”ll hire or give your wife or kid a sweetheart deal.”
For most of Western history bureaucrats – aka. civil servants, were considered morally superior to businessmen, because they were working for the common good and by doing so earning less than they could if they were in the private sector. Business was what you did if you were morally inferior: a person who was concerned about yourself and not others.
That ethos produced some very competent and high powered government bureaucracies which were well respected, especially when combined with civil service examinations.
Government and business are two different things. There has to be some understanding between them, since government must regulate business, but government’s job is to make the people better off, not to make businesses richer.
When government operates this way it can control private enterprise so that markets work to the benefit of society. When it doesn’t, usually because it’s been corrupted by capitalists, it enables monopolies and oligopolies and exploitative practices and when there are crises, it bails out the rich, not the people.
All of this is well understood, really, it’s just that there’s a lot of money to pay for scummy intellectuals and journalists and experts to obscure the fact and pretend that there’s a trickle down effect or that what’s good for rich is good for society. (Hello Milton Friedman, you corrupt hack.)
Markets are a lot like nuclear energy. Great if you do it right, but if you don’t, it’ll blow up in your face, and the first rule is that the more money a capitalist has the more harshly they should be treated if they break the law or hurt the public. In China, that’s how it is. In the West, the rich skate and the poor go to prison for life or have their homes and savings and livelihood stolen.
What I write here is for the benefit of everyone, but alas, I live in capitalism and I, and the site, take money to keep running. If you value the writing here and can, please subscribe or donate.
spud
this is actually a true strong powerful statement,
“If You Want Companies To Behave Well You Have To Punish Decision Makers”
its why Keen, Hudson, Mitchell and a few others of that caliber, name the names of the ones who did this to us, and why.
if we let them off of the hook, and believe their myths and lies. you can never reform.
meet the new boss, same as the old boss will prevail.
Feral Finster
Boeing is the poster child for this. Boeing management demanded “profits above all!” and were rewarded handsomely for delivering. As a practical matter, this meant that cost-cutting and production schedules were prioritized over mundane stuff like QC.
Thing with commercial aircraft is – they’re hella complicated, and poor QC leads to things like airplanes that fall out of the sky.
But, since management paid no price, not financially, and certainly not in prison like the poors, they just kept on doing what they’re doing, with some MBA-bafflegab about a “culture of quality” thrown on for PR purposes.
vmsmith
Incentives, man . . . it’s all about the incentives, both positive and negative.
“On the Folly of Rewarding A, While Hoping for B,” by Stephen Kerr
https://www.jstor.org/stable/4165235
Feral Finster
@vmsmith:
For some reason, Ian doesn’t like incentives, but as a practical matter, yes, you generally get the behavior that you reward.
spud
no one should be surprised at the outcomes of boeing, and many many others. after all, they committed no crimes, and it was perfectly legal.
the job of the government is to govern, not let the markets make decisions that affect us all.
if you really want to get to the core of this, just ask Keen, Hudson, or mitchell types, they name the names to who did this to us, and why.
if you believe we can stop this parasitical behavior, you have to educate the american people, or the west really, who’s policies created this mess, and why we have to reverse them.
other wise, in most cases, boeings management types will never face a day of reckoning.
till american politicians have to face the consequences for their follies, this will continue unabated.
———-
Bill Clinton’s administration favored a strategy of deregulation and market autonomy, which included accepting the financial markets’ influence over economic policy, often prioritizing their stability over direct government intervention. This approach contributed to the economic conditions leading up to the financial crisis in the following decade.
Dissent William J. Clinton Presidential Library and Museum
Economic Strategy Under Bill Clinton
Deregulation and Market Autonomy
During Bill Clinton’s presidency, the administration adopted a strategy that emphasized deregulation and market autonomy. This approach prioritized the stability of financial markets, often at the expense of direct government intervention in the economy. Key aspects of this strategy included:
Acceptance of Financial Market Influence: Clinton’s administration accepted the influence of financial markets over economic policy, which shaped many of its decisions.
Focus on Market Stability: The administration often prioritized maintaining stability in financial markets, which led to a reluctance to impose strict regulations.
Consequences of the Approach
This strategy had significant implications for the economy:
Contributed to Economic Conditions: The deregulation policies implemented during Clinton’s presidency are viewed as contributing factors to the economic conditions that led to the financial crisis in the following decade.
Long-term Impact: The reliance on market forces without sufficient regulatory oversight created vulnerabilities that would later manifest in economic instability.
In summary, Clinton’s administration favored a hands-off approach to economic management, allowing the market to dictate outcomes, which ultimately had lasting effects on the U.S. economy.
Dissent iatp.org
bruce wilder
The rules of a well-functioning market are fairly intuitive: good information, guard against monopoly dominance, etc.
There are very few actual markets. The dominant forms of economic business organization are complex networks of bureaucracies. Things get rather more complicated and I worry that common intuitions and suspicions are blunted.
In these networks, pathogenic cultures can thrive and envelop politicians and professionals pretty easily, creating incentive structures to husband bad behavior.
Just as an example, I follow an obnoxious new home inspector from the Phoenix area where there’s a lot of new construction by major builders. The notional rules of the game are set by state law, construction codes assembled by national non-profits and building product manufacturers specifying how their products should be installed. He’s a gadfly and an unremitting critic of poor workmanship, who will hammer on any systematic issue, no matter how seemingly minor individual instances may be. He gets a lot of pushback from people who don’t see why anyone complains about faulty work on houses selling for many hundreds of thousands of dollars. It is quite an entertaining social media spectacle. But, it does raise the question of how better “market” performance can induced. Can political reform investigate? Change methods? Change culture among the armies of realtors and other professionals that support the industry.
I don’t know, but I suspect that some systematic issues are involved — the suitability of balloon-frame construction in the desert, for example, or the recruitment, training and supervision of trades through a shady system of subcontracting. (Not really “free market” systems.)
cc
Other common routes for payoffs after office are rewarding the corrupt politicians with lucrative board of directorships, corporate-paid speaking fees, book deals, TV deals (see Obama, Blair, etc. Probably the same for Canadian politicians. Has Harper become wealthy since leaving office? Is Trudeau raking it in? Would our journalists even ask these questions?)
And in the US, presidential pardons, including pre-emptive ones, seem to allow their elites to commit crimes of corruption with impunity.
The structural incentives in the West are for politicians to serve corporations and the wealthy 1% after getting elected into office – not the people, not the voters but the wealthy donors (both campaign donors and post-time-in-office donors). In other words, plutocracy.
The PRC, on the other hand, has as the very first part of the country’s name: “The People’s”. The Western plutocracy, of course, can’t allow that example to be seen by us in a good light, so we are constantly bombarded with anti-China propaganda. (Last night, CBC News’ The National used a piece ostensibly about the Shein IPO to repeat the evidence-free claims they’re fed of “Uighur slave labour”, cotton from Xinjiang, “human rights abuses”, etc. So on a day in which the big news was about Canada standing up to the US attack on Canadian trade, our state news agency accompanied that with a piece to try to discourage us from trade with China. Diversify trade – but not with China. Convenient timing. Are they trying to keep Canada dependent on the US?)
> “I’d also track down any family member he made rich and take that money away.”
Based on the comments we read from KT Chong here a few days ago, the CPC did do exactly that:
https://www.ianwelsh.net/another-big-profit-opportunity-for-elites-is-on-the-way-bonds-carry-trade/#comment-171673
https://www.ianwelsh.net/another-big-profit-opportunity-for-elites-is-on-the-way-bonds-carry-trade/#comment-171674
Summarizing those comments of KT Chong, the two sons, who apparently both have Canadian passports, are in prison for 18 years each.
The wife and two daughters-in-law fled to London, but all 3 are on wanted lists and the UK honoured the Hong Kong court asset freeze, so the wife apparently only has access to about £20,000 ($26,000) per month – so over $300k CAD/year, still lots but not millions.
Dan Kelly
China has no problem with billionaires, multi multi millionaires or massive individual wealth.
If they did they would also go after Zhong Shanshan but since his surreal wealth is based on tangible goods…namely bottled water (lmao) and pharmaceuticals (not an ‘lol’ per se but these drugs aren’t exactly packaged ancient chinese wisdom – not that that is desirable either)…since this massive stupid money ‘wealth’ helps China ‘grow’ as opposed to ‘wealth’ built on debt bubbles like Evergrande.
So if we believe that massive wealth inequality itself is the problem then China isn’t a long-term solution at all.
I should say here that I personally don’t believe that everyone should be financially smashed down to size by the state so that we are all on equal financial footing.
And what China is doing is much better than what ‘the west’ or the US allows.
They are basically building up the way the US and others did before them as Ian has said repeatedly and as Ian has also said repeatedly they ultimately are on the same long-term trajectory with absolutely no sign of stopping or adjusting…
And this doesn’t bode well for the environment nor for ‘the little guy.’
So China is a state-capitalist nightmare that only currently looks good in direct contrast to the US et al.
But the US et al set such a low low low bar that this ‘looking good’ doesn’t really count for much in the whole grand scheme of things.
Ian Welsh
The fact that the absolute number of billionaires in China is decreasing suggests that the CPC does, in fact, have a problem with billionaires.
Egoculexegonos
> [..] as a practical matter, yes, you generally get the behavior that you reward.
Yes, generally, except when behaviour is craftily avoided or rigged in order to get the reward. The typical example is the infestation of rats in Hanoi at the beginning of the 20th century. https://en.wikipedia.org/wiki/Great_Hanoi_Rat_Massacre
mago
There ain’t no justice anywhere.
spud
they were given their freedom from 1993 on wards, we should not be surprised at the outcome. free markets like capitalism, work as advertised.
——
The free market can lead to monopolies and chaos due to the lack of regulation, which allows companies to dominate and manipulate the market. This occurs when competition is stifled, resulting in fewer choices for consumers and potential market failures.
Wikipedia economicsfromthetopdown.com
Understanding Free Market Dynamics
The Nature of Free Markets
A free market is characterized by minimal government intervention, where prices are determined by supply and demand. While this system promotes competition and innovation, it can also lead to significant issues.
Potential Issues in Free Markets
Monopolies: Without regulation, companies can dominate the market, leading to monopolies. This reduces competition and can result in higher prices and fewer choices for consumers.
Market Chaos: The lack of oversight can create instability. Companies may engage in practices that manipulate the market, leading to unpredictable economic conditions.
Consequences of Unregulated Markets
Issue Description
Monopolies Dominance by a single company reduces competition and consumer options.
Market Failures Inefficiencies arise when the market cannot allocate resources effectively.
Consumer Impact Higher prices and limited choices negatively affect consumers.
In summary, while free markets can foster economic growth, they also risk leading to monopolies and chaos without appropriate regulations to ensure fair competition and protect consumer interests.
Wikipedia
StewartM
I’m in favor of limiting the liability for corporations. The CEO and board are the paid stooges of the top stockholders. To really get better behavior, make the top 10 % or 20 % of top stockholders (those who in practice have the most control over the CEO) legally liable for corporate wrongdoing. And place a time limitation of say 20 years so that dumping their stock afterwards doesn’t protect them.
If the top stockholders start quaking in their boots for the consequences of corporate malfeasance, then they will make damn sure that their hired CEOs don’t cut corners on safety and the environment or engage in lawbreaking.
Jan Wiklund
The Chinese confucian system isn’t foolproof either. As Xi himself admitted, if there is no check upon CCP behaviour it will degenerate like every Chinese system in history has done, sooner or later. See https://www.bjreview.com/Opinion/Governance/202606/t20260629_800440660.html
The traditional Chinese check was the peasant rebellion. But that was an incredibly wasteful check, with millions of deaths.
The traditional European check has been the popular movement – peaceful or violent according to circumstances. It has been considerably less wasteful of lives. It should be high time to resurrect it again. Where are the trade unions, for example?
Arnran
I have always felt that given personhood, then they should pay by personal income tax rules rather then their corporate income tax rules.
spud
StewartM
I’m in favor of limiting the liability for corporations.
—-
limited liability and qualified immunity are get out of jail free cards , and no one should get them, except as the constitution says, only congress.
only humans are citizens, and we should can all corporations, and go to co-ops, and no stock or bond markets.
the federal government should have a central bank, where co-ops can go to for R&D, or startup money.
america is so burden by parasites almost untouchable by law, that the enemies of the empire could just sit back and enjoy the implosion, if the empire was not armed to the teeth.
StewartM
Spud
I’m in favor of co-ops too; but that doesn’t really fix all the problems. There is a place for customers having a say in the business (as in mutual companies) and also communities. Sad to say, I’ve seen workers who would be fine with polluting some other community’s water or air or other natural resource; or screwing the customers with unsafe or substandard products.
Some of the latter can be “fixed” by markets, but markets are also very problematic, as long as we have some with no money (and thus no “votes” in the market) and also great inequality. Right now there is a horrible mismatch between what the market will create and provide, vs what people actually friggin’ NEED. This mismatch exists because our markets, to the extend they exist, are dominated by a relative handful of people who have most of the “votes” and therefore “vote” to do things that actually make the lives of everyone else worse, while normal people can’t get what they actually need because they don’t have enough “votes” (i.e. money). All the money being sunk into AI is a salient example.
I also think our entire business leadership class has to go. They have no experience actually creating anything; they’re all just money manipulators.
Ian Welsh
We can’t really use the energy cut off because oil goes from the West down to the US, then back up to the East. Our infrastructure is designed for integration, not for independence. That needs to change, but building pipelines and refineries is not fast.
We have been ruled by fundamentally stupid people for a long time now.
spud
i am sure there can be a few bad apples, but,
Cooperatives are designed to be democratically controlled, which helps prevent domination by just a few members. This structure promotes shared decision-making and equitable participation among all members.
geo.coop
Cooperative Structure
Cooperatives are specifically designed to prevent domination by a small number of members. This is achieved through their democratic control structure, which ensures that all members have a voice in decision-making processes.
Key Features of Cooperatives
Democratic Control: Each member typically has one vote, regardless of their investment level, promoting equality.
Shared Decision-Making: Decisions are made collectively, which encourages participation from all members.
Equitable Participation: Members are encouraged to engage actively, fostering a sense of ownership and responsibility.
Benefits of Cooperative Structure
Feature Description
Prevention of Domination Reduces the risk of power being concentrated in a few individuals.
Inclusivity Ensures that diverse perspectives are considered in decision-making.
Community Focus Aligns the cooperative’s goals with the interests of its members and the community.
This structure not only enhances fairness but also contributes to the overall stability and success of cooperatives, making them a viable alternative to traditional business models.
geo.coop
——-
now this is a sugar coated version of actually what entails the inner workings of a typical corporation.
Bad managers are prevalent in many corporations because management often lacks the courage to make necessary changes, such as firing ineffective leaders. This can lead to high employee turnover and decreased productivity, as good employees tend to leave due to poor management rather than the company itself.
hrmorning.com lakewood.edu
Reasons Bad Management Persists in Corporations
Lack of Courage in Leadership
Many organizations struggle to address poor management due to a lack of courage among higher-ups. This often results in ineffective leaders remaining in their positions, which can perpetuate a toxic work environment.
Fear of Legal Repercussions
Companies may hesitate to fire bad managers due to concerns about potential legal liabilities. This is particularly true if the manager belongs to a protected class, as organizations fear discrimination lawsuits.
Short-Term Focus on Results
Sometimes, management prioritizes short-term results over employee well-being. A bad manager might be delivering results that the company values, leading to a reluctance to make changes, even if their management style is driving good employees away.
Impact on Employees
High Turnover Rates
Good employees often leave due to poor management rather than dissatisfaction with the company itself. This can lead to high turnover rates, which are costly for organizations.
Decreased Productivity
Bad management can result in lower productivity levels. Employees may feel demotivated and undervalued, leading to a decline in their performance.
Employee Well-Being
The presence of a bad manager can significantly affect employee mental health and job satisfaction. Many employees report feeling burnt out or undervalued, which can further exacerbate turnover issues.
Addressing bad management is crucial for maintaining a healthy workplace. Organizations must recognize the long-term costs associated with retaining ineffective leaders and take proactive steps to foster a more supportive environment for their employees.
lakewood.edu askamanager.org
———
yea lets keep a system in tack, that rewards criminal behavior, shields the corrupt, and is opaque. and this one is sugar coated also. but you get the picture.
Limited liability protects company owners from being personally responsible for the company’s debts and obligations, which can be seen as a “get out of jail free card” in legal terms. This means that if a company faces legal issues, the personal assets of the owners are generally safe from claims against the company.
lawgazette.co.uk search.sunbiz.org
Understanding Limited Liability
Limited liability is a legal structure that protects company owners from being personally responsible for the company’s debts and obligations. This means that if a company encounters financial difficulties or legal issues, the personal assets of the owners are generally safeguarded from claims against the company.
Key Features of Limited Liability
Protection of Personal Assets: Owners are not personally liable for the company’s debts.
Encouragement of Business Ventures: It allows individuals to invest in businesses without risking personal financial ruin.
Legal Distinction: The company is treated as a separate legal entity from its owners.
“Get Out of Jail Free Card” Analogy
The term “get out of jail free card” is often used informally to describe limited liability. This analogy highlights how limited liability can provide a safety net for business owners, allowing them to avoid personal repercussions from the company’s legal troubles.
Implications of the Analogy
Legal Shield: Just as a “get out of jail free card” allows a player to escape penalties in a game, limited liability allows business owners to avoid personal liability.
Encouragement of Risk-Taking: This protection can encourage entrepreneurs to take risks and start new ventures, knowing their personal assets are protected.
In summary, limited liability serves as a protective measure for business owners, functioning similarly to a “get out of jail free card” in legal contexts.
blogs.duanemorris.com lawgazette.co.uk
bruce wilder
Separation of ownership from control in a public company financed with marketable equity was going to be my theme, to reel you folks back from the economics Dunning-Krueger abyss, but realized it was superfluous to requirements.
What Xi’s ruling party brings to the game is the political power to govern. With all your ignorant drivel about corporate limited liability and co-ops, no one proposed a remedy for the West that would marshal political power to govern by punishing malfeasance. You want to tinker. You greatly exaggerate your own competence to think about economics. And, you completely overlook the key missing elements: political power and will. Corruption has erased those in the West along with democracy and the rule of law. We see them rear up — somewhat late in the game, perhaps — in China, and we blink uncomprehending.
Scott Stiefel
One of my favorite jokes about corporate personhood is “I’ll believe corporations are people when the state of Texas executes one”.
Carborundum
The energy calculus could change pretty quickly, if the will is there. The recently proposed Northern Shield could be crashed to about a three year project, if we designated as a project of national interest and decided to accept the political wedge issue it would be turned into.
Personally, I’d up the scale so that it had the capacity to be expanded to meet Quebec’s needs as well, regardless of what their current political positioning is. I don’t think it makes a lot of sense to extend to include Atlantic needs, given that if we’re dealing with supply constraint there, the balloon has likely already gone up.