Corruption: Dissolving the Locks

Corruption is easy to condemn and hard to understand. In recent months, anti-corruption investigations and reforms have appeared in headlines from China to the United States, often framed as matters of financial stability, market confidence, and state credibility. Public discourse usually treats corruption as economically destructive. Indeed, corruption and bribery are condemned as sins, as Proverbs 29:4 declares: “By justice a king gives a country stability, but those who are greedy for bribes tear it down.” However, the film Schindler’s List tells a different story about a briber in the 1940s.

Oskar Schindler, a member of the Nazi Party, was neither born a savior nor moral saint. He was originally a profit-seeking businessman who loved extravagant living. At first, he bribed Nazi officers only to secure cheap Jewish labor. But in the end, he spent all his fortune on bribes, saving more than 1,000 Jewish lives, illuminating a rare light of humanity in that dark age.

Oskar Schindler (second from right) with Jewish people he rescued. Munich, Germany, May-June 1946.

Bribery is a flower of evil, but in Schindler’s garden, it bore fruit of kindness. This was because the soil itself was evil. Might similar situations exist when we discuss the relationship between corruption and the economy?

Two explanations have long existed on corruption’s economic effects: sand the wheels and grease the wheels theories. The former represents the conventional conclusion and long-term consensus, where corruption slows and damages the economy by increasing costs and inefficiency. Meanwhile, the latter applies only to specific contexts or transitional stages, where corruption helps bypass inefficient rules, allowing economic activity to move faster. This article proposes a third explanation: dissolve the locks. When public authority or ideology itself opposes the market, corruption may act as a corrosive agent against the shackles of power, prying open a fragile passage for market survival.

Sand the Wheels

OpenAI, AI-generated image of rusted gears, generated by ChatGPT, May 21, 2026.

In standard economic theory, corruption is seen as harmful because it slows down and distorts economic activity.

First, corruption increases the cost of doing business. Instead of competing through efficiency or innovation, firms may need to pay bribes simply to operate. In this sense, corruption acts like an informal tax, raising uncertainty and discouraging productive activity. Empirical evidence supports this: a peer-reviewed quantitative study in Uganda conducted by Fisman and Svensson, published in the Journal of Development Economics revealed that even a 1% increase in bribery resulted in reduced firm growth by 3%.

Corruption also discourages long-term investment. When rules can be bent through personal payments rather than enforced consistently, firms face uncertainty about property rights and future returns. As a result, they are less willing to invest in capital, research, or expansion. Cross-country studies have consistently found that higher levels of corruption are associated with lower investment and slower economic growth.

Grease the Wheels?

Yet, debate never ceased on whether corruption can serve as a lubricant under certain circumstances.

In systems where bureaucracy is slow, rigid, or inefficient, bribery can function as a shortcut. Firms may use informal payments to speed up approvals, bypass unnecessary regulations, or avoid costly delays. In this sense, corruption can seem to “grease the wheels,” allowing economic activity to move forward when formal institutions fail to do so.

This idea is intuitively appealing, especially in environments where rules are excessive or poorly enforced. In such cases, corruption may not create inefficiency but help firms navigate around it.

However, this argument faces a critical problem. If officials benefit from bribes, they may have incentives to maintain, or even create, inefficiency in order to extract more payments. What begins as a shortcut can quickly become a system of repeated extortion. Evidence suggests that firms that pay bribes do not necessarily receive faster service but are often asked to pay again. For instance, firms that are asked for bribes take approximately 1.5 times longer to obtain construction permits and operating licences than firms that do not pay.

Some have also argued that corruption may encourage innovation by allowing firms to bypass restrictive rules and introduce new products more quickly. But this comes at a cost. When success depends on connections rather than competition, it distorts incentives and undermines fair market dynamics. As a result, what appears to be “grease” in the short term may ultimately produce even more friction in the long run.

What Have We Overlooked?

From existing literature, corruption’s positive effects are short-term and exceptional; its negative effects are long-term and general. As Méon and Sekkat (2005) noted, corruption in poorly governed countries may not always “grease the wheels,” but in well-governed countries it significantly “sands the wheels.” The economic harm of corruption remains inevitable.

Yet current discussions rest on two assumptions:

I, the market is a “complete wheel.” From the word wheels we can infer that the market is in motion, including the main mechanism for allocating resources and organizing production, only needing to overcome friction.

II, power is a necessary evil—the “axels of the wheels.” Here, power refers to the authority to create rules and enforce orders. Its legitimacy comes from the need to establish and maintain social order. Just as a wheel can’t turn without its axis, although power brings costs, reduces efficiency, and hinders innovation, it is required for growth and wealth creation and does not contradict with market economy.

Yet, these assumptions neglect another possibility: What if the market is not a flourishing tree in fertile soil, nor even a cactus surviving in the desert, but a fragile seedling barely sprouting? What if power in the economy is not a “necessary evil” but evil itself? What if it’s not the axle that supports the wheel, but the weight that crushes it—or the lock that prevents it from turning at all?

Power: Night-watchman or Jailer?

In the ancient world, power never arose from the need for public service, but as a product of survival of the fittest. Hunting evolved into herding when people realized the latter yielded more output from the same land. Violence evolved into power; plunder into taxation, because the latter produced more stable and long-term returns.

Power serving the public is only a feature of modern constitutional states. Over history, power served monarchs, tyrants, and ideological indoctrination. Its stance toward markets depended on whom it served.

When serving monarchs or tyrants, economic growth and wealth creation were often welcomed. Yet rulers’ understanding of wealth was neither comprehensive nor profound. Their biases shaped attitudes toward commerce. Under Louis XIV in France and Elizabeth I in England, royal power emphasized exports and surpluses, facilitating mercantilism. Meanwhile, the Ming and Qing dynasties in China pursued isolationist policies, almost suffocating all international trade.

When power served ideology, its relationship with markets could be even more hostile. Most early religions opposed profit-seeking, since greed was sin; opposed competition, fearing it would destabilize order; and opposed financial markets, as interest was unearned. One of modernity’s most prominent ideology—communism—explicitly aimed to abolish private property and markets altogether.

For those accustomed to market economies, one harsh reality is often overlooked: in other times and places, power was not Lassalle’s minimalist “night-watchman,” but the prison guard patrolling the towers of Berlin Wall; not the guardian of property and trading rights, but their jailer and strangler.

OpenAI, AI-generated political comic illustration of the Berlin Wall, generated by ChatGPT, May 21, 2026.

Corruption: The Traitor Within the Power System

Under a Limited Access Order, power is meant to embody the ruler’s will. In practice, however, it relies on a bureaucratic apparatus, creating a principal–agent relationship. Since agents pursue self-interest, corruption arises, and rulers sometimes tolerate or even acquiesce in it to keep the system functioning.

In Schindler’s story, the Nazi officers who accepted his bribes were certainly parasites of the system, unqualified bureaucrats. Yet without such corruption, Schindler could not have saved Jewish lives.

The same occurs in economic life. In Chinese history, salt was monopolized by the state, and free markets were prohibited. This made salt so expensive that the poor could not afford it, but illegal salt trading increased supply and improved welfare, with bribery of officials being unavoidable. Similarly, the Communist Party of Vietnam once eliminated the market economy. When it later tried to revive it, numerous prohibitive rules remained, and firms frequently bribed officials to bypass them.

When markets are banned or barely emerging from ideological shackles, the relationship between power, corruption, and markets differs from that in mature societies. Corruption is, of course, a traitor to power, but not necessarily the enemy of the market: it may instead be a co-conspirator in the market’s jailbreak. Here, corruption is no longer the grease nor the sand between moving parts, but acid dissolving the lock to make the wheel turn.

Conclusion

Accustomed to photosynthesis, we see fungi only as symbols of decay. Yet underground, fungi are vital producers of amino acids.

Corruption is a corrosive agent: it corrodes society, and it corrodes power. If it can yield positive economic results, it is only when power is not the economy’s foundation, but its chains.

Is corruption always the problem, or can it sometimes reveal a deeper one?

Writer: Shirley Ma

Editor: Jaycee Zhou