Why is this interesting? - The Micro-Kleptocracy Edition

On corruption, exploitation, and network effects

Colin here. Back in 2012, the New Yorker’s Evan Osnos wrote a very interesting piece about a train disaster that exposed the underside of China’s economic boom. It was an incredibly deep dive, using one event to unpack very complicated factors that led to a visible disaster, and one that caused ire among Chinese citizens.

The train crash that killed 40 people and injured 192 was a perfect storm of ambition, politics, corner cutting, and micro-level concessions that had huge second-and third-order effects. Among a multitude of causes was corruption, specifically the subcontracting of quality work down to people with little to no expertise:

One of the most common rackets was illegal subcontracting. A single contract could be divvied up and sold for kickbacks, then sold again and again, until it reached the bottom of a food chain of labor, where the workers were cheap and unskilled…In November, 2011, a former cook with no engineering experience was found to be building a high-speed railway bridge using a crew of unskilled migrant laborers who substituted crushed stones for cement in the foundation.

It was equal parts opportunism, gaming the system, and exploitation of a perceived human arbitrage opportunity.

I had the ethics and implications of this story in mind when I read another piece about on-demand delivery systems in France coming under fire for allowing this type of subcontracting to happen on their platforms.

How it works: people with a passport and legitimate credentials sign up with one of the services, but instead of delivering the meals themselves they subcontract it out to those who really need the work. The Times cited the specific example of a Parisian courier that “had outsourced the job illicitly to Mr. Arfaoui, who had been living in an abandoned car for a month after arriving from Tunisia. The migrant teenager said that he earned €17 that day for four hours of work.”

Why is this interesting?

We tend to think of kleptocracy and corruption in big tabloid headline terms. The Panama Papers. Russian Oligarchs playing hardball. African dictators looting budgets for personal gain. But both of the examples I outlined above feel like examples of what I’ve been thinking of as micro-kleptocracy. They are the types of regulatory and oversight breakdowns that happen in movements of great change or acceleration. When the system is moving faster than the rules, less than ethical behavior can flourish.

In the case of China, it was the ambitions, speed, and price tags involved, along with the symbolism of having incredible rail travel and progress. In the case of the on-demand couriers, it was a market that had gotten so saturated with players battling over ever-smaller margins, that the only people willing to do the work for the diminished pay are those that truly need it at all costs.

But these forms of system-gaming and micro-kleptocracy, when amplified by the network effects of the platforms, can add up to a large and destructive form of macro corruption with huge implications not just for economies, but also the lives of refugees or others in need. Human exploitation will always exist, but as these types of on-demand delivery services and utilities grow in influence in global markets around the world, the responsibility to monitor and safeguard grows. I fear this is just the beginning of a new problem. (NRB)

Number of the Day:

$750 million. Per Time: “…the annual operating cost of the Pentagon’s Global Positioning System, according to a new Congressional Research Service report. GPS is a constellation of 24 satellites that now can tell everyone where he or she is in the world (the initial constellation cost $12 billion to put into orbit). The operating cost works out to just over $2 million a day. Quite a bargain when you think about it.” Image below via GPS.gov. (NRB)

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Thanks for reading,

Noah (NRB) & Colin (CJN)