Sunday, June 28, 2009

On Corruption

I recently shared our Fearsome Comrade's worries about the intersection of government and business in America. The Skeptical Bureaucrat shares a related concern, that of the incestuous world of "formers" consulting, in which former politicians become consultants advising businesses how best to deal with politicians. He recalls a conversation with a Turkish official:
He furiously resented a World Bank effort that was going on at that time to combat public corruption, which the Bank saw as an impediment to economic development. The Turk maintained that in the Third World public corruption is more or less benign, since it consists of small amounts of graft broadly distributed throughout society all the way down to the level of traffic cops, whereas the U.S. style of corruption consists of huge amounts of money passed out to a very few people at the top of the government-business nexus. I had no good answer to him then, and I haven't thought of one since.
I have to say, I had never, ever thought of it that way. And it's pretty strange, when you think about it, that Americans would be outraged at a traffic cop demanding a $20 bribe, but are relatively unruffled by millions of dollars in payola at the state and federal levels.


FSN9 said...

I've heard similar things said about corruption in China. It's the only thing that actually allows the system to work. If you actually had to reply upon the bureaucrats to do their jobs, you'd never get anything done. Only corruption allows you to get anything done. Have you ever had any dealings with the INS? (Now laughably called US Citizenship and Immigration Service USCIP as if that will make them sound less incompetent or something.) There were times when I really wished that I could grease a palm or two, just to get some minor functionary to look at our damn file. Just look at it ... not give us any special treatment ... just do their damn job in an expeditious manner.

Fearsome Comrade said...

Graft of any kind is a drag on the economy, since it entails payment without production. However, it also has the effect of undermining security--a free economy needs enforced property rights and equality under law to thrive.

Bi-Coloured-Python-Rock-Snake said...

It's definitely a drag in both cases, but the Turk's point is that the West likes to browbeat the developing world about their graft, when ours could well be more damaging.

To me the biggest danger of Third-world graft is that it makes all sorts of civil service jobs potentially very lucrative, and is a disincentive to productive businesses.

So it's not a good thing, but compare that effect to those of, say, American agribusiness, whose preferential treatment in the form of ethanol subsidies had led to worldwide spikes in food prices. And that's just one industry.

I can only work from anecdote, since I'm no expert, so it's futile to try to prove which form of graft is more economically damaging. But I think it's clear that we should probably step off the high horse when talking about corruption in other countries. Far more effective than lectures, anyway, would be cutting off the most unaccountable foreign aid that feeds the very worst corruption in the poorest countries.

Fearsome Comrade said...

Which form of corruption is worse can be seen in the vitality of the respective economies. Who wins is a no-brainer. If the US economy got as bad as Turkey's or Argentina's, there'd be an armed revolt.