Fighting Corruption: Thorns and Chances. Contributions to the Debate #2

contribution by David Marcos

Developmental corruption: the flip side of the coin

The topic of corruption seems quite straight forward, corruption is evil and thus it has to be eradicated. However, misconceptions make strange bed partners. Fight to corruption has been advocated by both proponents on the left, seeing in it one more of the sources of elite control, and on the right throught the so called “Good Governance Agenda”, a roadmap to introduce the “good” workings of capitalist governance to developing countries.

Much of the confusion stems from the oversimplification of what corruption is and the lack of frameworks of analysis that can place corruption within a wider process of development. Clearly, not all corruption is the same. We can look for example at its scale, from the police officer taking bribes to the politician receiving kickbacks, there is clearly high level and low level corruption. But more interestingly we could make a difference between developmental and nondevelopmental corruption. The fact that corruption can aid development efforts is not new, we had for example the theory of the “roving bandit” as a characterization of non-developmental corruption, but these ideas still scare many. However, if we look for one minute to the facts of late development, most countries that have successfully graduated as industrial countries, such as China or South Korea are classified as very corrupt. Other countries however, such as Pakistan or Nigeria, are promptly used as examples of countries gripped to underdevelopment by their high levels of corruption. So, how to make sense of these stylized facts?

First of all we should get rid of simplistic terms such as “good” or “bad”. Traditionally corruption has been seen as a “zero sum game”. Money changes of hands but it is neither created or destroyed in the process of corruption, so a first intuitive way of characterizing corruption would be by looking at the end use of corruption funds. For example, a police officer in a developing country that takes money from car drivers on bogus charges of ill driving. The police officer clearly comes from a much lower social class than the average owner of a car in a poor nation, thus if he was to use this money to pay for her child school fees corruption could be having a redistributive and growth enhancing value. Neoliberal approaches fought this view by bringing in the concept of the “net loss”, the resources spent in acquiring this money, by for example the police officer not doing his job while he is chasing drivers, would offset the net benefits of corruption. However, let’s look at another example. South Korean development was based on a highly corrupt capitalist regime in which the authorities kept a tight control over licences and even ownership of means of production. Failing to provide the authorities with the adequate kick backs resulted in loss of property. However, the ability to pay those bribes was tied up to the efficiency of those industries, therefore a virtuous circle was found in which firms will strive to make good use of learning licenses to be able to be in business. This goes frontally against neoclassical theory that advocates for secure (private) property rights as an ex ante condition for development. However, if we recall the “Brenner debate”, we could argue that capitalism itself was born out of weak property rights. English capitalism was able to flourish thanks to a weak crown that could not avoid the enclosure (and therefore theft) of common lands.

Yet neoliberals and anti-imperialist will call again the cases of the Pakistanis and Nigeria as counter examples. To make sense of this we have to introduce another concept against which measuring corruption. This is the so called “political settlement” of each particular country. Here we have now an element that could be use to explain the failure or success of certain policies on the face of corruption. Taking the example of Pakistan, the country implemented the same set of policies of Korea, but they failed. This is explain because while Korea´s political settlement was characterized by a centralized political class, a uniform society and a fragmented economic elite, Pakistan was a fragmented society with a weak government and a relatively strong economic class. Under the later circumstances companies were able to retain learning grants and other privileges without having to deliver. Thus, the application of this same policies would have catastrophic results in a country such as Congo but it is working well for China. This is so because evidently, Congo and China are not the same country, a point missed in many “one size fits all” analysis of corruption. 

Apart from sometimes being economically efficient and even progressive, corruption plays another important role particularly important in developing countries: It keeps stability. Stability here could sound quite reactionary, but the opposite of it is sometimes exemplified by what we can see these days in Afghanistan. Senseless killing and widespread armed violence is not really progressive, even if we could dedicate another debate to this. The fact is that all societies have resorts to keep at bay their most “dangerous” elements by “bribing” them somehow. In advanced economies this takes the form of a welfare state and some type of legally established benefits for certain groups. In developing countries politics work very differently. There are no enough resources to provide for everyone in a law abiding manner, so the politics take the form in these countries of clientelism. Clientelism is a way of using informal transactions to maintain stability by buying out dangerous elements from creating trouble. Trying to fight this type of corruption can be very dangerous as we have seen in Afghanistan. Disrupting these informal alliances without putting in place some at least equally good mechanism does not work, on the contrary, it normally leads to conflicts.

In my opinion, the so called fight of corruption in developing countries is just another good intentioned but ill conceived western strategy at best, and a way of disrupting development processes in the South at worst. I don't mean by this that corruption should not be fought. But we have first to analyze with what type of corruption we are dealing and what measures are realistic. Perhaps doing nothing is the best call. To fight corruption just for the sake of it makes no sense.