More on corruption and development (AR and MR speak)

Here is a conjecture: corruption is a way for many economists and policymakers to talk about bad political outcomes without talking about politics. As long as the discussion is not about politics, there can always be a simple, non-political solution, often designed and operated by some impartial clever politicians, advisers or economists.

That is Jim Robinson and Daron Acemoglu commenting on the British fetish for anti-corruption in other countries.

My take, last week, is here. Tyler Cowen jumps in as well:

I see a strong correlation between high levels of per capita income and low corruption.  (I don’t worry about the lack of correlation with growth rates because, for one thing, poor countries, even many corrupt ones, may grow more rapidly for reasons related to the Solow model.)  The causality here is hard to sort out, but there is plenty of micro evidence that corruption harms prosperity; it’s not just an aesthetic taste of wealthy people to limit corruption, the way they might buy nice interior drapes.

Furthermore, the correct corruption/poverty model may have multiple equilibria, depending on expectations.  In that setting, making your country “look clean” may improve outcomes by shifting the economy up to better equilibria, even if lower corruption isn’t a direct cause of greater prosperity.

Fair points. We all agree, however, that corruption does not belong in the same sentence as protecting property rights or stopping civil war.

i would still argue, moreover, that if outsiders want to promote prosperity, or get out of a bad equilibria, far better to talk about term limits and strengthening political parties and parliaments. People in poor countries hate corruption too, and will eventually take care of it if they have the means to mobilize and exercise voice, and hold leaders accountable. Outsiders can’t do much about that, but if they speak loudly and consistently on the subject I think they strengthen the people’s hand.

As it happens, Marginal Revolution university’s corruption lectures went up this week. View them here.

28 thoughts on “More on corruption and development (AR and MR speak)

  1. “We all agree, however, that corruption does not belong in the same sentence as protecting property rights or stopping civil war.”

    Tyler Cowen mentioned civil war but not property rights in his blog post. And I don’t see how it is possible to distinguish property rights from corruption? If the government does not respect its own laws (i.e. corruption), how is it gonna respect property rights (one of its own laws)?
    I also think you forget the far-reaching consequences of corruption such as lack of technology adoption, higher prices, lower public spending etc..
    Is stopping civil wars more important than stopping corruption? Of course as we can avert human deaths by sending blue helmets and stuff. But the key to development is in getting governments to behave properly… but then again this might just be about different definitions of corruption… and there are a lot of development projects designed to fight corruption. For example by setting up support centres for citizens victims of corruption, helping governments put in place electronic systems for visas or licenses etc that make it harder for officials to extract bribes, or making information public and easier to reach… wikileaks and twitter (and facebook?) also helped a lot in ousting corrupt rulers by disseminating information. And this technology came from the West…hence outsiders can help a lot people in poor countries exercise their voice… foreign aid is just not focusing on the right means yet…

  2. Yes corruption, accountability, transparency,… these are ways to talk about “governance” in generic terms without having to take “who is governing” into consideration. In that way I do see it as a way to dodge “politics” insofar as “politics” refers to consideration of the specific identities and tendencies of leaders and their challengers. But isn’t this exactly what we are supposed to do, as social scientists who believe in the role of institutions above and beyond the role of specific personalities as determinants of development?

    Anyway, much of the corruption literature considers how institutional alternatives may affect the likelihood of corrupt practices by a politician or bureaucrat. The institutional alternatives considered often include accountability measures which, of course, structure “politics”.

    In short, corruption research often focuses on politics in terms of institutions, rather than personalities, which strikes me as exactly the way we should be doing it.

    On whether it deserves to be on the “short list”, let me propose that this depends on your take on the role of the state in development. If you think state intervention to, eg, compensate for market failure is crucial, then it is natural to prioritize problems that inhibit a state’s capacity to perform such a role. Assuming that sheer incompetence is not the problem, it is natural to focus on corruption, along with consideration of institutional interventions (accountability, transparency, etc) to remove corruption as an obstacle. This strikes me as immensely important.

  3. The current development strategy in the Philippines involves a massive anticorruption drive including the cancellation of allegedly anomalous contracts. However, “focusing solely on anticorruption for its own sake may also undermine lasting institutional reform, if property rights, credibility and stability are weakened in the course of enforcing against anomalous transactions’.”
    http://www.econ.upd.edu.ph/perse/?p=1693