“Pay Me Money – Pay Respect; Don’t Insult My Intellect”

A different kind of cash transfer...

A different kind of cash transfer...

Owen Barder’s newest Development Drums features Mushtaq Khan and Daniel Kaufmann debating corruption . I haven’t heard it yet (a combination of a temperamental internet connection and a hearing problem that makes podcasts less than ideal for me), but I know their views on the issue, and I imagine it will be brilliant and interesting.

I studied under Mushtaq during my Master’s degree. His was probably the best lecture series I ever attended. His work covers a range of issues relating to the development of capitalism, taking a strong political economy and historical approach, but the area in which he’s probably received most attention is corruption. His arguments are extremely persuasive, but there are elements to the corruption issue that are best understood from outside the paradigm of economics (even political economy) that merit further considerations.

Even a brief consideration of his ideas shows their merit, though. There are two central elements to Mushtaq’s argument about corruption. Firstly, he argues that corruption itself is not necessarily bad for development. The second and more important argument is that different kinds of corruption obtain in different kinds of polities, and some specific patterns of corruption are symptomatic of a polity is structurally impeded from a transition to capitalism and rapid economic development.

England provides an example of the first element to his argument. There, agrarian capitalism was one of the pre-conditions for the industrial revolution. It arose from the enclosures movement, in which landowners essentially annexed public land for their personal use. Rule of law was manipulated for the benefit of a select group, in turn providing material benefits to those with the power to ratify this. Yet, the enclosures movement made a significant contribution to English economic development, allowing for the efficiency gains required to feed a nation, and also created a class of landless labour, who played a key role in the industrial revolution and the transition to true capitalism. The corrupt practices of the landed and powerful contributed to an economic transformation.

Of course, there are also many economically stagnant or failing countries that are characterized by corruption. This is where the second element of Mushtaq’s argument about corruption comes into play: it is the underlying socio-political structure that determines the pattern and effect of corruption and explains their poor performance.

Much of Sub-Saharan Africa is characterised by complex patron-client networks, in which a number of groups vie for the patronage of a Government with a weak power base vis-à-vis these groups. The Government cannot cut the corrupt relationships that exist between them and any of these groups in order to aid economic transformation, as the spurned group frequently has the political power to successfully challenge the Government. This contrasts sharply to patterns prevalent in most currently developed countries at the time of their transition to capitalism. In these cases, the crucially important aspect was that in the relationship between the state and one or more key economic actor, power was asymmetric. For example, South Korea’s Government was in a position of unchallenged power vis-à-vis the Chaebol, a legacy of WW2 in which they were seen as collaborators. As a result, Government was in a position to offer subsidies (and accept bribes), but more importantly, it was able to remove these subsidies without political repercussions. This meant that if a conglomerate was unable to meet the targets that Government set, it could easily be disciplined through the removal of subsidies. Patronage was focused and contributed to economic transformation and consolidation of resources in the most productive hands.

Even much abridged, this summary of Mushtaq’s position demonstrates some of the most valuable insights he brings to analysis of corruption (and indeed development more broadly). He homes in directly on the power relations and political realities that underlie the way Governments and polities in the broader sense function; and he makes a clear and persuasive case as to how this distribution of power and political clout can help or hamper the economic transformation that must stand at the heart of any sustainable development process.

Despite this, there is another approach to the problem of corruption that also needs to be considered, one that doesn’t invalidate his arguments, but rather introduces new complications, focusing on the role of the state and the effects of corruption on state – subject/citizen relations.

One of the most insidious effects of corruption does not arise from its practice or direct economic effect. It arises from the experience of participating in, witnessing and reading about corruption – from its openness and transparency. Corruption has a profoundly emotional effect on those who come into contact with it, and this in turn affects behaviours. It showcases people at their most venal, unjust and unprincipled. In fact the very function of corruption is to circumvent or even destroy networks of principles, be they legal rules or accepted social norms. People who have been compelled to pay a bribe, or been witness or victim of another example of bribe-paying, develop not just a mistrust but profound dislike, even hatred, for the individuals who put them in this position and the institutions they represent.

This is no small matter. Such deep mistrust pervades many less-developed countries and has practical implications. The state, normally a key player in corruption, becomes an institution devoid of legitimacy. All of its functions become open to question. Not just allocation of subsidies or provision of public goods, but its administrative functions, for example. A corrupt bureaucracy may disincentive the legal registry of legitimate assets – a nightmare scenario in a large parts of Africa, which struggle for both capitalism and capital.

More than this, it can cause traditional sources of authority and justice to break down. I knew few people in Malawi who trusted the police service. It was openly known that at every level of it, illegality was simply an expense – a good to be purchased. As such, the functioning of the state as a source of justice was undermined. At road blocks, people lie as routine to police officers. After committing a crime, the instinctive response becomes to buy ones infraction out of the records I still tease a close friend of mine about the time he described the fine for his speeding as a ‘price’. A slip, but a revealing one.

At higher levels of Government, people lose trust in the ability of the Government to perform functions for which it is the only legitimate actor. As an example, shortly after the tsunami, it emerged that a senior Sri Lankan politician had diverted millions of rupees into his bank account. Not only did he barely bother to conceal it, when it was exposed, his secretary took the blame for the ‘administrative mistake’ and he was allowed to continue in office. The legitimacy of the state to perform the role of coordinator of future aid efforts has been devastated. No-one else can perform this function with structural legitimacy so this is not a minor concern.

Ultimately, corruption can cause, not just reflect, the breakdown of structures of authority; in the event of a change in the political settlement that makes a transition to capitalism more likely, the after effects of a pervasive culture of corruption may continue to restrain progress. The functioning state is better placed to achieve economies of scale and resolve conflict than the myriad of self-help groups and community initiatives that fill its space when it cannot be trusted. Yet the emergence of a functioning state may itself be restricted by the wider culture of corruption it has precipitated or participated in.

None of this undermines Mushtaq’s argument that the political settlement must change before transformation is possible and before corruption changes form, but it does indicate an additional barrier that must be overcome for this to happen.

What’s more, this kind of response is possibly more likely to happen when corruption is widespread and widely known – which is in polities characterized by complex patron-client networks, where it does not contribute to or at least stay out of the way of a process of economic transformation which can eventually minimize it. Where corruption has not spread throughout a society, this line of argument may actually lead to a conclusion that too much transparency about corruption is a bad thing – that if it can be dealt with ‘in-house’ it will have fewer negative effects. Of course, this must balance against the idea that justice and democratic openness are to be valued in their own rights.

It all just illustrates what an incredibly complex issue this is. As Owen said, it’s time to treat it as such outside of the rarefied air of academia and among jaded development professionals. Next time someone asserts that ‘the problem is kleptocratic Government’, challenge them; show them this complexity.

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