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.

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Tags: corruption, Mushtaq Khan, State building