Arnold Kling  

The Corruption Trap

A Glacial Rate Isn't Bad... I miss Michael Powell...

Philip Keefer writes,

political competitors who are unable to make credible promises to most voters will, upon taking office, underprovide public goods, overspend on transfers to narrow groups, and engage in significant rent-seeking. That is, the behavior of such politicians can be characterized as highly clientelist. However, politicians in older democracies have had greater opportunity than their counterparts in younger democracies precisely to build up policy reputations across a wide swath of the electorate. To the extent that credibility and age of democracy are related, though, younger democracies should exhibit the same behavior – under-provision of public goods, over-spending on transfers to narrow groups of citizens and high rent-seeking – predicted to emerge in countries where politicians are credible to only limited numbers of voters.

They find that young democracies do indeed tend to be more corrupt than older democracies.

Bryan has coined the term "idea trap" to describe a situation in which low average wealth leads people to prefer bad economic policies, which leads to low averagewealth, etc.

I see a similar possibility in Keefer's model. The more corrupt the government, the less credible the government, the more it has to rely on corruption for support, etc. Hence, I would call this a corruption trap. The challenge for a young democracy is how to escape the corruption trap. How do you get to a point where leaders can rely on more than pure corruption to remain in power? Many Latin American democracies are no longer young, but they are still in the corruption trap.

Perhaps Haiti and the Phillipines are examples of countries that never have been able to escape the corruption trap, even when they held clean elections. If so, then I wouldn't be too optimistic about a more recent nation-building effort (not that I want to turn this into a blog about that.

Another question: is it possible for an older, established democracy to fall into the corruption trap? Can the credibility of its leaders erode to the point where they only way anyone can hold onto power is through out-and-out payoffs?

Oh, by the way. The Milken Institute Review gets yet another thank-you, thus time for the pointer.

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COMMENTS (7 to date)
Eric writes:

Keep an eye on what's going on in Canada. Seems pretty close to the corruption trap you're describing.

John Brothers writes:

At one point the US was a young democracy. And it survived this period because of the strong ferderalization of the government - the national government was too weak to make promises, the state governments couldn't keep people in-state, and the supreme court, in general, keeps the states from getting too corrupt.

I would think that this technique would work in most countries except for the extremely small - divide it up into a number of "states" or "regions" that citizens can freely travel between, but not laws, and then federalize the government. Not perfect, but probably a lot more likely to avoid the trap.

Chris Bolts writes:

I was going to say keep an eye on Canada, but I was already beat to it. However, I'd keep an eye also on what's going on in the EU. With the direction many of those countries are going, they are not only victims of Bryan's so-called "idea trap", but they are priming their governments for the corruption trap.

While I will not say that the U.S. is impervious to corruption, lay citizens are adept at voting out corrupt individuals (although the mayoral race in Detroit seriously challenges this) and everyone raises a stink whenever they feel the Constitution is threatened. This has only occurred with age and serious debate, and many people need to realize that democracy for former corrupt countries does not automatically mean freedom and that in all likelihood it is the birthplace of corruption on a grand scale.

As some famous person said, "Power corrupts and absolute power corrupts absolutely" and it is always true of politicians in democracies both young and old.

Ann writes:

Surely the degree of corruption depends also on how the government is set up. If government is largely limited to setting the ground rules but prevented from picking winners and losers, there's less incentive to try to bribe officials. It's when government mainly hands out favors to specific individuals and companies (as in the Philippines) that the corruption trap is hard to grow out of, due to vested interests.

The EU and Canadian examples are good. Socialism puts the government in the position of handing out favors to specific individuals, which tends to attract side corruption in addition to the institutionalized corruption.

jn writes:

I think most people in the US underestimate how important labor mobility in the US is to limiting corruption and bad public policy in general. In Europe the quilt of languages and labor laws makes mass movements from one place to another difficult if not impossible. In both China and Russia, the governments still maintain internal passport systems that limit movement to varying degrees, both limiting competition at all levels and increasing the rents to be earned by established hierarchies.

You get less Tiebout and more Tamany Hall.

Daniel writes:

Talking about corruption, the election campaigns in the US come to my mind. The money that changes pockets in election years is growing each election and is often greater than smaller countries GDP's. Maybe this corporate money and the obligations it buys from the elected officials is the reason for dubious wars, reluctancy in environment protection and tax cuts for the rich in war times. The corporations and the rich are not simply partisan, they have special interests, which they promote and/or secure with large sums of money. That is essentially what corruption is all about.

Lord writes:

Social attitudes have a powerful effect on corruption. Those with less of a universal bent, those to whom friends are more important than principles, are more liable to accept corruption. And it certainly affects what the society deems corruption and what they accept as normal. All societies are subject to increased corruption when exposed to declining living standards, and possibly even declining relative living standards.

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