Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
We're waking up today to the news that Harry Reid seems to be trying to buy votes. And it will surprise no one to learn that Transparency International is reporting widespread corruption Turkey.
As for the latter story, one of my editors once asked me, “Are we really interested in that? We want to know if they’re fundamentalists, right?”
I’ll reply by analogy: When Gorbachev came to power, analysts in the West were extremely concerned to know if he was a truly a dogmatic communist. It was an important question, but not as important as this one: “How long are the lines for pantyhose in Moscow?” If you want to know how Turkey is doing, the first question to ask is, “How many people do you have to bribe to get a government tender?” And this question might usefully be asked of any country when attempting to assess its stability, long-term economic health and likeliness to pose a threat to its neighbors. But for some reason it rarely is.
I've observed before that corruption is woefully under-studied:
Corruption is not a particularly popular topic for academic research. It is by no means ignored — it is a thriving sub-specialty in institutional economics — but a quick search on Google Scholar under the terms “corruption” and “interest rates” will suggest something about the academic world’s research priorities. There are 492,000 entries for the former, 5,210,000 for the latter. Although there are many well-funded American think tanks devoted to studying and advancing free-market economic principles, there are none exclusively committed to studying and combating corruption. Cast your mind back to the most recent American presidential campaign. How many references can you recall to the candidates’ economic advisors? Now ask yourself the same question about their corruption advisors. If you’re drawing a blank, it is not because your memory is faulty.
The reasons for this are obvious. The term “corruption” compasses such practices as bribery, fraud, embezzlement, kickbacks, cronyism, and extortion. These are crimes. Like all crimes, they are difficult to study because those who commit them are not motivated — indeed, are particularly unmotivated — to cooperate with efforts to study them. In the best case, the data are buried; in the worst case, the researchers are buried. It is much easier and safer to study interest rates. But this is like looking for the lost keys under the lamppost because the light is better there.
It is my strong suspicion, based on my experience of living in corrupt countries, that it is vastly more important for policymakers, the media, and academics to devote their time and thought to promoting robust anti-corruption policies than to worrying about sound monetary policy — important, at least, that is, if their goal is to lift people out of poverty rather than to get tenure. Indeed, worrying about the niceties of monetary policy is literally an academic exercise when the problem of corruption remains unaddressed and unsolved.
But suspect is the operative word. I cannot prove this, and nor can anyone else. Nor can they prove the contrary. This is the heart of the problem.
As I point out in that article, Transparency International does important work. But its methodology is hugely problematic. The major problem—how do we measure corruption?—remains to be solved. It's an urgent problem.
Anyone on Ricochet have any good ideas?
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Oct '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Philippines has improved from 139th to 134 ranking.
Edited on Oct 27, 2010 at 3:37amRe: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Which is meaningless ... nice to see you here, John!
Oct '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
yup. finally, i made it.
Edited on Oct 27, 2010 at 4:38amSep '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Claire: Understanding the definition of corruption is something I struggle with. You seem to make at least a tangential link between corruption and legality and I suspect you use the Reid example because it is somewhat blatant. The use ear marks on the other hand are viewed by most ordinary people (non-elites) as bribes, are certainly corrupt and corrupting while being perfectly legal. This nuanced, legal corruption, of which there are many more examples, is perhaps more harmful than what is ordinarily thought of as corruption. I lived 3 years in Manila and found, at least some of the time, that having to pay bribes to get some things done on some level to be an honest practice. But then again I do have some corrupt tendencies.
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
LJ, there's a school of (academic) thought arguing that the kind of corruption you encountered in Manila is actually economically useful; it cuts through bureaucratic red tape, makes things more efficient in practice. I don't generally buy it, but suspect it varies from culture to culture. Yes, we need a good working definition of corruption; I discuss that in the article--as I wrote,
I'd say the issue of earmarks should probably be studied separately--it may be wrong, but it is out in the open (thus comparatively easy to study). The things that are by definition crimes fall into that dark research area; it's a different kind of problem.
Jul '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
I maintain that politics in the U.S. are far more corrupt than international studies suggest.
While politicians in other countries might accept bags of cash and arrogantly accumulate visible riches, we're a bit more innovative and discrete about it.
You want an earmark or a law that somehow enriches you? Have your brother-in-law give my idiot daughter a nice job. Or my give my idiot son an introduction at a K Street lobbying firm, where he can steer funds to my campaign.
While the amounts of money involved may ultimately be less breath-taking than in, say, Turkey or the Philippines, the distortions to the political system are every bit as evil as in countries where the mechanisms of corruption are less, um, nuanced.
Edited on Oct 27, 2010 at 5:50amMay '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Thank you Claire for bringing this up. My take is that corruption correlates negatively with trust. In low-trust societies one must rely on family ties for everything and those ties trump the law. This is certainly true in the Philippines and probably Latin America (is Hispanic colonialism a causal factor?).
Japan is interesting. In everyday life, Japan is very uncorrupt. But in the awarding of large government contracts there there seems to be an endless parade of cartels that fix the bidding. Information is sometimes fed to favored bidders by insider bureaucrats, but not usually for money, but instead for a tacit agreement to provide employment after retirement. Government pensions in Japan are not scandalously huge, so some supplemental non-demanding employment is welcome.
The old joke about Thailand was that in most countries you have to pay a bribe if you want to do something illegal, but in Thailand you have to pay a bribe to do legal things.
Chinese are very accustomed to this kind of dealing and no doubt will prosper in the Third World, to our disadvantage
Aug '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Until very recently, I thought the issue of illegal immigration into the U.S. was overblown. It was like corruption: how can you measure it? Then the President of Mexico, addressing the U.S. Congress, essentially adopted illegal immigrants as his own, and that settled it for me. I still don't know how many there are, or whether the problem is imaginary, but I now know of a problem that's real: official Mexican cynicism. I feel that way about corruption too. Whether there is a lot or a little of it in Laos, Nevada, or Istanbul, the thing I can see and hear is how normal it is considered to be in those places. Corrupt officials? I don't know how many there are. Resigned people? Those can be counted. And their effect on a country may be more profound than that of rascally civil servants.
Jun '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
I have a lesson plan for my students designed around the question "Why do Americans stop at red lights?" After all, in places like Mexico and Egypt the law is routinely ignored. The discussion that follows reveals that voluntary compliance to the law by a cooperative and orderly people results in freedom and material prosperity for all. A culture where people routinely ignore the law invites the heavy boot of tyranny to keep order, and is generally unfree and poor.
Is America any more or less corrupt than other nations? I will suggest that we are differently corrupt. The average citizen voluntarily complies with the law without coercion. But the oligarchs play by an entirely different set of rules. They live in a world where influence peddling, pay-offs, and kickbacks are the quids pro quo to achieve status, wealth, and power. The other difference is that America is so wealthy that until recently we as a people have turned our eyes from corruption because we're content with our lot. I can only lament that we would be more free and even more prosperous if the ruling class played by the same rules.
Edited on Oct 27, 2010 at 6:38amMay '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
American corruption is not just about the pols. When the Chief White House Correspondent of a major American television network is married to a Democratic Campaign Consultant who brags on her web site about flipping control of the Senate, how do you believe any thing he says? After all, he's supposed to be our watchdog but he has skin in the game, campaign wins by his wife means more money into his kids trust funds.
Oct '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
How does a cycle of endemic corruption begin? It begins when governments realize that they can save lots of money by cutting the salaries of police officers, judges, and inspectors, knowing these officials have the power to collect their own wages on the street.
One can say: "Well, then, we need to give cops, judges, and inspectors a living wage." But once an endemic cycle of corruption has been established, any such raise in "official" pay simply increases the income of corrupt public officials (Thank you very much!) and does nothing to stop the extortion: the millions of "black transactions" that together comprise the enormous black economies of developing nations.
I hate to say this, but the only cure is the complete destruction of corrupt institutions and the total banishment of corrupted officials. They can then be replaced by organizations composed of newly hired officials who are paid living wages. But that, of course, is much easier said than done. Corrupt organizations have often resorted to armed rebellion when necessary in order to perpetuate themselves, as every reformer in Latin America (and elsewhere) has discovered.
May '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
I've witnessed miniature versions of the same corrupt acts politicians are famous for (favoritism and gifts, embezzlement, suspension of sanctions due to fear or apathy, etc) in many different work environments. Every form of corruption found in government is also common beyond it. Contrary to popular wisdom, power does not corrupt so much as feed and amplify the corruption already present in people's hearts. It's basic human nature. The greater one's power, the greater the effect of one's corruption (so the more responsibility one has to resist those temptations).
Public and official corruption seems to be the norm. It is more the absences of corruption which need to be explained.
~Paules is right. The place to begin is explaining why Americans so adamantly guard the rule of law.
Could it relate to public and official preference for Judeo-Christian values? The only other nations I know that continue to so honor these roots are Israel and Poland. Europe's history doesn't offer great perspective since the institutions were mixed as ours are not.
Or could it have to do with our frontier spirit? With rugged individualism?
May '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
In developed countries, corruption is largely at the top. In the developing world it is all pervasive and serves as a cancer, infecting all attempts to progress. Every ex colony of Spain for example is corrupt, with the sole exception of Chile. Chile enjoys an economy more vibrant with more individual freedom than any of the others.
We used to "measure" corruption in the Philippines by the method and amount it took to get stuff through customs in non election years. In the days pre Erap you would put your bribe in a drawer unofficially designated and officials would take it out, count and distribute on breaks. During Estrada the bribe would be clipped to the documents to be processed and everyone openly took his bit.
Another measure was in the Dept. of Education. In normal times 20% would be skimmed off the top for normal expenditures and up to 40% on specials. Again under Estrada this increased to 30 - 40 on normal, 60% on specials. This in a country with 120 kids in a class and not enough books, pencils and desks to go around.
May '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Might it also be related to our history of limited government (which, bear in mind, reflects our values as much as influences them)?
The larger any government and its legal code, the fatter it is with plainly foolish/unnecessary laws and favoritism. The more common and the more grevious that unrespectable laws and officials become, the more difficult it becomes to respect law and government in general.
Is corruption in our government more common now than it was before the vast expansions of regulation and centralized authority after WWI? Perhaps corruption exists in inverse proportion to freedom, in which case it could be measured by similar criteria.
Edited on Oct 27, 2010 at 8:21amMay '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Aaron touches the very heart of the matter. When men are free to peaceably do as they please corruption is held to a minimum. It is when the peaceable man must seek permission to accomplish the simplest tasks that corruption rears its ugly head.
Wait to see what ObamaCare does to America. Wait until "rich" doctors are told how much they may legally earn and what procedures they may practice on which patients. Corruption will be advanced to a whole new level.
Sep '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
The real question is when does the parasitism reach a level so high that basic services become undeliverable and political unrest ensues. We are lucky in this country that the mere specter of this in health care has helped ignite the tea party movement but we seem to tolerate it in education in many places.
Sep '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Aaron and EJ: I agree. Today Congress routinely passes bills that advantage one group or another. When the groups advantaged are the poor, minorities, etc the action tends to be overt and will publicized. When the groups are Wall St. bankers, unions, etc. the action tends to be more disguised. None the less in both cases I view it as corrupt. When you dress corruption up in a suit and tie its still corruption. Claire, if I understand her article, would want to call this something else. I agree with her point, but don’t know what label to put on it, but it certainly is a kissing cousin to what she’s talking about.
Oct '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Ward:
On the contrary, one of the problems is that, locally, the "black"economy is often larger and more stable than the official economy. The black economy encompasses all sorts of quid pro quo relationships that can continue to function even if the "white" economy utterly collapses. As a result, people often come to trust the black market, treating official attempts to repair the local or national economy with scorn and ridicule.
Despite the utter worthlessness of the currency of Zimbabwe, the majority of its people somehow manage to procure enough food to keep themselves alive.
So I must disagree that rampant corruption must eventually cause basic services to become undeliverable or will cause political unrest. In many cases the reality is quite the opposite. Corruption and the framework in which it exists- the black market- are often what keep people alive. Certainly you are not naive enough to believe that the UN feeds all those souls who live in failed states, with their currency not worth the paper it's printed on!
Their food comes from the black market, the 'economy" of official corruption. What inertia to overcome! Prosperity is required to make even a start at eliminating it!
Jun '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Having participated in discussions about corruption many times, it is certainly true that it is difficult to track and quantify. However, I always end up using a basic tenet: "When all else fails, look at the results." Those countries normally associated with less corruption, rankings or not, are wealthier. Those countries normally associated with more corruption, are poorer. Corruption of any type is a burden to society. Those that can keep it in check possess a lower burden, and so a larger portion of its citizens can get a fair shake when the law works. They don't have to waste their time building "relationships" with bureaucrats or increasing their expenses for an activity that should usually cost a nominal fee.
When there is more trust in the system, people tend to behave more honorably. Their risk is lower. Of course, this can be a chicken-or-egg scenario. Which came first, the culture that accepts corruption, or the politics which enables corruption? I can't help but compare Russia and Poland. Both were part of the same Empire, but one is less corrupt than the other, so how can the root cause of corruption be politics? Part 1/2
Jun '10
Re: Harry Reid, Turkish Tenders, and The Dark Figure of Corruption
Part 2/2
My previous post rambled a bit, but this time around, I'll answer Claire's original question. First, continue to use the Transparency International system. It's at least something that all can use. It doesn't hurt. Next, I suggest the following:
You know a country is corrupt when:
1. The middle class, relative to the specific country, is small and lacks political strength.
2. Foreign investment is lower than other countries of equal size or potential.
3. Payment of taxes is low or non-existent. (people don't pay taxes in corrupt countries because they know it goes into a black hole)
4. Political class and/or business elite fight over the same resources over and over.
5. Governments announce a crackdown on corruption but never catch or convict anyone.
I've got many more, but I'd say look at the typical economic and social indicators you find in the CIA World Factbook. Where the stats are low, you're likely to have corruption (all things being equal, e.g. natural resource differences, etc.)
All I got for now. One of my favorite topics.