Paralyzing Vice Or Inventive Social Self-Defense?

Looking into Corruption

By George Handlery

It is elementary, that when you write about a term you should give its definition. In the case of corruption, we all know what is meant. This agreement does not help to get closer to a precise meaning that satisfies everybody at all times. Those that admit this and persist to give a definition are either fools or they write a weekly column. It is quite likely that the “or” can be omitted. 

Its omnipresence is what makes “corruption” as slippery as a freshly caught fish. We often become unaware participants because an innocent aspect is implied. This can make actions that open privileged opportunities not legally actionable and these are therefore not criminal. When I got my Swiss citizenship an official had to determine whether I am integrated. Due to assumptions he had reason to make in the light of my training, he skipped the obligatory questions about society and politics. Once he found out that I am a member of a local pistol club, being a participant himself, he visibly concluded that I “belong”. The case gets more complicated once other shared interests are exploited to pull the cart of a firm. For good reason, retired politicians are in demand as lobbyists. For the same reason, many countries limit their lobbying.

Some time ago, a statistic made the point that the poverty and corruption are causally interrelated. This is PC, as it implies that the West, being responsible for poverty is also the cause of third world corruption. It is also a coded argument for more aid. More money means less poverty and leads to more honesty. The rule could be reversed: the more corruption, the more poverty there will be. It seems that cause and effect are not connected with a line between A and B. The shape created by connecting the causes form a complicated shape. Corruption correlates with authoritarian rule and the next corner might by the culture’s economic order. The greater the role of political distribution in the context of backwardness and poverty, the more pervasive will corruption be. 

Some uncertainty is created by the cultural factor behind corruption. Under comparable economic - political conditions, societies will still score differently. Some value systems hinder corruption by making its practitioners feel guilty. Others ignore the vice or even imply that it is a sign of an ability to find clever solutions to otherwise stifling problems. 

To dissect corruption one should not begin with “poverty” –some rather well-to-do countries are notoriously corrupt- but with the regulating role of the state in society and the economy. In all but ideal systems, politics will have an allocating function. Recall the definition that it determines “who gets what”. Improve this by adding, politics determines who will give up what and how much of it. Evidently, there will be a temptation to exploit these functions to reward supporters. Expropriation through taxation will also include discretionary powers that explain why at least some corruption is universal. 

The public affairs-mandated allocation means that non-economic considerations will guide the allocator. These still include “gain” and “loss”, however, these are not measured in economic terms that emphasize efficiency. 

The greater the state’s controlling role over the economy the more it, respectively those representing the state, are enabled to replace the “invisible hand” by political considerations. To the extent that this can happen, the resulting system will become inefficient. The participants of transactions will not move to maximize their economic success but will be guided by the non-economic goals set by politics. In economic terms, the result is inefficiency and shortage. Factors of production –labor, capital and resources- will not be directed to where they work best. They will go to points determined by politicians acting to further goals that stand above economics and the will of individuals. To the extent that this allocation is influenced by personal interests, we encounter corruption in the application and in the reactions to abuse. 

To the extent that economic allocation can be superseded by the political apparatus, goods and services will lack as the resources needed for their creation are misplaced. Politically-driven economic activity creates goods that do not respond to spontaneous demand and these are, therefore, mandated by those that exercise state power and whose sanctions are not economic but coercive. The arrangement means that, due to the lacking economic sanctions the performance of the system cannot be judged by objective economic considerations. By implication, much uncontrolled power is used to determine the angle of the playing field. We must keep in mind here that nothing is easier than to confuse personal preferences with the public’s interest.

The scarcity alluded to is a major force that induces corruption. This response to an artificially created want –remember, the capacity to produce what the market demands is channeled into political projects- can be seen as a spontaneous action of social self-defense. What is needed but not planned must be provided through informal channels. (At thirteen this writer has been an entrepreneur creating socks the comrades failed to anticipate from material that was officially not available.) Some socialist-operated “reform” projects –Cuba comes to mind- recognize the usefulness of this type of corruption. Therefore, they legalize what has been practiced undercover. The benefits are both political –more satisfaction and personal success related to merit- and economic –less scarcity and shorter queues. 

Where there is “much state” that restrains society’s autonomy, the upshot is a forest of regulations. These rulings provoke corruption as they force people to seek short-cuts. Bribes, that is payments for services that would be unneeded if there would be less government, make being an official lucrative. This assures more regulations to raise the functionaries’ income and the restrictiveness of their application by which control and revenue can be raised. 

While poverty comes before systemic vice, a contemporary response to poverty can be a source of sleaze. The reaction to the poverty of underdevelopment is “foreign aid”. Huge sums flow from donor to government. Direct support to projects is rare because it signals a lack of confidence in the local elite, betrays “lack of respect” and is said to be the continuation of colonialist paternalism. The money channeled to the state makes running it a lucrative business. Meanwhile, the funds make rulers independent of the tax payer and society. The consequence is authoritarian rule, centralized power and clientism. At the same time, diverted funds can finance illegal projects and society’s disenfranchisement reduces the risks of selling government functions for money.

In time bribery becomes a way of life and is accepted as a normal sign of rank.  At that stage, nearly everybody with a brain in his head is, in his own realm, a taker. “Finding solutions” or “arranging things,” opening “little passages through the wall” are more than euphemisms. They are expressions of a way of life and its distorted perspective. With that stage reached, such as in the case of Greece, reform, a normal market –driven economy, limited government, service and upright citizenship will be difficult to restore or to create. That makes corruption the most successful approximation of a perpetuum mobile ever seen.