False Economy - Alan Beattie [117]
Corruption is a form of self-interest that thrives on a lack of information and a lack of competition. Information can extinguish corruption by bringing the self-interest of the agents into plain view, thus eliminating discretion over the way they act. Competition can extinguish corruption by ensuring that those agents doing business expensively and ineffectively to benefit themselves are undercut by those doing it honestly and cheaply. The more monopolistic and discretionary are the powers that agents have over whatever service they are supposed to provide, and the less accountable they are, the more likely they are to succumb to corruption.
But rather than competition bringing down corruption, corruption is often allowed to prevent competition. Apart from the general moral and ethical arguments against bribery and dishonesty, and the way they undermine the rule of law, corruption is generally bad for efficiency. It leads to decisions made by bureaucrats on the basis of what is good for them, not good for the economy. It directly affects quality of life by stopping public spending, whether for health, education, or infrastructure, from going to where it is intended. It loads heavy and often uncertain costs on business, making it hard for companies to plan ahead. It is especially bad for international trade. Controlling a border post is a particularly good way of extracting bribes: the exporter often has a lot to lose through delays, whereas the customs officer, who has the authority to hold up shipments, has all the time in the world to wait.
And it rewards those businesspeople skilled in bureaucratic infighting and political maneuvering rather than those actually good at running companies.
There is no doubt about the overall verdict: corruption is bad for growth. Standard measures of the perception of corruption within countries correlate quite well with national poverty. But within the broad brushstrokes of that overall picture there is some intriguing fine detail. In particular, a clutch of countries in East Asia have done well despite a long history of corruption. The most astonishing reduction of poverty in recent history has taken place mainly in another East Asian country, China, which achieves no better than a so-so grade in any international rating of incorruptibility.
I heard a succinct explanation for this from a very senior official in the Indian government several years ago. I asked him why India attracted much less foreign direct investment than did China. Corruption, he said. I pointed out China's regularly poor scores in the corruption tables. (In the 2007 version of the "corruption perceptions index" compiled by the antibribery campaign Transparency International, China and India are equally crooked.) Yes, the official said, but the thing about China is: There is only one political party to bribe.
If you are going to have corruption, best have it in as efficient and streamlined a way as possible. It is in this context that we will spend some time looking at the rule of President Suharto in Indonesia, not least because his name is pretty much synonymous with the "crony capitalism" that defined much of the economic rise of East Asia over the past forty years. It was, perhaps, the most striking example of how a corrupt, bloodstained dictatorship could nonetheless be an economically successful one. That Indonesia was corrupt under Suharto is not in doubt: Transparency International's inaugural ranking of countries in 1995 put Indonesia at the