False Economy - Alan Beattie [122]
For the efficient cream-skimming kind of corruption to work, a degree of central coordination seems to be necessary. The economic theory that explains this is akin to a situation where within a set of companies, each has a monopoly in producing goods that complement the others. Imagine a frankfurter company, a bun baker, and a mustard manufacturer; together they make the constituent parts of a hot dog. If the companies are working cooperatively, each will set their prices relatively low so they make a decent profit but do not kill off demand for the final product. But if they are operating independently (without regard for one another), each will jack up prices much higher in the expectation that the others will as well. There is no point in the baker's giving up profit by underpricing buns when the demand for the assembled hot dog is going to be reduced by the stratospheric prices of sausages and mustard.
Similarly, a set of agencies with the ability to extract bribes from businesses—say the customs service, the tax authorities, and the electricity company—will charge lower rates if they are working together than if they are working independently. A lower rate of bribe means more businesses can flourish; that means more growth, and, ultimately, more bribe revenue collected. A centrally organized, cream-skimming bureaucracy wants the economy to grow quickly—it means more Mercedes-Benzes and cocaine all round. A disorganized grab-what-you-can bureaucracy is reckless as to whether the economy grows or not.
Perhaps the best example of disorganized, decentralized corruption is India, where, as the Indian official quoted above suggested to me, there is a multiplicity of political parties and bureaucrats to placate. Like East Asian countries, it has a large and powerful bureaucracy, and in the first half-century after independence in 1947, the prevailing belief in state intervention gave them the ability to meddle extensively in the economy.
But as we will see at length in the next chapter, Indian politics became dominated by a series of fractious, squabbling political parties, which often rely on electoral blocs defined by religious, caste, or ethnic identity. The form of politics practiced, though it often goes under the name of socialism, is essentially a form of "clientelism," in which government spending and privileges (such as jobs) are directed toward key constituencies to buy their support. Enough people can be bought off this way that there is not enough popular demand for the entire system to be overthrown.
In India, as Mark Twain said of the weather, everybody talks about corruption but nobody does anything about it. And despite a series of political bribery scandals from the 1980s onward, and the dismantling of much of the system of government licenses and rules that enabled bureaucrats to extract bribes, estimates of the amount of government money going astray in India remain staggering.
So why did East Asia tend to have one kind of corruption and Africa and Latin America different types? The answer appears to be the usual combination of legacy from the past and choices made in the present. East Asian autocrats tended to inherit powerful state bureaucracies and rarely experienced much opposition from other sections of society, such as a powerful landowning class. This was not so in most of Latin America, where the need to buy off the traditional aristocracy led to fiscal irresponsibility and frequent changes of government.
The pattern is not uniform. It is a standard joke in Manila that the