Sunday, December 06, 2015

Corruption as symptom, not cause, of poverty

Interesting hypothesis being advanced by Daron Acemoglu and James A. Robinson (WSJ):

Corruption doesn’t come from nowhere. It is a result of economic and political institutions that empower unrepresentative elites while shutting out the rest of the country. That empowerment lets politicians, bureaucrats and soldiers grab resources and get wealthy from bribes. What allows them to get away with it is the absence of democratic accountability and effective checks and balances, like the rule of law and press freedom. Without fundamental change in these institutions, anticorruption crusades aren’t likely to improve the economic lives of ordinary people. The greedy elites that dominate most poor countries will just find other ways to enrich themselves at public expense.

If corruption were the real problem, its absence would mean widespread prosperity, but we know that’s not the case. Take pre-1994 South Africa, where white-supremacist rule included a competent, professional bureaucracy and a somewhat independent judiciary. Uncorrupt though it might have been, this apartheid state ruthlessly oppressed its impoverished and disenfranchised black majority.

Or consider Cuba, which Transparency International today considers to be less corrupt than Greece. Cuba is poorer now than at the time of Fidel Castro’s revolution in 1958. The reason isn’t graft or the enrichment of the country’s elites. The problem is communist dictatorship: The economic institutions established by the Castro brothers discourage investment, innovation and entrepreneurship.
It would have been nice had the authors explored further what this means. What institutions can/should get developed and how does one develop them when their transparency and creation run counter to the entrenched interests of local elites?

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