Breaking the Rules - Clientelism and Corruption Flashcards
How does democracy promote broader development?
- Accountability for politicians in enforcing the rules and delivering development
- Credibility for the protection of (property) rights
Problems of democracy for development
- A short-term bias
- An electoral cycle
- A “concrete” bias
A short-term bias (problems of democracy for development)
- Even well-meaning politicians need to worry about re-election in 4 years’ time
- Less attention to climate change, pensions for aging populations
- Commitment problems: why invest now if my successor might cancel it?
– Especially as successors prefer to claim credit for their own ideas
An electoral cycle (problems of democracy for development)
- Voters remember recent events more sharply
- So politicians concentrate their investments and stimulate the economy just before an election
- Unpaid electricity bills spike by 3% in election years in Uttar Pradesh, India
– Favors (forbearance) to consumers and businesses for electoral support
A “concrete” bias (problems of democracy for development)
- Development requires many “hidden” inputs, eg. teacher training, management, oversight, maintenance
- But politicians invest only in what voters can see and reward: concrete buildings, ribbon-cutting events
- Democratization in Africa led to the abolition of school fees and many more children in schools, but no investment in quality
Definition of clientelism
The contingent exchange of material benefit for political support
How does clientelism work?
- Rules for neutral distribution exist on paper
– eg. everyone has a right to healthcare - But are broken/twisted in practice
– Bureaucrats, politicians use discretion to control access
– Access to healthcare depends on who you vote for - A “quid pro quo” between patron and client; an unequal exchange
- Local brokers monitor who you support/vote for
Varieties of clientelism
- Patronage
– Distributing public jobs (the opposite of autonomy/meritocracy) - Vote-buying
– Gifts, cash, or services for votes - Relational
– Long-term ties of trust between parties and voters
How does clientelism harm public services?
- Private goods over more efficient public goods
– Handouts instead of infrastructure - A patronage bureaucracy has less autonomy
– In Brazil, students’ scores get worse when a new party replaces temporary teachers - A lack of accountability
– Voters must vote for their patron, not the best candidate
– Inverts democratic accountability - Property rights protection is less credible
– In Cote d’Ivoire, land rights depended on who you voted for
Are voters to blame for clientelism?
Voters often demand clientelism
- So are voters to blame?
- Where’s my money for my vote?
- I’m going to go pressure the politician to help me with my hospital bill
Why is it that voters may prefer clientelism?
Politicians often break their promises so voters are almost smarter/safer to accept the money as it’s more certain
What is the opposite of clientelism?
The opposite of clientelism is “programmatic” politics
What is programmatic politics?
- Politicians offer distinct programs: policies and public goods
- Can target groups of citizens, eg. women, the poor
– Based on the objective socioeconomic characteristics
– Not their political behavior
Comparison of Mexico’s social development programs
Pronasol
- 1989-1996
- Clientelist
- Did not benefit the poor
- Won many votes for the incumbent
Progresa
- 1997-
- Not clientelist
- Does benefit the poor
- Does not win the incumbent many votes
How does democracy affect clientelism?
- Democracy encourages programmatic parties and broad appeals using public goods
– eg. the PAN in Mexico
– eg. the Workers’ Party in Brazil
OR - Democracy creates “competitive clientelism”
– eg. Nigeria, Kenya
– An incumbency advantage in resources for clientelism
How did democracy affect clientelism in Mexico?
In Mexico democratization led to more programmatic social policies
- The state had the capacity to deliver and monitor (Progresa/Opportunidades)
- Threat of violence if clientelism continued (Zapatista rebellion)
- The opposition controlled the legislature so could constrain the government’s discretion
Definition of corruption
The misuse of public power for personal gain
Examples of corruption
- Bribery
- Extortion
- Fraud
- Kickbacks
- Collusion
Petty corruption
- Bribes to police to pass a roadblock
- Bribes to get a driving license faster
– Average payment is twice the official price in India
– Drivers don’t really take the exam -> unsafe drivers
Grand corruption (examples)
- Carwash (Lava Jato) in Brazil
– Contractors for Petrobras colluded on how much to bid, raising prices and channeling >$2bn to politicians - Goldenberg in Kenya
– Fake importing of $1bn of gold and diamonds paid for by Central Bank to finance election campaign - Anglo-Leasing in Kenya
– $740m in up-front payments for security services never delivered; redirected to politicians - 1MDB in Malaysia
– $4.5bn laundered from government development corporations, channeled to Prime Minister Najib Razak and his party UMNO
How does corruption harm development?
- Wasting scarce resources
– $3.6tr per year, 5% of global GDP
– Uganda 1991-1995: only 13% of budgeted funds reach schools - Discouraging investment and merit
– Corruption demands prevent construction being completed (or started)
– Bureaucrats pay for jobs where they can be corrupt - Weakening institutions
– By definition, corruption is rule-breaking
– How you’re financed -> how you govern - eg. Kenya’s government blackmailed into giving more favors to its financers
- Undermining trust
– eg. Barcenas scandal, Spain (2013)
What could corruption be instead of a cause of poor development?
Corruption may be a symptom of weak institutions and a weak state rather than a root cause
How can corruption be useful?
Corruption is useful for citizens in developing countries to address systemic problems
- Corruption can help protect property rights
– Paying off the police secures your investment
- Corrupt politicians have more power for enforcement
– Being tough/corrupt can help deliver projects where there’s no embedded autonomy
– Voters support corrupt candidates
– If 10% of budget is stolen, what happens to the 90%?
- Corruption in electoral campaign financing
– Essential to political competition where there’s no public funding
– Goldenberg scandal: financed food distribution to voters and cars to bribe politicians
- Corruption is an informal institution that becomes normalized
– More than a third of people in Mexico and Nigeria say that other people believe it is ok to pay a bribe
What happens if corruption is systemic and a system of deeper problems?
- Anti-corruption efforts mostly will not work
– Strict formal rules don’t change systemic norms/incentives
– Can a corrupt system reform itself?
– Strong incentives for isomorphic mimicry - Targeting corruption may do nothing to strengthen the underlying institution/state
Why may corruption not matter?
- “Corrupt” countries can develop quickly, eg. China, the West
- If investment happens despite corruption
- If the weakness of the state and institutions is being gradually addressed by deeper political processes
Does democracy cause corruption in transnational democracies with weak institutions?
- Transnational democracies have weak institutions
– More competition -> more electoral financing needed -> more corruption - Authoritarian Kenya was less corrupt because leaders limited corruption to “enlarge the pie”
– Democracy makes corruption “visible”: NGOs and Free Media
—> undermining legitimacy
Does democracy cause corruption in consolidated democracies?
- In consolidated democracies
– Active anti-corruption with autonomy
– Institutions and rule of law are strengthened with a rich state
– Free media, free speech, civil society are effective
– Informal institutions (social norms) against corruption
Why can development produce losers (in the short term)?
- “Creative destruction” of old industries - textiles, coal mines, drivers
- Enforcement instead of forbearance
- Monopoly rents or corruption
- Losses can also be relative, eg. teachers, traditional villages chiefs, men
How can losses be political instead of economic?
- Dictators may not care if the middle class get rich
- But they may care if they start to demand democracy and threaten revolution
Definition of vested interests
Actors with an interest in preserving existing institutions
How can resistance impact policy implementation?
- Resistance raises the economic/political cost of policy implementation
Examples for resistance that can increase the cost of policy implementation
- Protests
- Sabotage
- Lobbying
- Bribery/corruption
- Veto power
When is it easier for losers to resist development?
- It is easier to resist when the losses are concentrated on a specific group
- Losers are often powerful - they benefited from the “old” system
– Concentrated wealth allows them to organize against reform - Inequality can harm development when the rich oppose change and have the resources to block it
How can we overcome resistance from losers?
- Insulating the state from the political pressures of losers
– Autonomy/discipline (the developmental state)
– Repression
– Authoritarianism/dominant parties - Strengthening winners
- Compensating losers
Why can’t we always compensate losers for their losses?
If development “grows the pie” then the collective gains can be distributed to everyone
- Compensation may not be credible
– Promises of future benefits are hard to make
– The newly-powerful can just take everything in the future
– Social welfare systems can help make compensation credible
- Compensation may not be equivalent
– Would you accept money to give up your career?
Who are the winners of development?
- Workers benefiting from investments in physical capital -> higher productivity -> higher salaries
- Households benefitting from cheaper food (more productive agriculture)
- Children benefitting from better teaching (human capital)
- Consumers benefitting from smartphones (new technologies)
Definition of policy feedback
Policies and institutional reforms change future politics
- Winners often support continued reform:
- But diffuse winners struggle to achieve collective action to push for more reform
Why do winners often support continued reform?
- Motive to extend their gains
- Means from the newly-acquired resources
What happens when the winners are diffuse?
Diffuse winners struggle to achieve collective action to push for more reform
- Lots of consumers with a small stake
- And difficulties in communicating and organizing
Who are concentrated winners and what happens when winners are concentrated?
- Investors can be concentrated winners
- They can gain form partial reform
– Opportunities created by the transition from old to new institutions
– eg. privatization without an effective competition regulator
– eg. liberalizing consumer prices but not exchange rates - So partial reform creates new rents
– Monopolies, uneven subsidies
– Lack of regulation, weak police/judiciary
What happened in Eastern Europe with development/reform?
The countries in Eastern Europe that carried out “intermediate” reforms seem to have suffered the greatest increases in inequality, and opposition to further reform
– eg. inequality doubled in Russia
How can you overcome resistance from partial reform winners?
- Insulating the state from the political pressures of winners
– Autonomy/discipline (the developmental state)
– Repression
– Authoritarianism/dominant parties - Strengthening losers
– More democracy/competition - Tax the winners
Who are the winners and who are the losers of development?
Subject to political debate/manipulation
- Resistance to vaccination
– Personal and community benefits
– But strongly correlated with trust in government
- Misinformation creates “a seed of doubt”
– About government intentions
– About who is a winner
- Misinformation is often disinformation circulated by elites opposed to reform
What other interest except economic and political can be considered in the development process?
Identity
- Behavior is also a question of identity
– Shared beliefs and practices
How do the interests of identity clash with modernization theory?
Modernization theory: from traditional “ethnic” identities to modern secular “post-materialist” identities
- Ethnic identities are strong at the start of development
- And threatened by development
- eg. Triqui in Mexico protesting against displacement as a group (even those who were not affected)
What is the effect of ethnic diversity on investment in public goods?
Ethnic diversity reduces investment in public goods
- The challenge of cooperation across identities
- Differences in preferences
- Lack of information about others
- Harder to use social sanctioning to enforce informal institutions
- eg. diverse parts of Western Kenya receive less money per pupil
- eg. diverse parts of Indonesia suffer greater deforestation
What is the caveat with ethnic diversity reducing investment in public goods?
- Applies only to “politically-relevant” ethnic groups
- Ethnic groups are divided by politicians to form majorities
- The Chewa and Tumbuka cooperate in Zambia but oppose each other in Malawi
How does ethnic discrimination affect investment in public goods?
Ethnic discrimination reduces investment in public goods
- Biased against the less powerful ethnic groups
Why do dominant identities discriminate?
Discrimination by dominant identities:
- As pure discrimination
- As political strategy to mobilize allies
- As a side-effect of being more socially connected among themselves
How can we distinguish the diversity and discrimination hypotheses (of public good provision) (India)
- Diversity: villages with more diversity do NOT get fewer public goods
- Discrimination: villages with more upper castes do get more public goods
– 4 more hours of electricity
– From 77% to 97% chance of having a primary school
Definition of constructivism
Identities are not fixed but created by social interactions and political manipulation
How can we twist identities to promote development?
- If people of the same identity trust each other and are more willing to invest together, we need more inclusive identities
- Overlaying ethnic identities with civic identities
- eg. in Tanzania, nation-building” has promoted inter-ethnic cooperation
– A common language (Swahili)
– National identity in the school curriculum
– Village councils replace tribes
– Tanzania provides more public goods than Kenya in diverse communities
