Causes Of Corruption

At one level, corruption can be seen as a problem of multiple equilibria. When bribes are rare, someone who sees a bribe or bribe offer might reasonably expect to be supported for exposing it, and fear being exposed and punished for going along with it. But when bribes are common, one can expect to be punished more for trying to expose corruption.

At another level, however, many policies can reduce corruption. Bounties paid to any who expose corruption can encourage decentralized policing that central powers can find it hard to suppress. And eliminating government agencies whose social benefit is doubtful or moderate, even without corruption, can eliminate opportunities for corruption. I’m told many places are eliminating drivers licenses, to eliminate corrupt issuing of such licenses.

Since policies can discourage corruption, the deeper question is what makes politicians expect to not be rewarded for supporting such policies. Perhaps the people who benefit from corruption have more political information to know how to vote well, and more influence on other voters. In this case they might in effect have more votes, when votes are weighed by voter information and influence. I find this implausible, however.

Perhaps voters find it plausible that the above anti-corruption policies would work, but also find other ineffective anti-corruption policies similarly plausible. If ordinary voters are fooled by these ineffective policies, but those who benefit from corruption are not fooled, politicians may prefer to adopt such ineffective policies. By the time voters find out the policies didn’t work, the politicians may be long gone.

This raises the question: why do politicians have such short time horizons? Why don’t they expect to win by first implementing corruption-reducing policies, and then waiting for corruption to actually go down, before being rewarded by voters? The puzzle becomes more stark when one notices a usual way world-round to get long term project commitment: hire a multinational firm with a global reputation to protect. Yes, NGOs tend to prefer to hire local organizations to achieve charity aims. But they are often “surprised” to see the money stolen and nothing done. When folks really need something done, they hire long-lived multinational firms.

So the obvious solution to reducing corruption, and promoting good policy more generally, is for big multinationals with reputations to protect to run as candidates in local elections! They’d have a long term view that would make wary of making promises they could not keep. Of course upon hearing this suggestion you immediately know why this can “never be”: nationalism. Even voters of basket-case nations couldn’t stand the “humiliation” of publicly admitting they needed to hire foreigners to do something they couldn’t do for themselves.

And so let us admit that a big root cause of political corruption, and of inefficient policy more generally, is nationalism: the reluctance to hire organizations that seem to do the best worldwide in keeping reputations for effectiveness. Of course people do admit this daily in private, as they choose to use products made and distributed by multinational firms. But alas voting is a far fest of idealism, where the ideal of nationalism has more influence.

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  • RJB

    How closely does a long-lived political party adhere to your solution, after accounting for the fact that they avoid having a for-profit organization take on a public service position? They have reputations too. Insert jokes about for-profit politicians and “public service” in scare quotes here.

  • http://twitter.com/sclopit Stefano Bertolo

    but big multinationals with reputations to protect have entire, well resourced, departments whose job is to protect their reputation, i.e. to prevent the public from forming the opinion that the multinational is corrupt (whatever the facts on the ground might be).

  • Ilya Shpitser

    Multinationals tend to have a “home nation state,” and could reasonably be expected to be influenced by this state in hard-to-detect, but potentially dangerous ways.

  • http://entitledtoanopinion.wordpress.com TGGP

    I think Mencius Moldbug had a similar argument for colonialism, blaming nationalism (bigotry, pure and simple!) for opposition to its revival, whether that meant conquest at the hands of Israel or rule by join-stock corporations (possibly one with military experience).

    • http://entitledtoanopinion.wordpress.com TGGP

      Also, Paul Romer advocates just this (well, not having them run for election) as an anti-corruption measure. Crown Agents is a non-profit, but it has existed since at least the mid 19th century.

  • David

    We’ve handed over a substantial part of warfighting to multinational corporations. Did that help with corruption? Just think back to the corporate entity once known as Blackwater. I think there are two lessons here. One is that the reputation harm to a multinational is often less than the benefit of raking in forklift loads of dirty money. The second lesson is that if brazen acts of corruption do finally tarnish a brand, the corporation can opt for a rebranding.

  • Seem

    Nationalism also means a multinational’s reputation at home is not harmed so much by its actions abroad. Who cares what Apple does in India as long as I get new gadgets here in the west? Plus foreign employees of the multinational would probably take any blame.

  • T L Holaday

    Suppose American voters were to be persuaded by this argument. If a candidate from an anti-corruption Danish for-profit stood for election in a U.S. county which used Diebold voting machines, would not the Diebold technicians simply set the machines to ignore votes for the candidate?

  • http://twitter.com/basil_seal Basil Seal

    Why would a multi-national firm run for office? I wouldn’t think the direct pecuniary benefits would be enough. There may be indirect benefits that would provide sufficient incentive… but this would (justifiably) given reason for citizens not to trust multi-national firms.

    What you’re really suggesting is the need for a strong ‘brand’ that survives on reputation. Political parties are supposed to do this, but your characterisation suggests that they are not strong enough and citizens vote for people, not parties. Or at the very least, poor bahaviour by politicians cannot tarnish the parties’ reputation.

  • http://www.detailedabstractions.com Michael S. Langston

    Let’s not discount culture… you can imagine many decisions made by the US government which enhanced certain private companies’ wallets being defined as corruption even if none really existed….. the whole ‘follow the money mantra’ as if even Rosie the Riveter’s main motivation for WWII was a good factory job.

    Not an overall bad idea given independent oversight should be sought where possible, just not sure if any really independent firms exist.

    Maybe a business idea :-)

  • JGWeissman

    It seems silly to worry about why multinational firms don’t run for local office when firms don’t run for local office. Candidates for government office are people (not legal fiction people).

  • Scott Messick

    I agree with JGWeissman. Robin, you seem to overlook a more basic reason why people would reject this: they would reject corporations holding any office at all. The inhumanness of corporations makes people uncomfortable, even if some of the inhuman qualities would actually be advantageous here, benefiting society overall.

  • Doug S.

    By “big multinationals with reputations to protect” you mean multinationals such as British Petroleum, Goldman Sachs, Blackwater, Halliburton, Firestone Tire and Rubber Company, and <a href="http://en.wikipedia.org/wiki/Bhopal_disaster&quot; Union Carbide?

  • http://hanson.gmu.edu Robin Hanson

    RJB, political parties have more reputation, as they exist longer, but multinationals can offer even more data on their performance, and weak parties can less control member behavior.

    David and Doug, multinationals are eager to preserve their reputation for giving customers what they want. When hired by administrations, they do what those administrations want, not what the public wants.

    Basil, yes we’d want to greatly raise the fees paid to those who win election, to entice such organizations to run for office.

    JG and Scott, I agree the law now bars firms; I’m say this is a cause of our poor policies.

    • Thomas Bartscher

      Multinationals already have a bad name, why should they now try to make a good one? What’s even more important: they don’t really provide an alternative to political parties. They’re one and the same, there’s no difference that would survive for more then a few years.

  • gita kakumaanu

    IN INDIA CORRUPTION IS PREVALENT AMONGST POLITICIANS AND BUREAUCRATS, SOMETIMES WE WONDER WHETHER THE ILLITERATE POLITICIAN IS ONLY CORRUPT, NOT SO, IN INDIA THE ILLITERATE POLITICIAN AND THE EDUCATED POLITICIAN/ BUREAUCRAT ARE EQUALLY CORRUPT. MANY A TIME THE EDUCATED BUREAUCRAT TEACHES THE POLITICIAN THE WAYS TO CORRUPT DEALS.THE LAW MAKER IS THE LAW BREAKER, BUT HE OR SHE WILL TALK AS THOUGH THEY ARE THE MOST VIRTUOUS BEING’S IN THIS WORLD.

    • poopyfacetomatonose

      why are you yelling

  • Akriti S 04 05

    corruption is the burning topic these days . I can’t understand that why people have become so self centered . Today the thing which matters for all of us is just money and this is what  causes corruption , is this why the leaders of our past have struggled so much . Though we have got freedom from Britishers but i don’t think That ever in our life we would succeed to freed ourself from corruption .
    IT IS THE HIGH TIME WHEN WE ALL SHOULD JOIN HANDS TO THROW OUT CORRUPTION FROM OUR COUNTRY AND MAKE IT THE MOST DEVELOPED COUNTRY IN THE WORLD. AND MAKE THE EFFORTS OF OUR LEADERS USEFUL

  • Mulugeta Kassaye

    what does it mean political weakness is causes of corruption

    • bitA

      nothing!!!!!!!!!!!!!!