Lecture 8 - Breaking the Rules - Clientelism and Corruption

Democracy promotes broader development by: (5)

1. Accountability for politicians in enforcing the rules and delivering development

2. Credibility for the protection of (property) rights

3. Eg. Democracy benefits health:

   1. Inc life expectancy

   2. Greater calorie consumption

   3. Longer demos reduce infant mortality

Developmental tasks that demos are bad at - 3 challenges

• Short-term bias

• An electoral cycle

• A concrete bias

Short-term bias (4)

1. Even well-meaning politicians need to worry ab re-election in 4 years' time

2. Less attention to climate change, pensions for ageing populations

3. Commitment prob: Why invest now if successor might cancel it?

   1. Esp as successors prefer to claim credit for own ideas

4. Only care ab either Policy (A/B) dep on when next election is → e.g. Climate Change too high costs and benefits in the future (post election so doesnt matter)

   

An electoral cycle (6)

1. Voters remember recent events more sharply

2. So politicians concentrate investments + stimulate econ just before an election

3. E.g. Africa 

   1. Proportion spending on social protection -> spending taken away after election+ rises when election coming up 

4. Unpaid electricity bills spike by 3% points in election years in Uttar Pradesh, India

   1. Forbearance to consumers + businesses for electoral support -> Gov wait until after election to force them to pay electricity bill 

A concrete bias (5)

1. Development requires many 'hidden' inputs, eg. teacher training, management, oversight, maintenance

2. But politicians invest only in what voters can see + reward: Concrete buildings, ribbon-cutting events (on visible roads/schools opened up + built but not when medicine delivered/maintenance that are hidden to voters) 

   1. Many villages have too many schools that were never maintained + only keep building more for pol support 

3. Democratization in Africa led to abolition of school fees + many more children in schools, but no investment in quality of teaching -

   1. Visible: many children in school that gives pol support (quantity) over hidden: no quality education/trained teachers (quality) 

Clientelism (9)

1. Definition = Contingent exchange of material benefit for pol support 

2. Rules for neutral distribution exist on paper

   1. Eg. everyone has a right to healthcare

3. But are broken/twisted in practice

   1. Bureaucrats, politicians use discretion to control access

   2. Local Brokers monitor who you support/vote for

      1. E.g. In brazil after leaving voting booth citizens get asked if candidate wore a tie or not as they are only able to see a pic of candidate they voted for 

   3. Access to healthcare depends on who you vote for

4. A 'quid pro quo' between patron + client; an unequal exchange

Varieties of clientelism (3)

1. Patronage: Distributing public jobs (opposite of autonomy / meritocracy) -> e.g. if ppl vote for candidate they give their family jobs -> this was a big problem of predatory state 

2. Vote-buying: Gifts, cash or services for votes

3. Relational: Long-term ties of trust between parties and voters

How does clientelism affect development (8)

1. Clientelism harms public services:

   1. Private goods over more efficient public goods

      1. Handouts instead of infrastructure

   2. A patronage bureaucracy has less autonomy 

      1. In Brazil, students' test scores get worse when a new party replaces temporary teachers

   3. A lack of accountability

      1. Voters must vote for their patron, not best candidate

      2. Inverts democratic accountability -> politician holds you accountable not you to them

   4. Property rights protection is less credible

      1. In demo by police, rule of force..

      2. With clientelism they depend on whether you support gov

      3. E.g. In Côte d'Ivoire, land rights depended onwho you voted for

Who is to blame for clientelism (2)

• Bureaucrats?

• Voters?

Bureaucrats? (6)

1. Donors often use aid to do 'capacity building' to reduce clientelism

   1. Training for bureaucrats

   2. New IT system

   3. Revising inst rules

   4. New organizations

2. But capacity building just makes bureaucracies more efficient at clientelism

   1. The pol incentives haven't change

Voters? (2)

1. Voters do demand clientelism -> also when only alternative 

2. It depends on alternative -> voters are wise to ask for exchanges because they themselves know politicians are not going to transform country 

Opposite of clientelism - Programmatic politics (6)

1. Politicians offer distinct programs: policies + public goods

2. Can target groups of citizens, eg. women, poor

   1. Based on their objective socioeconomic characteristics

   2. Not their pol behavior

3. E.g.ANC Manifesto 2019 

4. E.g. Mexican social development programs

E.g.ANC Manifesto 2019

E.g. Mexican social development programs

How does democracy affect clientelism (6)

1. Demo encourages programmatic parties + broad appeals using public goods

   1. PAN in Mexico

   2. Workers' Party (PT) in Brazil

2. OR -> Demo creates 'competitive clientelism'

   1. Nigeria, Kenya -> meeting more demands, clientelism got accelerated, this party gives you 20 i will give you 40 $

   2. An incumbency advantage in resources for clientelism

Democratization in Mexico (4)

1. Led to more programmatic social policies

   1. State had capacity to deliver + monitor Progresa / Oportunidades

   2. Threat of violence if clientelism continued - Zapatista Rebellion (rebelled against clientelism as it did not give them benefits as they were in opposition of gov) 

   3. The opposition controlled legislature so could constrain gov discretion

Corruption - Definition (6)

1. Misuse of public power for personal gain 

   1. Bribery

   2. Extortion

   3. Fraud

   4. Kickbacks

   5. Collusion

2 types of corruption

• Petty corruption

• Grand corruption

Petty corruption (4)

1. Bribes to police to pass a roadblock

2. Bribes to get a driving license faster

   1. Average payment is twice official price in India -> if want it in a few weeks then need to pay twice if not it will take forever

   2. In India -> Drivers don't really take exam -> Unsafe Drivers

Grand corruption (5)

1. 'Carwash' ('Lava Jato') in Brazil: contractors for Petrobras colluded on how much to bid, raising prices + channeling >US$2bn to politicians

2. Goldenberg in Kenya: Fake importing of US$1bn of gold + diamonds paid for by Central Bank to finance election campaign

3. Anglo-Leasing in Kenya: $740m in Up-front payments for security services never delivered; redirected to politicians

4. 1MDB in Malaysia: US$4.5bn laundered from gov development corporation, channeled to PM Razak + his party,UMNO

5. Truong My Lan in Vietnam: US$44bn of loans,93% of Saigon Commercial Bank's lending, to its main owner to buy real estate

Costs of Corruption for development (5)

1. Corruption harms development

   1. Wasting scarce resources

   2. Discouraging investment + merit

   3. Weakening institutions

   4. Undermining trust

Wasting scarce resources (2)

1. US $3.6tr per year, 5% of global GDP

2. Uganda 1991-95: Only 13% of budgeted funds reach schools

Discouraging investment + merit (2)

1. Corruption demands prevent construction being completed (or started)

2. Bureaucrats pay for jobs where they can be corrupt

Weakening institutions (4)

1. By definition, corruption is rule-breaking

2. How you're financed -> how you govern

3. Eg. Bangladesh Rana Plaza collapse 2013 -corruption led to safety standards being violated

4. Eg. Donor-funded mayors in Colombia have double rate of deforestation due to not enforcing environmental rules (forbearance)

Undermining trust

Eg. Bárcenas scandal, Spain, 2013 -> made the level of trust in the government go down

But corruption may be a symptom of weak institutions and a weak state (6)

1. Rather than a root cause

2. Corruption is useful for citizens in developing countries to address systemic problems:

   1. Corruption can help protect property rights

   2. Corrupt politicians have more power for enforcement

   3. Corruption is electoral campaign financing

   4. Corruption is an informal institution that becomes normalized

Corruption can help protect property rights

Paying off police secures your investment -> E.g. Bangladesh textile industry even tho no safe standards but there was investment + got women many high paying jobs

Corrupt politicians have more power for enforcement (3)

1. Being tough/corrupt can help deliver projects where there's no embedded autonomy

2. Voters support corrupt candidate - Muhammed Juhabadeen re-elected 5 times even tho he was a criminal but was really popular -> citizens liked him because corrupt politicians get things done (know how to bribe + push bureaucrats to stay in line even if not sustainable) 

3. If 10% is stolen, what happens to the 90% -> some countries the 90% never happens and there is no investment (road not built), other countries actually deliver change and there is an investment (road built)

Corruption is electoral campaign financing (5)

1. Essential to pol competition where there's no public funding

2. Goldenberg scandal: Financed food distribution to voters + cars to bribe politician

3. Electoral cycles in corruption

   1. Politicians need lots of cash in weeks before an election

   2. In Russia, sourced from firms w public procurement contracts

Corruption is an informal institution that becomes normalized

More than a third of people in Mexico and Nigeria say that other ppl believe it is okay to pay a bribe

If corruption is systemic, a social norm, and a symptom of deeper problems: (11)

1. Anti-corruption efforts mostly will not work

   1. Strict formal rules don't change systemic norms/incentives

   2. Can a corrupt system reform itself?

   3. Strong incentives for isomorphic mimicry

2. Targeting corruption may do nothing to strengthen underlying institution/state

3. Despite decades of anti-corruption projects in Sub-Saharan Africa:

   1. Average CPI declined from 36 to 29 since 1998

4. Corrupt' countries can develop quickly, eg. China, West

   1. If investment happens despite corruption

      1. The corrupt have their investments protected

   2. If weakness of state + inst is addressed by deeper pol processes

Does democracy increase corruption? (8)

1. New democracies have weak institutions:

   1. More competition -> More electoral financing needed -> More corruption

   2. Authoritarian Kenya was less corrupt because leaders limited corruption to 'enlarge pie'

   3. Demo makes corruption 'visible': NGOs + Free Media

      1. Undermining legitimacy

2. In consolidated demos:

   1. Active anti-corruption agencies w autonomy

   2. Institutions + rule of law are strengthened w a rich state

   3. Free media, free speech, civil society are effective

   4. Informal inst (social norms) against corruption