Class 8: Breaking the Rules - Clientelism and Corruption

1. Electoral Distortions

• democracy promotes broader development by

  • 1) 1. Accountability for politicians in enforcing therules and delivering development

  • 2. Credibility for the protection of (property) rights

• Eg.

  • Democracy benefits health:Increased life expectancy McGuire (2010)

  • Greater calorie consumption Blaydes and Kayser (2011)

  • Longer democracies reduce infant mortality Gerring et al (2012)

• question: are there any developmental tasks democracies are particularly bad at?

  • we only care abt things that happened today —> politicans focus on things today

  • getting a majority takes a while to form a coalition

  • these challenges are motivated by clientelism, corruption

1. Electoral Distortions

• 1. A short-term bias

  • Even well-meaning politicians need to worry about re-election in 4 years' time

  • Less attention to climate change, pensions for ageing populations

  • Commitment problems: Why invest now if my successor might cancel it

  • Especially as successors prefer to claim credit for their own idea

depends on when the election is for policy a and policy b

• for climate change the costs are now and benefits are later = for a politician this is stupid

• long term challenges are difficult for democracies to meet

• 2. An electoral cycle

  • Voters remember recent events more sharply

  • So politicians concentrate their investments and stimulate the economy just before and election

    • things that happened a long time ago don’t affect politicians

    • policians save for policies when it comes near the elections, so they can reward us

  • Unpaid electricity bills spike by 3% points inelection years in Uttar Pradesh, India

    • Forbearance to consumers andbusinesses for electoral suppor

example: spending is taking away and ramped up when the election comes

people dont have to pay closer to the election= debates on the electoral cycle

• 3. A 'concrete' bias

  • 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

    • ex: no one cuts ribbons when teachers are getting trained , these less visible activities are not visible

    • they only invest in visible concrete things like clinics and schools

    • many villages have too many schools, but are not maintained

    • build to get political credit

  • Democratization in Africa led to the abolition of school fees and many more children in schools, but no investment in quality

    • no quality because parents can’t see it

    • quantity>quality

2. Clientelism

• Clientelism: the contingent exchange of material benefit for political support

  • ex: you vote for me you get 20$: it is a deal. each party is contingent

  • citizens: material benefits

  • politicians: political support

• 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

  • Local Brokers monitor who you support/vote for

    • so they know who voted for who

  • Access to healthcare depends on who you vote for

• A 'quid pro quo' between patron and client; an unequal exchange

• Varieties of Clientelism

  • Patronage: Distributing public jobs (the opposite of autonomy/meritocracy)

    • clientelism w/ jobs

  • Vote-buying: Gifts, cash or services for votes

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

    • ex: you can go to that politicans if someone in your family gets sick

How does clientelism affect development?

• theres a trade off between good and bad , but generally bad for development

• Clientelism harms public services:

• 1. Private goods over more efficient public goods

  • Handouts instead of infrastructure

• 2. A patronage bureaucracy has less autonomy

  • In Brazil, students' test scores get worse when a new party replaces temporary teachers (Akhtari et al 2017)

• 3. A lack of accountability

  • Voters must vote for their patron, not the best candidate

  • Inverts democratic accountability (Stokes2005)

    • if we don’t have a pressue to do well maybe the politicians will be more corrupt

• 4. Property rights protection is less credible

  • In Côte d'Ivoire, land rights depended on who you voted for (Boone 2009

  • contingent on your support because the gov doesn’t provide this right (wheras democracy does).

Are bureaucrats to blame? clientelism

• Donors often use aid to do 'capacity building' to reduce clientelism

  • Training for bureaucrats

  • New IT system

  • Revising institutional rules

  • New organizations

• But capacity building just makes bureaucracies more efficient at clientelism

  • The political incentives haven't change

    • it makes them actually more capable, theres still votes to be won through clientelism

clientelism

Are voters to blame?

• Are voters to blame?

  • Voters do demand clientelism

    • because theres no alternative

• It depends on the alternative:

  • example: "voters know if you promise them good gov and infrastructure they can’t deliver so they ask for material benefits like rice where you can guarantee it

  • everyone goes w clientelism cuz gov cant provide public goods

• The opposite of clientelism is 'Programmatic' politics

  • Politicians offer distinct programs: policies and public goods

  • Can target groups of citizens, eg. women, the poor

    • Based on their objective socio economic characteristics

    • Not their political behaviour

• example: Mexican social development programs

  • before pronasol (clientelism) effective to win votes

  • progresa (w/o clientelism): not as good as getting votes but has poverty reduction

How does democracy affect clientelism

• Democracy encourages programmatic parties and broad appeals using public goods

  • Eg. the PAN in Mexico

  • The Workers' Party (PT) in Braz

  • = helps improve quality of governance

  • In Mexico, democratization led to more programmatic social policies

    • The state had the capacity to deliver and monitor Progresa/Oportunidades

    • Threat of violence if clientelism continued - Zapatista Rebellion

      • rebels against clientelism

    • The opposition controlled the legislature so could constrain the government's discretion

• OR

• in africa competitive clientelism where theres more clientelism

• Democracy creates 'competitive clientelism'(Lindberg and Morrison 2008)

  • Nigeria, Kenya

  • An incumbency advantage in resources for clientelism

  • = accelerated clientelism

=clientelism can harm development and programmatic policies are prob better. Democracy alone is not enough

3. Corruption

• Definition: Corruption

  • The misuse of public power for personal gain

    • Bribery

    • Extortion

    • Fraud

    • Kickbacks

    • Collusion

• Petty Corruption

  • for any service you pay

• Bribes to police to pass a roadblock

• Bribes to get a driving license faster

  • Average payment is twice the official price in India (Bertrand et al 2008)

  • Drivers don't really take the exam -> Unsafedrivers

• Grand Corruption

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

  • Goldenberg in Kenya: Fake importing of US$1bnof gold and diamonds paid for by Central Bank tofinance election campaign

    • imported gold and diamond but didn’t actually import it

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

  • 1MDB in Malaysia: US$ 4.5bn laundered from government development corporation, channeled to Prime Minister Najib Razak and his party,UMNO

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

corruption : Imagine Kenya has launched a 'Zero corruption' reform

1. Will this work?

2. Will it boost development?

• Corruption harms development

  • 1. Wasting scarce resources

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

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

      • because investments require money to get benefits later

      • you waste investment opportunities

        • less money for education and health care

  • 2. Discouraging investment and merit

    • Corruption demands prevent construction being completed (or started)

    • Bureaucrats pay for jobs where they can be corrupt (Wade 1982

  • 3. Weakening institutions

    • By definition, corruption is rule-breaking

    • How you're financed -> how you govern

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

    • Eg. Donor-funded mayors in Colombia have double the rate of deforestation due to not enforcing environmental rules (forbearance)(Harding et al 2023)

  • 4) Undermining trust

    • Eg. Bárcenas scandal, Spain, 2013

where does corruption come from?

• But Corruption may be a symptom of weak institutions and a weak state

• Rather than a root cause

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

• 1. Corruption can help protect property rights

  • Paying off the police secures your investment

  • ex: corruption allowed to get rana plaza building

  • ex: historically many investments in the west happened because of corruption

• 2. Corrupt politicians have more power for enforcement

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

  • Voters support corrupt candidates (Vaishnav2017)

  • If 10% is stolen, what happens to the 90%

    • corruption can actually help enforce some rules

    • politicians know how to corrupt people and they can even use violence to threaten bureaucrats to do their job

    • theres a difference on corruption that allows for some investments vs a person that keeps all the money

• 3. Corruption is electoral campaign financing

  • Essential to political competition where there's no public funding

  • most developing countries don’t have money to finance parties/politics so they need it

    • ex: Electoral cycles in corruption

      • Politicians need lots of cash in the weeks before an election

      • In Russia, sourced from firms with public procurement contracts (Mironov and Zhuravskaya 2011

• 4) Corruption is an informal institution that be comes normalized

  • More than a third of people in Mexico and Nigeria say that other people believe it is okay to pay a bribe (Agerberg 2021)

    • because its widespread and systemic

• if corruption is systemic, a social norm, and a symptom 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

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

    • gets worse ; cuz the whole system is based on it

example: you can have corruption and int development

• Corrupt' countries can develop quickly, eg. China, the West

  • corruption helped grease the wheels and help protect us

  • this is also how the west got rich

• If investment happens despite corruption

  • The corrupt have their investments protected

• If the weakness of the state and institutions is addressed by deeper political processes

Does democracy increase corruption?

• New 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' (Mwangi 2008)

  • Democracy makes corruption 'visible': NGOs and Free Media

    • Undermining legitimacy

• In consolidated democracies:

  • Active anti-corruption agencies with autonomy

  • Institutions and the rule of la w are strengthened with a rich state

  • Free media, free speech, civil society are effective

  • Informal institutions (social norms) against corruption62 / 63

Conclusion

• 1. Electoral Distortions

  • Even if democracy boosts social services overall...

  • Short-termism, electoral cycles and a 'concrete' bias harm the quality and sustainability of development

• 2. Clientelism

  • Buying votes harms accountability and weakens public services

  • Programmatic politics reduces poverty but relies on specific types of democratic competition

• 3. Corruption

  • Discourages investments and weakens institutions

  • But may just be a symptom of weak institutions and a weak state

  • Eliminating corruption is not necessary or sufficient for development