L8: breaking the rules - clientelism and corruption

Democracy promotes broader development by

• accountability for politicians in enforcing the rules and delivering development

• Credibility for the protection of (property) rights

Are there any developmental tasks democracies are particularly bad at?

1. Short-term bias

2. An electoral cycle

3. A concrete bias

4. *Speed of reaction —> less decisive, slow reactions

   • Gaining consensus, decision making is just a slower process as it needs to be agreed upon by more branches or people 

development tasks democracies are bad at: 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 ideas

• What policy makes sense depends on when the next election is

  • There needs to be benefits during the election period bc otherwise you most likely wont be elected

• Picture: Policy B = an investment

  • Could be climate change —> green living

development tasks democracies are bad at: Electoral cycle

• Voters remember recent events more sharply

  • Things that happened a long time ago people wont remember and politicians know this —> use this to their benefit

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

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

  • Forbearance to consumers and businesses for electoral support

    • Ex. Politicians might not be so eager to force people to pay up during election times, so they will be happy with the regime at the time of election —> forbearance inline with election periods

• Picture: Spending on social protection is higher at elections, goes down during the regime and then back up again the next election

development tasks democracies are bad at: 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

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

  • These are things a parent and voter will feel —> more money in pocket, kids in school

    • But quality stayed the same —> weren’t able to handle the increased amount of kids being sent to school

  • Quantity over quality bc politicians will get credit for more kids in school but wont matter to them if those kids are actually getting a useful education

Clientelism

The contingent exchange of material benefit for political support

• Citizens gain material benefits

• Politicians gain political support

  • Most common —> votes

Clientelism explanation

• 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

    • Even if you have a right to it, politicians can block bc they didn’t vote for them → use brokers to know who it voting for who 

  • Local Brokers monitor who you support/vote for

  • Access to healthcare depends on who you vote for

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

Varieties of clientalism

• patronage

• Vote-buying

• Relational

Patronage clientelism

Distributing public jobs To friends or supporters (the opposite of autonomy/meritocracy)

Vote-buying

Gifts, cash or services for votes

Relational clientelism

Long-term ties of trust between parties and voters

Example of clientelism

motorbike taxi drivers lined up to get cash from candidate (striped orange and black shirt) to buy their votes and support

How does clientelism affect development?

Can have benefits but is generally harmful to development

Harms public services

1. Private over public goods

2. Less autonomy

3. Lack of accountability

4. Property rights protection less credible

Clientelism affect development: public goods

private goods over more efficient public goods

• handouts instead of infrastructure

• Can’t control public goods

Clientelism affects development: less autonomy

a patronage bureaucracy has less autonomy

• in Brazil, students test scores get worse when a new party replaces teachers

  • Education suffers bc of patronage

Clientelism affects development: lack of accountability

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

• Inverts democratic accountability

  • Normally voters hold politician accountable

  • Clientelism leads to politicians holding voters accountable —>are they voting for them 

Clientelism affects development: less credible

property rights protection is less credible

• in Côte d’Ivoire, land rights depended on who you voted for

Who is to blame for clientelism?

• bureaucrats

• Voters

Who is to blame for clientelism? Bureaucrats

• 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 changed

    • More skilled but still have the same politics

• Politicians fault?

who is to blame for clientelism? Voters

voters do demand clientelism

• Relational clientelism → many demands on their politicians so they fold and give them what they want

  • Voters are demanding it bc the system is failing them

• What is the alternative?

  • Voters know if you promise good governance, infrastructure and good education, politicians wont deliver → no good credibility

    Have never seen it happen

    • They know that they will get the bag of rice so that is what they ask for

      • Clientelism keeps them alive → no ones fault individually

Programmatic politics

the opposite of clientelism

• Politicians offer distinct programs: policies and public goods

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

  • Based on their objective socioeconomic characteristics

  • Not their political behaviour

Programmatic politics: Mexico social development programs example

Pronasol

• more people voted for it bc you would not get it if you didn’t

Progresa

• less voted, but more people actually got the benefits of the program

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 Brazil

OR

• Democracy creates 'competitive clientelism'

  • Instead of clientelism disappearing , they are competing → accelerated

• Democracy in Africa has had a different effect : Nigeria, Kenya

• An incumbency advantage in resources for clientelism

*Programmatic is better for development but how we get it is not straight forward

how does democracy affect clientelism? Mexico example

• democratization led to more programmatic social policies

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

  • Threat of violence if clientelism continued - Zapatista Rebellion → led to an actual resolution of poverty

  • The opposition controlled the legislature so could constrain the government's discretion → balance of power

Corruption

the misuse of public power for personal gain

• personal gain = economic and/or political

Examples

• bribery

• Extortion

• Fraud

• Kickbacks

• Collusion

2 types of corruption

1. Petty

2. Grand

Petty corruption

• Systematically spread in many countries —> ‘normal’

• Smaller amount for each bribe (5-100 dollars)

• 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 → Unsafe drivers

    • Once you have paid, you get the license - don't take the test bc they have already gotten the license

Grand corruption

• How do you get money out of gov and into our personal pockets

• Millions of dollars

• '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$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: US$4.5bn Made to promote investment in Malaysia → used as front to launder money

  • Channeled back to the prime minister and their party

• 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 harms development

1. Wasting scarce resources

2. Discouraging investment and merit

3. Weakening institutions

4. Undermine trust

Corruption harms development: wasting scarce resources

• US$3.6tr per year, 5% of global GDP

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

Corruption harms development: discouraging investment and merit

• Corruption demands prevent construction being completed (or started)

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

• If you know it will be stopped, you wont invest → too high a risk

  • Same for international and national investment

Corruption harms development: 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

  • Had 4 stories more than it was premiered to have, no escape routes, wrong building materials → happened bc bribed people checking for safety

• Forbearance

Corruption harms development: undermining trust

Gov is benefiting and the people are not

Green line is trust in gov —> less likely to pay taxes, get vaccinated, etc

Where does corruption come from?

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

  • Rather than a root cause

    • Anti-corruption campaign can lower it, but wont get to the rooted cause

      • Root cause = weak institutions and weak state

• Not about bad people but bad systems and institutions

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

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

1. Can help protect property rights

2. Corrupt politicians have more power for enforcement

3. Financing electoral campaigns

4. Informal institution that is normalized

Corruption useful to citizens: help protect property rights

• paying off the police secures your investment

• Fast development in Bangladesh only possible bc of corruption

  • None of the industries and jobs it created would be there without corruption

Corruption useful to citizens: corrupt politicians have more enforcement power

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

• Voters support corrupt candidates

  • Why? Corrupt politicians get things done!

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

  • Either nothing happens with it → stays in bank

  • OR it is used to develop →build the road or whatever is the cover for the stolen 10%

Option between not corrupt and nothing gets done OR corruption and things do change

Corruption useful to citizens: financing electoral campaigns

Essential to political competition where there's no public funding

• Electoral cycles in corruption

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

  • In Russia, sourced from firms with public procurement contracts

corruption useful to citizens: informal institution becomes normalized

Practicing corruption isn’t seen as bad → it is how citizens survive

• Petty corruption is moralized

  • Okay to pay a bribe bc that is how the system works

  • Systemic → follow system

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

• Challenging corruption is challenging a social norm —> hard to do

Does anti-corruption work?

If corruption is a social norm and systemic then most likely no

• 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

Corruption can be compatible with development

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

• If investment happens despite corruption

  • The corrupt have their investments protected

  • The people investing protected by gov?

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

  • The West got rich through corruption, violence

  • These shows (Peaky Blinders, Gangs of New York) show peak industrial times in the West → through corruption

     

     

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 200

  • 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 corruption

Summary

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