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Chang, Ha-JoonKicking Away the Ladder: Development Strategy in Historical Perspective (2002)
Category: economy; history; industrial policy; Rating: 5/5
Summary: Kicking Away the Ladder:How the Economic and Intellectual Histories of Capitalism Have Been Re-Written to Justify Neo-Liberal Capitalism (Ha-Joon Chang)

Much has been said of the smug arrogance, cultural aloofness and end-of-history conceit characterizing the neoliberal Washington Consensus, the philosophy that a one-size-fits-all set of “good policies” (e.g. privatization, liberalization, deregulation) and “good institutions” (e.g. patent and IP protection system, etc) can – and must – be transplanted onto any country, irrespective of its historical or cultural traditions, if it were to ever join the developed “international community’. The general bankruptcy of this approach is evident from the facts on the growth, with global GDP growth during the 1960-1980 period of “bad policies” substantially higher than during the “good policies” 1980-2000 period. After seeing high growth during the earlier period, Latin America stagnated, and Africa and Eastern Europe declined during the latter; the major exception was mercantilist China.

Though always disabused by reality, from 1998 Russia to the 2008 crisis, the neoliberals retain their intellectual underpinnings by continuing to claim, like Marxists, that history itself is ultimately on their side – after all, did not Britain and the United States, the world’s greatest economic successes, rise to global preeminence through the virtues of minimal government and free trade? Not at all, argues Ha-Joon Chang in this excellent book.

Britain: From Mercantile Struggle to Kicking Away the Ladder

Take the example of Britain, alleged to be the historical laissez-faire state par excellence, in stark contrast to the stultifying dirigisme of Colbertist France. This is actually an inversion of the truth, for the French state was generally laissez-faire and backward-looking in the period between the end of Napoleon’s Continental System and the post-WW2 years (after which the state began large-scale interventions in the French economy, which experienced burgeoning growth that saw it overtake Britain’s GDP by the 1970′s). On the other hand, Britain was highly protectionist up until it established and cemented its global industrial predominance by the middle of the 19th century.

British protectionism has a long history, stretching back to medieval import substitution designed to foster an indigenous wool manufacturing industry, instead of being reliant on raw wool exports to Europe. Henry VII tried to change this by taxing raw wool exports and poaching skilled workers from the Low Countries. This kick-started the industry that would come to constitute the key element of British industrial supremacy in the 19th C.

In 1721, Walpole expanded on previous Navigation Acts to encompass mercantile measures like lower tariffs on raw materials imports, duty drawbacks on the imported raw materials used for exports, the removal of export duties, the raising of duties in imported manufactures, export subsidies and a system of quality control to maintain the reputation of British exports. The colonies were treated as captive markets and resource appendages to fuel the commerce and industry of the mother country, by measures such as the 1700 ban on (better-quality) Indian calicos, which (possibly) stifled an incipient Indian industrialization. Britain fine-tuned the terms of trade between the US colonies itself to discourage industrialization in the latter, even resorting to overt illiberal measures like outlawing rolling and slitting steel mills on the American continent.

This is how Friedrich List, a leading economist of the German Historical School, described Britain’s rise to industrial dominance in his The National System of Political Economy in 1841:

Having attained to a certain grade of development by means of free trade, the great monarchies [of Britain] perceived that the higher degree of civilization, power, and wealth can only be attained by a combination of manufactures and commerce with agriculture. They perceived that their newly established native manufactures could never hope to succeed in free competition with the old and long-established manufactures of foreigners… Hence they sought, by a system of restrictions, privileges, and encouragements, to transplant on to their native soil the wealth, the talents, and the spirit of enterprise of foreigners. …

It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations.

Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development than no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she ha hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth.

Even the 1846 repeal of the Corn Laws protecting domestic agriculture were justified by its British supporters on protectionist terms, e.g. Robert Cobden of the Board of Trade:

The factory system would, in all probability, not have taken place in America and Germany. It most certainly could not have flourished, as it has done, both in these states, and in France, Belgium, and Switzerland, through the fostering bounties which the high-priced food of the British artisan has offered to the cheaper fed manufacturer of those countries.

It was only in 1860, by which time Britain’s status as the workshop of the world was unquestioned, that it truly transitioned to a free-trade regime with the Cobden-Chevalier Treaty with France. Yet during the next fifty years it was undermined by German technological prowess and American economies of scale, and was obliged to reintroduce substantial tariffs in 1932 under the stress of the Depression-era protectionism scramble.

[International tariff rates 1820-1950, taken from Google Books].

The Protectionist Roots of Pax Americana

What about the US, then, today’s champion of free trade? This is an ironic position for it to take up, given that in the years after the Civil War and prior to the Second World War, America was the protectionist nation par excellence.

The “infant industry” theory was invented by Alexander Hamilton, the first Treasury Secretary, and the American economist Daniel Raymond. With its history of being held as a resource appendage and captive market by the British and spurred on by the War of 1812, protectionism was firmly established from 1816. A US Congressman, a contemporary of Friedrich List, said of British liberal trade theory, “like most English manufactured goods, [it] is intended for export, not for consumption at home”. President Ulysses Grant, a Civil War hero, remarked of it, “within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade”. So the populist right-wing politician Pat Buchanan makes a perfectly valid point when he condemns free trade as being un-American.

Ha-Joon Chang stresses the importance disputes over the proper level of tariffs played over the start of the US Civil War. The crux of the matter was that northern industrial interests wanted high tariffs to protect themselves from British competition, whereas the South, which had no industries of its own and an idle, rapacious elite, wanted lower tariffs to make British goods more affordable. There were frequent spats on this matter from the 1830′s; slavery only provided the fuse. (Chang points out that Lincoln was deeply racist by modern standards and only emancipated the northern slaves in 1862 as a strategic move against the South). Lincoln’s top economic advisor, Henry Carey (described by Marx as the only American economist of any significance), argued that British free trade was an imperialist ploy to consign the US to a future of primary production.

Following the North’s political and military triumph, US tariffs between the Civil War and World War Two remained the highest amongst those of any industrial power, with the sole exception of Russia. As with its British imperial predecessor, the American superpower only ditched free trade once it achieved a global industrial dominance made possible by the wartime devastation of its European competitors. Though tariff rates are now very low, the US somewhat compensates with voluntary export constraints, (textiles) quotas, agricultural subsidies, and unilateral sanctions against countries suspected of dumping, so it remains far more protected than Britain was during the Victorian Golden Age of globalization. Likewise there is extensive state support for R&D, which enabled US success in hi-tech areas like computers, the Internet, aerospace, and biotech.

State Intervention Critical to Economic Sovereignty

The vast majority of other now-developed countries (NDCs) also employed extensive protectionism and state intervention during their periods of successful economic convergence. Though Germany eschewed the kind of “blanket protectionism” used in mercantile Britain and the pre-superpower US, the state was far more active in promoting modern technology, industrial espionage, technological “demonstrations”, teaching science at its world-class universities, and pioneering social welfare by the late 19th C to defuse social tensions. Though Japan was actually forbidden from raising its tariff rates above 5% in the first decades following the Meiji Restoration, it compensated by investing heavily in infrastructure, education, and the acquisition of foreign technologies and institutions. Sweden had high tariff rates (especially in the early 20th C), an unrivaled record in public-private cooperation, and “strategically used tariffs, subsidies, cartels, and state support for R&D to develop key industries, especially textile, steel, and engineering”. It also preserved social harmony through the Saltsjöbaden agreements of 1936, in which labor committed to restraining wage demands in return for the employers committing to building one of the world’s most comprehensive welfare states. As for some of the smaller nations:

There were some exceptions like the Netherlands and Switzerland that have maintained free trade since the late 18th century. However, these were countries that were already on the frontier of technological development by the 18th centuries and therefore did not need much protection. Also, it should be noted that the Netherlands deployed an impressive range of interventionist measures up till the 17th century in order to build up its maritime and commercial supremacy. Moreover, Switzerland did not have a patent law until 1907, flying directly against the emphasis that today’s orthodoxy puts on the protection of intellectual property rights (see below). More interestingly, the Netherlands abolished its 1817 patent law in 1869 on the ground that patents are politically-created monopolies inconsistent with its free-market principles – a position that seems to elude most of today’s free-market economists – and did not introduce another patent law until 1912.

Contrary to the conventional wisdom, it was the open economies that failed to develop rapidly. Not much chance for European colonies / captive markets to develop an indigenous industrial base under the constant, unchecked pressure of superior European competition. Semi-independent countries like China and the Ottoman Empire were paralyzed by “unequal treaties” capping tariffs at a 5% flat rate and loss of tariff autonomy (Ha-Joon Chang points out that today the World Bank recommends a maximum 15-25% tariff rate, low and uniform, despite that the development differential between today’s poor and rich countries are vastly greater than they were a century ago). Finally, industrial leader nations (like Britain) tried to stymie the growth of competitors by preventing the outflow of skilled workers in the 18th century, machines in the 19th century, and enforcing intellectual property rights in the 20th century.

Institutions aren’t Everything

The author also points out that institutions today are far better in the developing world today, in most cases, than of NCDs at an an equivalent stage of development. For instance, despite the fact that Britain in 1820 had a similar level of development to India in 2000:

[Britain] did not have universal suffrage (it did not even have universal male suffrage), a central bank, income tax, generalised limited liability, a generalised bankruptcy law, a professional bureaucracy, meaningful securities regulations, and even minimal labour regulations (except for a couple of minimal and hardly-enforced regulations on child labour).

As such, the rich would should moderate their unrealistic demands for the developing nations to instantaneously reform their institutions to world standards. It is a difficult process that took centuries in the NDCs themselves, and besides in some cases the poor countries would be better off spending that money on other things. For instance, would it be better for Gabon to spend its (very limited) resources on hiring legions of (foreign) intellectual property lawyers to ensure a modern IP environment, or should it spend them on training its own primary school teachers? Tough choice, right?

As Tainter teaches us in The Collapse of Complex Societies, complexity isn’t always all it’s cracked up to be.

Conclusions & Lessons for the Present

The “official history” of capitalism has been highly distorted by neoliberals with little appreciation of economic history, either maliciously, or because of their ideological blinkers. The reality is that even today’s stalwarts of free trade and liberalization only got to the top though blanket protectionism and intelligent state intervention, a tradition that has been carried on by the East Asian tigers (Korea, Taiwan, etc) – the only major non-Western nations to successfully industrialize after Japan. After they had industrialized, the new leader nation – in modern times, the US – has an interest in creating a global free trade system which could reinforce its hegemony. The poachers become the gamekeepers. The climbing followers become leaders kicking away the ladder.

However, uninterrupted free trade does eventually undermine even its guarantors. Last century, it was Germany challenging Britain. Today, it is China challenging the US.

Leveraging its cheap, docile and decently-educated labor force, China used the window of opportunity thrown open by US trade policy to build up the world’s premier industrial base – as of now, it produced around half the world’s steel and cement. Though it’s economy is ostensibly relatively free-wheeling, China having ditched central planning three decades ago, in practice the state remains extremely active in building up infrastructure, improving human capital and industrial espionage. It couldn’t care less about intellectual property rights, given that it has almost none of its own to protect (you don’t need innovation when you’re at the point when you can just buy or steal the next technological levels), giving it a further competitive advantage. The sheer comparative advantage it has built up in manufacturing means that overt protectionism is simply unnecessary for it.

Open trade has led to the steady deindustrialization and “hallowing out” of the US industrial base, which no longer maintains a positive balance of trade in any manufactured goods category, with the marginal exception of (heavily-subsidized) aerospace. (The effects in some European countries have been as bad, e.g. Italy’s traditional artisanal manufacturing destroyed by cheaper Chinese competition). The US machine tool industry, the heart of any industrial ecosystem, has been decisively buried by European and Asian competition. From 1999 to 2008, US automobile production declined from 13.0mn to 8.7mn units, while in the same period this figure rose amongst its main competitors like Japan (9.9mn to 11.6mn), Germany (5.7mn to 6.0mn), Korea (2.8mn to 3.8mn), and China (1.8mn to 9.3mn).

The shifting winds of history are steadily unraveling Pax Americana‘s center of gravity, threatening to send the global system into a chaotic tailspin. The paradox is that though globalization sustained US hegemony, it also contained within it the seeds of its own destruction. America has overstayed in laissez-faire land, blinded by its own instruments of success to the dangers they pose to itself.

Russia has an exceptionally strong need for protectionism and state intervention, on account of its traditional economic backwardness, highly unfavorable geography, and innate tendencies towards illiberal anarchy (in which nothing gets done at all). Hence the reason for the forward-looking, dirigiste industrial policy pursued under the Putin administration (special economic zones, clauses obligating foreign automobile companies to source a percentage of their parts from Russian suppliers, nanotechnology, etc) – and the likelihood that the state will resume its old rule as the main driver of the Russian economy in the unstable decades to come.

A few criticisms of the book. It makes the blanket statement that growth was higher during the “statist” 1960-1980 period than the “open” 1980-2000 period, but fails to consider other possible factors behind it, such as: a) the end of hyperbolic growth in oil extraction, and more generally, energy production (energy and natural resources are indispensable and highly-neglected factors of economic growth) – i.e. the appearance of limits to growth to the global economy, b) the ebbing of the electro-mechanical / petrochemical cycle and c) the end of the Flynn effect (end of IQ rise), especially pertinent given that education is the elixir of growth. In other words, the scope of the book is rather narrow – state industrial policy as the be all and end all of economic development. That said, his arguments are intuitive and convincing, if not fully complete; though then again, I doubt comprehensiveness would have been one of his aims in a book of just 140 pages.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Russia is commonly represented as one of the most corrupt countries in the world in the Western media, ruled over by Kremlin clans who sugarcoat their kleptocracy with bombastic nationalism. The most oft-cited evidence comes from Transparency International. This is an organization which aggregates surveys of foreign businesspeople and regional analysts to compile a Corruption Perceptions Index (CPI). Its verdict on Russia is decidedly unflattering; apparently, as of 2008 it was the 147th most corrupt nation on Earth. This morass of bribery and corruption will inevitably stymie its leadership’s economic development and Great Power ambitions.

I’ve criticized such views for being far too simplistic here, here and here. The crux of my argument is that the CPI measures the subjective perceptions of a narrow class of people; it does not accurately portray the extent of corruption in the wider society. For instance, according to Transparency International itself, ordinary Russians do not pay more bribes in a typical year than the Czechs, despite that the latter have a much higher CPI. Businesses and citizens do not pay more exorbitant amounts to “get things done” than is typical for the former socialist world, or middle-income nations in general. And there is compelling evidence that the extent of corruption declined under Putin from the 1990′s, though not by much. Finally, as I pointed out in Education as the Elixir of Growth, though corruption slows growth it is not a crucial factor; a well-educated workforce is far more important for long-term convergence to developed status.

Now I present a summary of an article by Dietwald Claus, Missing the Forest for the Trees, a counter-intuitive analysis of the causes of corruption, its consequences, and how to reduce it. He works from his experiences in Russia to reach global conclusions, which can be summed up by: “Corruption is the consequence of regulation and poverty: regulation creates the incentives for corruption, while poverty determines its price”. Applied to Russia, its metastasized bureaucracy and reams of red tape provide ample scope for corrupt, rent-seeking activities, especially at the higher echelons where foreign observers are concentrated. (Their impressions are reflected in the CPI and the Western media). It also explains INDEM’s findings, which I covered here, that since the late 1990′s, the incidence of corruption fell, even as the average bribe size soared.

Missing the Forest for the Trees

Dietwald Claus

Summary

After hearing all the talk of Russia’s apocalyptic-like corruption, Claus was surprised to find that in the two years he spent there not once was he approached by a bureaucrat seeking a bribe. He decided to investigate the discrepancy between media hyperbole and reality on the ground. He starts off by discussing corruption, emphasizing that it is not always bad and indeed sometimes correct and necessary, for instance to circumvent bad laws. He mentions a study on Soviet Georgia, which concluded that the inefficiencies of the planned economy actually made corruption and black markets there productivity enhancing! Another caveat is that corruption is only counted as such if it’s illegal; for instance, in many European nations American-style institutionalized special-interests lobbying and soft-money political contributions would be considered deeply unethical. (I would also note that the sleazy relations between the Wall Street oligarchy and the US government exposed by the economic crisis – e.g. see The Quiet Coup by Simon Johnson – provides further food for thought about the nature of corruption in nations with different levels of development).

He then turns to Russia, which has a very high CPI, but whose people paradoxically do not pay much to bureaucrats (less than Czechs or Ukrainians, for instance). He does a series of statistical analyses, trying to tease out the linkages between the CPI, the GCB (the Global Corruption Barometer – what percentage of the population said they paid a bribe in the past year?), the World Bank’s Ease of Business metric, and GDP per capita. One conclusion was that nations with a high CPI paid few bribes, but those with lower CPIs had a more variable experience:

No country with a score of five or more in the CPI (indicating a lower level of perceived corruption) has more than 7 percent of respondents who report paying a bribe in the past year; for most countries this figure is substantially less. For those countries whose results are weaker in the CPI 2006, there is far more differentiation in the experience of bribery.

To the contrary, GDP per capita is a much better predictor of CPI scores than prevalence of bribery! For rich nations, there is a strong correlation between the GCB (self-reported corruption) and the CPI; but the linkage becomes weaker in middle-income countries, and disappears entirely amongst low-income nations. The GCB depends more on the level of bureaucracy and regulation in a country as measured by Ease of Business, especially in less-developed nations:

Bureaucracy and regulation seem to have a much more direct effect on the willingness of ordinary people to pay bribes than they influence the perception of corruption by foreign experts and business people.

Furthermore:

…when ease of doing business is controlled for, the correlation between GCB and CPI becomes insignificant. This is a strong indicator that regulation and bureaucracy are the most important factor influencing both corruption experience and perception.

If corruption is defined as “getting things done”, then the relationship between CPI and GDP growth should be negligible, but positively correlated with Ease of Business. This is indeed the case:

The results show that the relationship between CPI and GDP growth is weakly significant, but is opposite of what is predicted by theory: the more corruption is perceived (low CPI score), the higher is GDP growth… What makes these findings even more curious is that the relationship becomes much stronger for countries with high GDP/capita (above $10,600)… For countries with low GDP/capita (below $5,000), there is no significant correlation between GDP growth over 10 years and CPI:

This is basically the same conclusion I reached in my Education as the Elixir of Growth articles. Even the Economist agrees that a link between the rule of law and growth is hard to establish.

Conclusion: Gathering the Strands (quoted, my emphasis)

I began this research because I was interested why my experience of living in Russia was so much different from the picture presented by Transparency International’s research: how is it possible that I never paid a bribe over the course of two years, even though Russia is supposedly one of the most corrupt countries in the world? And how is it possible that Russians admit to far less corrupt behaviour than Czechs or Ukrainians, even though Russia is ranked as by far more corrupt than the Czech Republic?

Based on my research and analysis, I believe that I have found at least partial answers to this question. The first is that the CPI seems to depend on the level of a countries economic development far more than on the level of every day corruption experienced by locals: the poorer a country is, the more likely it is perceived by outsiders to be corrupt – regardless of how corrupt locals are. Or to put it differently: a countries GDP per capita is a far better predictor of Perceived Corruption than the level of actual corruption experienced by locals. Only in relatively wealthy countries does the experience of foreigners align with that of locals.

This should not be surprising: foreign business people and experts in poor countries are very likely citizens of wealthy countries, or representatives of companies and organizations based in wealthy countries. Their much greater wealth relative to locals puts them in a much better position to engage in corrupt behaviour. They are also more likely to interact with people of their own socio-economic background, and will therefore encounter corrupt(ing) individuals more frequently than if they were to interact mostly with locals. Since during my time in Russia I lived mostly among Russians and had a Russian lifestyle, rather than among wealthy expats, my chances to engage in corrupt behaviour were very low. Rather than being a measure of corruption in a particular country, the CPI is better understood as a measure of a country’s relative poverty. One implication of this is that foreigners in poor countries are not only victims of corruption, but also perpetrators of corruption. In the words of Bernard Donners, CEO of Phillips in Russia: “50 percent of the corruption is imported.”

The second answer to my riddle is that the most significant cause of corruption is regulation: the more difficult it is to do business in a country, the higher the level of corruption. “Less government equals less corruption,” writes Francois Melese: “the fewer rules, regulations, contracts, etc., government officials have the discretion to write, modify, or enforce, the less opportunity for corruption.” This may appear to be the same argument made by Transparency International and others involved in the fight against corruption that see inefficiency of government and the lack of good governance as the main cause of corruption. But this is misleading: it is not the quality of regulation enforcement that makes the difference between corruption and no corruption, but the existence of the regulations themselves. Highly regulated wealthy countries with low corruption are not less corrupt because of better governance, but because it is more expensive to corrupt their officials. It is almost equally difficult to do business in France and South Korea, but South Korea is perceived to be far more corrupt: while citizens of both countries report the same level of corrupt behaviour, France’s GDP/capita is twice that of South Korea. Even in high income country, this relationship holds to some degree: Germany and the Netherlands have an identical GCB, but the Netherlands are perceived to be slightly less corrupt – the Dutch also have a slightly higher GDP/Capita.

Before this background, it is curious to note that Transparency International never advocates the reduction of regulation, but instead argues for the introduction of even more regulation, such as the development of anti-corruption policies on the national and international level: “TI believes that keeping corruption in check is only feasible if representatives from government, business and civil society work together and agree on a set of standards and procedures they all support. … It is TI’s goal to define and introduce strategies and mechanisms that make corrupt practices if not impossible, at least unlikely and punishable, both on the national as well as on the international level.”

As already mentioned, it explicitly denies that reducing regulation is an approach that should be considered since it would create other problems, such as environmental degradation. At the same time, there is evidence that increasing monitoring and other anti-corruption measures has ambiguous impacts on the prevalence of corruption: Transparency, for example, “may have potential perverse effects unless accompanied by reforms of the incentives facing the bureaucrats,” such as in some cases “the incentives to invest in quality [of governance performance] are reduced when information is revealed.” Another study found that “monitoring and thus possible detection obviously reduces honesty.”

My research leads me to conclude that Transparency International’s approach to the fight against corruption may be fundamentally misguided, fighting the wrong enemy with the wrong weapons. Corruption is a symptom of a sick polity, just as heavy coughing is the symptom of a sick body. But just as tuberculosis is not cured by the administration of highly effective cough repression drugs, the dysfunction of a society is not addressed by more effective ways of detecting and punishing corrupt behaviour. Corruption is the consequence of regulation and poverty: regulation creates the incentives for corruption, while poverty determines its price.

Transparency International’s insistence on regulations and active policies as tools for fighting corruption is paradoxical: the highest rates of corruption are in poor countries, which have neither the resources nor the institutions to effectively fight corruption – a fact recognized by Transparency International. These countries have difficulties implementing their already existing regulations, and Transparency International, as well as other international organizations, recommends even more regulation to solve the problem caused be regulation in the first place.

Corruption does not depend on the ‘culture’ of a country, or the ‘quality’ of its civil servants, but on regulation and economic wealth. The wealthier and less regulated a country, the less corruption it has – both real and perceived. Only relatively wealthy countries seem to be able to combine high regulation with relatively low incidents of corruption.

Since there can be no corruption without regulation, the simplest way to fight corruption is to reduce or eliminate regulation in those areas of bureaucracy where corruption is rampant, at least in poor countries. Since corruption often negates the effectiveness of regulation, resulting in outcomes the regulation was supposed to prevent, the existence of the regulation is a double hazard: not only does it not have the positive effect it was meant to have (such as environmental protection), but it also creates an additional negative event: corruption. A circumvented regulation is worse than no regulation at all. The original problem remains unaddressed, and is now compounded by a new problem. The logical solution would therefore be to accept the continuation of the original problem, and at the very least eliminate the damage done by the ineffective regulation that rewards corrupt behaviour and punishes honesty. The more widespread dishonest behaviour is perceived to be, the more likely are people to engage in dishonest behaviour, thereby creating a climate of dishonesty which further decreases the effectiveness of regulation in general. In fact, other than the reduction of regulation, there is little evidence that any other means to fight corruption are effective: according to Svenson, “to date, little evidence exists that devoting additional resources to the existing legal and financial government monitoring institutions will reduce corruption.”

Instead of continuing to pursue tried and failed policies that do little to fight corruption, and may even make the problem worse through increasing the opportunities for corruption (what better opportunity for corruption could there be than being a Corruption Cop in a highly corrupt society?), Transparency International should consider refocusing its efforts to remove the prime cause of corruption: government regulation.

Should a government have the political will and energy to take on the problem of corruption – and those who benefit from it – it might be wiser to focus these efforts on at least temporarily eliminating all those regulations that give rise to the most corrupt behaviour. This would have two benefits: first, it would free up valuable resources – both in terms of reducing the financial burden of corruption from companies and in terms of not having to pay for as many bureaucrats involved in (not) enforcing regulations. Secondly, it would reduce the level of dishonesty in the relationship between government, business, and the general public, decreasing the likelihood of corruption undermining the implementation of the remaining rules and regulations.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Anatoly Karlin
About Anatoly Karlin

I am a blogger, thinker, and businessman in the SF Bay Area. I’m originally from Russia, spent many years in Britain, and studied at U.C. Berkeley.

One of my tenets is that ideologies tend to suck. As such, I hesitate about attaching labels to myself. That said, if it’s really necessary, I suppose “liberal-conservative neoreactionary” would be close enough.

Though I consider myself part of the Orthodox Church, my philosophy and spiritual views are more influenced by digital physics, Gnosticism, and Russian cosmism than anything specifically Judeo-Christian.