Centralization of Bribery - 2

Shleifer and Vishny would explain the
increase in the inefficiency flowing
from corruption in post-Communist
Russia in comparison with Communist
Russia in these terms. Formerly, the
Communist Party used to centralize the
collection of bribes and effectively
monitored (sometimes with the help of
the KGB) deviations from agreed-upon
patterns of corruption. Now different
ministries, agencies, and levels of local
government all set their own bribes independently
in a decentralized attempt
to maximize their own revenue. It is
usually suggested that the regulatory
state is at the root of the inefficiency
due to corruption spawned by the regulations;
the above analysis suggests that
a weak central government with its inability
to stop the setting up of independent
corruption rackets (a kind of economic
warlordism) makes the problem
of inefficiency particularly acute. This
may be relevant in a comparison of corruption
in, say, Indonesia with that in
India. Table 2 in the Appendix suggests
that in the perception of foreign businessmen
the two countries are about
equally corrupt;4 and yet the economic
performance by most accounts has been
much better in Indonesia. Could it be
that Indonesian corruption is more centralized
(controlled largely by the first
family and the top military leadership in
cahoots with the ethnic Chinese-run
conglomerates) and thus somewhat
more predictable, whereas in India it is
a more fragmented, often anarchic, system
of bribery?
Centralization of the political machine
also makes it possible to have a
system approximating “lump-sum” corruption,
without distorting too many decisions
at the margin. It has been suggested,
for example, that corruption in
countries like South Korea5 may have
been more in the form of lump-sum
contributions by the major business
leaders to the president’s campaign
slush fund, without taxing economic activity
at the margin. The important
question here is how the ruler can
credibly promise to keep the contributions
lump-sum, and not come back
again for individual quid pro quo deals
at the margin. This ability to credibly
commit is a feature of “strong” states
that very few developing countries
have.