III. The Growth Process - 2

Historians, of course, point to many
cases when a great deal of corruption in
dispensing licenses, or loans, or mining
and land concessions has been associated
with (and may have even helped
in) the emergence of an entrepreneurial
class. In European history the latter
class grew out of the sales of monopoly
rights, tax farms, and other forms of
privileged access to public resources. In
the U.S. “gilded age” of 1860s and
1870s widespread corruption of state
legislatures and city governments by
business interests and those seeking
franchises for public utilities is reported
to have helped rather than hindered
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7 One problem with this data set is that it is
based on the perception of foreign businessmen
whose experience of corruption may be different
from what domestic businessmen face in a country.
The former may have less insider knowledge
about the intricacies of the indigenous bureaucracy
and even less patience with its slow processes.
So they may end up paying much larger
bribes than what the latter settle for at the end of
long negotiations and endless cups of coffee in familiar
terrain. This discrepancy may vary from
country to country and thus bias the results of statistical
analysis on the basis of this data set.
8 These results are confirmed in Mauro (forthcoming)
with a larger and more up to date data set.
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economic growth.9 More generally, corruption
may have historically played
some role in undermining the sway of
collective passions that used to fuel internecine
group warfare. As Ronald
Wraith and Edgar Simpkins (1963, p.
60) say of English history: “For two
hundred and fifty years before 1688,
Englishmen had been killing each other
to obtain power. . . . The settlements of
1660 and 1688 inaugurated the Age of
Reason, and substituted a system of patronage,
bribery, and corruption for the
previous method of bloodletting.” In
this century, the highly corrupt system
institutionalized in the PRI enabled
Mexico to transcend the decade of
bloodletting that followed the Revolution.
Without denying the positive role
that corruption may have played in history
in some situations, in many developing
countries today, however, corruption
is perceived to be so pervasive and
endemic that it is unlikely to have good
net effects, on grounds that we have
discussed earlier in this section and because
corruption tends to feed on itself
(as we shall discuss in the next section)
and it is impossible to confine corruption
to areas, if any, of relative beneficial
effects.