IV. Factors Behind Differential - 1

IV. Factors Behind Differential
Incidence and Persistence
We now turn to the question of why
the incidence of corruption is so palpably
different in different countries and
the related question of why in some
cases corruption is so persistent. Liberal
economists, of course, have an easy
answer to this: it is the regulatory state
with its elaborate system of permits and
licences that spawns corruption, and
different countries with different degrees
of insertion of the regulatory state
in the economy give rise to varying
amounts of corruption. This explanation
is no doubt valid to a large extent, but
inadequate. It cannot, for example, explain
why corruption, in the judgment
of many perceptive observers, may have
increased in post-Communist Russia or
in China after the onset of the market
reforms in recent years. Comparing
across countries in Appendix Table 1
(based on the Business International
survey data for the early 1980s), it cannot
explain why corruption is supposed
to be so much more in Mexico than in,
say, South Korea or Taiwan in the early
1980s (when in the latter countries the
state was not much less interventionist
than in Mexico).
Another common explanation of differential
corruption, popular among sociologists,
is that social norms are very
different in different countries. What is
regarded in one culture as corrupt may
be considered a part of routine transaction
in another. (Visiting Westerners
are often aghast that an Asian or an African
will sometimes not carry out his
ordinary service without baksheesh or
tips; the latter, on the other hand, finds
the high degree of monetization even in
personal transactions in advanced capitalist
countries somehow “corrupt.”)
But a more important issue is involved.
It is widely recognized that in developing
countries gift-exchange is a major
social norm in business transactions,
and allegiance to kinship-based or clanbased
loyalties often takes precedence
over public duties even for salaried
public officials. Under such circumstances
use of public resources to cater
to particularistic loyalties become quite
common and routinely expected. At the
same time, it will be wrong to suggest
that concern about public corruption is
peculiarly Western. In most of the same
developing countries, public opinion
polls indicate that corruption is usually
at the top of the list of problems cited
by respondents. But there is a certain
schizophrenia in this voicing of concern:
the same people who are most vocal
and genuinely worried about widespread
corruption and fraud in the
public arena do not hesitate at all in
abusing public resources when it comes
to helping out people belonging to their
own kinship network. (It is a bit like the

U.S. Congressmen who are usually livid
about the rampant pork-barrel politics
they see all around them but they will
fiercely protect the “pork” they bring to
their own constituency.) Edward C.
Banfield (1958) comments on the prevalence
of what he calls “amoral familism”
in the Mezzogiorno in Italy, but Robert
Putnam (1993) observes in his study of
comparative civicness in the regions of
Italy that the amoral individuals in the
less civic regions clamor most for
sterner law enforcement. Mayfair Yang
(1989) notes how people in China generally
condemn the widespread use of
guanxi (connections) in securing public
resources, but at the same time admire
the ingenuity of individual exploits
among their acquaintances in its use.
A major problem with norm-based explanations
is that they can very easily be
near-tautological (“a country has more
corruption because its norms are more
favorable to corruption”). A more satisfactory
explanation on these lines has to
go into how otherwise similar countries
(or regions in the same country like
North and South in Italy) may settle
with different social norms in equilibrium
in, say, a repeated game framework,
and how a country may sometimes
shift from one equilibrium into
another (as has happened in the case of
today’s developed countries in recent
history with respect to corruption).