V. Policy Issues - 3

One way of reducing bureaucratic
corruption is to reduce the monopoly
power of the bureaucrat when a client
faces her in trying to get a licence or
some subsidy or transfer. Rose-Ackerman
(1978) has suggested that, instead
of giving each official a clearly defined
sphere of influence over which she has
monopoly control, officials should be
given competing jurisdictions so that a
client who is not well-served by one official
can go to another. When collusion
among several officials is difficult, competition
will tend to drive the level of
bribes to zero. Of course, without an
appropriate incentive payment system,
this can encourage laziness in some officials,
because clients who are tired of
waiting can turn to another official, instead
of complaining to the official’s superior.
Also, in cases of what Shleifer
and Vishny (1993) call corruption with
theft, competitive pressure might increase
theft from the government (including
relaxation of minimum quality
standards) at the same time as it reduces
bribes. So in such cases, competition
in the provision of government services
has to be accompanied by more
intensive monitoring and auditing to
prevent theft. Rose-Ackerman (1994)
has suggested that multiple officials
with overlapping jurisdictions may also
help in such cases, because the potential
briber has to face the prospect of
“persuading” all the officials involved,
which raises costs and uncertainty for the
corrupt project. (It has been reported
that in the United States the overlapping
involvement of local, state, and
federal agencies in controlling illegal
drugs has reduced police corruption.)
In case of legitimate business projects,
however, this raises the multiple veto
power problem discussed in Section II.
In some cases, on account of large
fixed costs, indivisibilities, and coordination
problems, bureaucratic competition
through overlapping jurisdictions is
not feasible (nor desirable, if bargaining
advantages are to be pressed), as in the
case of large defense contracts or when
the government buys in bulk in world
commodity markets (say, in petroleum)
or expensive single items like aircrafts.
Not surprisingly, some of the major corruption
scandals in developing countries
(with substantial kickbacks from
foreign contractors) involve politicians
and bureaucrats in charge of such large
procurement cases. On the bribe-givers’
side it should be noted that when competition
among the foreign contractors
is intense, very few governments of industrially
advanced countries discourage
the bribing of officials in the purchasing
countries (in fact tax-deductibility of
bribes by the companies often makes the
tax-payers complicit in the payment of
such bribes). Even in the exceptional
case of the U.S. where there is the 1977
Foreign Corrupt Practices Act forbidding
American companies from making
payments to foreign officials, what are
described as “grease payments” to speed
up transactions are not ruled out. (In fact,
the 1988 amendments to the Act expand
the range of such payments allowed.)