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Varieties of corruption

Jagdish Bhagwati:

India in the 1950’s had a civil service, and a political class, that were the envy of the world. If that seems shocking today, the loss of virtue must be traced to the all-pervasive “permit raj,” with its licensing requirements to import, produce, and invest, which grew to gargantuan proportions. High-level bureaucrats quickly discovered that licenses could be bartered for favors, while politicians saw in the system the means to help important financial backers.

Once the system had taken root, corruption percolated downward, from senior bureaucrats and politicians, who could be bribed do what they were not supposed to do, to lower-level bureaucrats, who would not do what there were supposed to do unless bribed. Clerks would not bring out files, or get you your birth certificate or land title, unless you greased their palms.

But if policies can create corruption, it is equally true that the cost of corruption will vary with the specific policies. The cost of corruption has been particularly high in India and Indonesia, where policies created monopolies that earned scarcity rents, which were then allocated to officials’ family members.

Such “rent-creating” corruption is quite expensive and corrosive of growth. By contrast, in China, the corruption has largely been of the “profit-sharing” variety, whereby family members are given a stake in the enterprise so that their earnings increase as profits increase – a type of corruption that promotes growth.

In the long run, of course, both types of corruption are corrosive of the respect and trust that good governance requires, which can undermine economic performance in its own right. But that does not absolve us of the responsibility to define corruption properly – and to acknowledge obvious and important cultural differences in how it is understood.

That's how we might understand the difference between, say, Boss Tweed, and Obama (definitely subject to correction by actual historians).

In Boss Tweed's day -- see caveat above -- New York was fabulously corrupt, but the city also got built, and grew fantasticallly. In Obama's day, Versailles is fabulously corrupt, but the country is being destroyed. Tweed's corruption was profit-sharing, Obama's is rent-seeking. Let's have a return to "honest graft", say I!

NOTE Via Economist's View.

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Submitted by MontanaMaven on

I'm reading "The Hellhound of Wall Street" by Michael Perrino about Ferdinand Pecora whose investigation and interrogation of banksters helped FDR and Congress to write strong financial regulation. He at one time worked for Tammany Hall and there were good bosses and bad bosses. In 1916 Charles Murphy was boss and believed in "honest graft" which was awarding contracts to friends and family. "Dishonest graft"like bribing police to look the other way was bad. After the Triangle Shirtwaist Factory catastrophe of 1911, he pushed for some of the most progressive reforms in the country.

I grew up near Chicago. The machine was corrupt but it also took care of the rank and file. The Obama administration is only interested in the aristocracy. Even the mob protected the neighborhood.

Submitted by regulararmyfool on

When the British pulled out of India in 1947, they had about 2,000 British civil servants and about 40,000 Indian civil servants.

By 1990, the Indian government had over 40 million civil servants.

Under British rule, law cases had to be settled within a year. That included any appeals to the British Parliamentary House of Lords.

By the end of 1946, all cases from 1945 had been adjudicated and settled. Period.

In 2005, cases were still in court from 1946.

Some day, some one will finally stop worshiping Gandhi and start assessing his influence on the common people. Almost totally negative. Millions of people have died as the direct result of this "good" man's interfering in things that he knew absolutely nothing about. Hell, he was a damned lawyer.

With the exception of the starvation in eastern India when the Japanese invaded and the British burned the food stocks, Gandhi got more people killed in the massacres after "liberation" than the British killed in their 200 years, including wars, hanging criminals and wiping out the thuggees.