Reading "Corruption," by Fisman and Golden

Economist Ray Fisman and political scientist Miriam Golden have written a very useful book that summarizes a lot of recent research on corruption. It is one of those books that is meant for a general readership, but that ends up mostly being read by other academics because it gives a very efficient overview of recent frontier research. It touches on many angles of research on corruption. There are probably three main ideas. First, corruption is a coordination problem: one doesn't stop contributing to it unless others do the same. Second, in this coordination problem, common knowledge plays a very important role. This is probably the strongest part of the book, with very interesting examples on how not only actions that speak against corruption are important, but it is also important that information and participation become well known by many people. And third, there are no panaceas to fight corruption, although there are examples of societies leaving corruption behind, or at least some forms of corruption. Unfortunately, the book was written before Donald Trump becoming the US president. Seeing Trump every day on TV it would have been difficult to mostly forget, as the authors do in my view, about vertically integrated corruption, that is, moguls buying a political party or a political system to benefit from it. There were previous examples, either ignored or minimized in the book, like Piñera in Chile or Berlusconi in Italy, but now the problem also affects the first economy in the world. Although there are many examples in the book, one misses a more qualified approach to some cases of success, such as Chile or Sweden. The Latin American country has experienced recently important corruption scandals, addressed by a commission chaired by an economist, Eduardo Engel. Now the favourite candidate to win the next presidential election is again Piñera, one of the wealthiest capitalists of the country with interests in several regulated industries. Sweden escaped corruption, but it wasn't easy, as explained by Rothstein and Teorell. In my modest opinion, some dichotomies are a bit exaggerated in the book, like the big bang or nothing idea. Clearly, Sweden or the US cities escaped corruption after some decades of trial and error. As the authors say, there are no panaceas, and there have been many failed reforms. Then there is no way forward without learning from past experiences and try again. In multi-level democracies with checks and balances, in addition, centralized big bangs are just impossible. It is also in my view a false dichotomy as the authors seem to implicitly suggest at the end that we should go either for great leaders or bottom up efforts. Surely elites and organizations can do a lot to reform. Most people who get involved in political parties and other organizations are honest and well-meaning. I missed making a little bit more the connection between powerful transnational corporations and the concentration of fortune and corruption, and in general the connection between inequality and corruption. Sometimes in the book the idea is given that it is politicians who have most of the bargaining power. FIFA, Putin's olygarchs, corruption scandals in public-private partnerships and other examples show that the public-private frontier is fuzzy at best in corruption. Transnational implications of corruption are very relevant. Something is said on the importance of external pressure and coordinated international efforts, but the enormity of the problem is perhaps not exposed. In spite of all these comments, it is a great book that I recommend. Perhaps it should be read together with the book by Putterman on why humans CAN be angels, under the right environment of course. Democratic quality is a public good, and sometimes humans manage to provide public goods. The book finishes with a list of suggestions on what ordinary people can do. The list is taken from Transparency International. I fully support these suggestions. I would add two: if you are an angel, become a politician, and if you know any other angel, convince her or him to become a politician, or to get involved and active in politics.

Preference formation following autocratic regimes

Yesterday I attended the thesis defence of a student I have supervised. The dissertation is a collection of empirical essays in political economy that I hope will make their way to the publication circuits in the near future. One of the chapters was about how the memories of economic management in previous military regimes affected the support for democracy in Latin America. The main finding is that this benchmark does significantly affect perceptions of democracy, showing that reference points are important in political preferences, as we know from behavioral economics that they are in other fields. Another apparently very different chapter was about how the Catalan public TV channel had affected preferences for nationalism in the voting population. This influence is difficult to identify, as causality may go in different directions and there may not be enough variation to find statistical significance. However, by exploiting the fact that some territories started the channel before others probably for exogenous reasons, the author found that this channel, in the early periods (the only ones that can be analyzed using this technique) had an effect on preferences that was double in size than the effect in other similar studies. Finally, the third chapter was an event study about how the Catalan secession campaign of the last years had affected the stock returns of firms with interests in the region. In this case, the effects are very small and non-significant. I found very interesting that one of the very thorough members of the evaluation committee thought that the three studies were related because all of them analyzed preference formation following autocratic regimes. It was humbling to realize that many things that happen in Catalonia and Spain are the result of a country that just experienced a 40 year military dictatorship that finished just 40 years ago. Many of those who lived under that regime, in favour and against it, are still with us. The dark shadow of the Franco period still influences us in many ways, not always in the expected direction.

Paying attention to the US debate from Europe

In Spain, Catalan nationalists are teeming up with a part of the radical left to take advantage of a weak an unpopular government to organize an illegal and revolutionary self-determination referendum. To hold a self-determination referendum is a legitimate proposal, but those who endorse it should do so with a minimum of rigour and some arguments that weigh the difficulties and contradictions of the proposal in XXI Century Europe. Of course, the weak and unpopular government of Mr. Rajoy in Madrid is not only a problem for the Catalans, but also for all the Spaniards. A secession campaign accompanied by the typical nationalist ingredients of hate, intolerance and demagoguery, will do nothing to improve democracy or democratic quality. The campaign is being suported by Julian Assange and congressman Dana Rohrabacher from the US, an ally of Trump and Putin. Watching yesterday an interview with Steve Bannon (former alt-right and ultra-nationalist advisor of Donald Trump) in Bloomberg TV, I see that the convergence of interests between nationalists and a part of the radical left does not only happen here. Some aspects of their tactics and their style of doing things is also similar in Europe and the US. Now in Europe we are more relaxed about national-populism after the defeat of Marine Le Pen against Macron, but we should not be relaxed about the dangers ahead. In that interview, Bannon predicted (as if wishing it) that the future will be a battle between left-wing populism and right-wing populism, and that the Americans will become united behind economic nationalism. Paul Krugman recently predicted that with the fall of Bannon in the White House, Trump would abandon economic nationalism and just spouse a traditional conservative agenda. Bannon predicts the opposite.

Responding to the critics of economics without pandering to them

John Cassidy explains in The New Yorker the details of the CORE project to teach introductory economics at the undergraduate level in a way that responds to the critics without pandering to them. That is, the economists of this project have listened carefully to critical students that raised their voices especially after the last global financial crisis, and accordingly they have developed a new method and new materials to teach economics in a reformed but rigorous way. The new materials promise to be much better than the traditional textbooks. For example, in my introduction to economics for sociologists I use the book by Krugman, Wells and Graddy. Although its last edition covers the global financial crisis, some of the topics in the rest of the book (e.g., minimum wages) are covered in a way that is contradicted by what Krugman himself says in his blog. According to Cassidy, "The CORE approach isn’t particularly radical. (Students looking for expositions of Marxian economics or Modern Monetary Theory will have to look elsewhere.) But it treats perfectly competitive markets as special cases rather than the norm, trying to incorporate from the very beginning the progress economists have made during the past forty years or so in analyzing more complex situations: when firms have some monopoly power; people aren’t fully rational; a lot of key information is privately held; and the gains generated by trade, innovation, and finance are distributed very unevenly. The CORE curriculum also takes economic history seriously." Samuel Bowles and Wendy Carlin, two of the promoters of the project, explain in Vox that the new method (which can be downloaded for free) introduces politics and empirical evidence in a much more substantial way than traditional materials. Good work, economists everywhere should use it.

Are wild dogs smarter than us?

Animals also vote. Not exactly like us, but they also make collective decisions. A study about wild dogs shows that they use sneezes (or something similar) to cast their votes. An interesting part of the study is that the percentage of votes needed to make a decision is variable. They use variable quorum thresholds. In particular, the thresholds change with the status of the "agenda-setter." It may also depend on other variables, but human scientists are happy enough for the time being on what they have discovered. It is as if wild dogs had their own Venice Commission, that is, the Council of Europe's Commission for Democracy through Law, which prescribes the conditions under which referendums should take place. In the particular case of self-determination referendums to create new countries from existing ones, the conditions are very strong. That is, it is more difficult to change borders, especially in democratic countries, than to decide where to go for dinner. This is often forgotten by some superficial commentators, who recommend this kind of referendums usually for countries that are not their own. The USA, Germany, Italy, France, and all major democracies either prohibit or do not contemplate such referendums in their constitutions. Only four countries in the world include such possibility in their written Constitution (Ethiopia, Uzbekistan, Saint Kitts and Nevis and Liechstenstein). In some cases, of course you can reform the Constitution, but reforming it is difficult. This is probably for good reasons, to avoid lies, divisions and instability, as the British now know from the Brexit experience. Some referendums are necessary and good, but they must take place under very strict conditions. The distinction between good and bad referendums is crucial. Franco and Hitler did organize referendums. Orban, Le Pen, Wilders, and Putin have also used or tried to use referendums. Being rigorous about the defence of such instrument is as important as the distinction between democracy and autocracy. Wild dogs have very careful rules, not everything goes. They do not have a written document like the code of good practices of the Venice Commission. We humans have such a document, but many people refuse to know about it.

What is the matter with Catalonia

September is the season of marches and pseudo-referendums in our land, and this year is no exception. A narrow majority in the Catalan autonomous Parliament tries to impose a new illiberal democracy that will be stopped by the Constitutional institutions of Spain with the support of the European Union. Catalonia has an average income that is above the average income of the EU citizens. Its original language is official and the one used as a priority in the school system. The police, prisons, universities, hospitals, are run by the regional government. Nevertheless, a successful campaign by the Spanish Popular Party, now ruling in Spain, in 2010, to put pressure on the Constitutional Court to reject parts of a new Statute of Autonomy, triggered a campaign for Independence that has been used by the conservative nationalists in Catalonia, under pressure from their own corruption scandals and austerity policies, to start a scalation of commitments to something that is ultimately impossible: a unilateral and peaceful process of Independence that disconnects Catalonia from Spain but not from the European Union. The Catalan society is deeply divided and examples of intolerance and the mob rule (so fare, limited to the social networks) now abound. We can afford it as long as tourists keep visiting us and our economy remains healthy, but we are giving a very sad example of fanatic nationalism and illiberal democracy. The narrow majority in the Catalan government (with the necessary support of a radical euro-phobic group) tries to impose a procedure to vote in a referendum excluding half of the citizenry from the decision about the question, the date, the legal framework, the electoral authority, etc., of the pseudo-referendum. Those who oppose it need more than reasons, we need emotions and narratives. We keep working on it, for example reading today Jonathan Freedland in The Guardian (the answer is Europe, not making the mistake that Spanish Prime Minister Mariano Rajoy is about to make, of visiting Donald Trump days before the pseudo-referendum): "In a talk on Thursday night, Le Carré spoke of the behaviour of Donald Trump and others as “absolutely comparable” to the rise of fascism in the 1930s. “It’s contagious, it’s infectious. Fascism is up and running in Poland and Hungary. There’s an encouragement about,” he said.
This is a warning to take seriously. Hungary is indeed led by a man who boasts that he is building an “illiberal state”, while Poland’s government is trampling over fundamental democratic protections, including an independent judiciary and freedom of the press (and Trump is cheering them on as they do so).
The US president is not making America great again, but he is making the 1930s current again. Perhaps, then, and in a way he would not want, Trump is providing the anti-Brexiteers with the one thing they always lacked: an emotional heart to their argument. Trump and the fascist contagion is reminding us why the EU exists: to ensure that the neighbourhood we live in is never again consumed by the flames of tyranny and hatred.
On that fateful day in June 2016, it’s possible that some of those who voted leave did so because they believed that democracy and peace were now safe and secure in Europe. In the short time that has passed since, we have seen that those things are, in fact, fragile. As the head of Nato warns that the world is at its most dangerous point in a generation, Britain’s duty, to use a word that might make Smiley wince, is surely to defend the body that helped lead Europe out of its darkness."

There are other voices: the federalist alternative in Catalonia and Spain

As it has been happening since 2012, September is the month of nationalist demonstrations and political dramas in Catalonia. This year, another expected season of choreographed marches and a third so-called "referendum" (again, and for the third time since 2014, promoted as a decisive "vote of your life") between September 11th and October 1st will try to show to the world that the Catalan society is unanimously behind the idea of secession from Spain. A well funded and hypermobilized  strong minority of citizens mostly from the upper-middle classes, will also try to show support for the idea that only a unilateral self-determination referendum without a legal framework, where the question and the date are unilaterally decided, without a neutral authority, that only this mechanism can be chosen to change the status quo of Catalonia in Spain. However, the truth is that the Catalan society is very diverse and plural, and that there are many other voices. Among these voices, one of the best organized and the one with the most constructive proposal is the Federalist Movement, represented by Federalistes d'Esquerres, a platform that was born in 2013 to reivindicate the rich federalist tradition of the Catalan and Spanish left. It has organized many debates and events in Catalonia since then, and it has participated in federalist marches and public meetings in several Spanish regions, as well as in Brussels and in Rome. Among its more tan 3000 members and sympathisers, there are citizens from several political parties and trade unions. Its first president was the current member of the Spanish Parliament, the philosopher Manuel Cruz, and its current president is the Dean of the School of Political Science at the Autonomous University of Barcelona, Joan Botella. Their members include the former Anti-Corruption public prosecutor of Spain, Carlos Jiménez Villarejo, and the prestigious writer and professor of Ethics Victoria Camps. This group has been gathering strength since its birth despite the lack of institutional and public support, and it has a very active agenda of events. It is also promoting a crowd-funding campaign for the production of the documentary "Federal", directed by award-winning film director Albert Solé. This documentary is now in the last stages of production, and will be the focus of a strong campaign in 2018.
This movement defends the following ideas and positions:
1. Strong nationalisms reinforce each other: the Catalan question is now the excuse of Spanish and Catalan elites to avoid introducing in-depth reforms in our democracy that make it more transparent and egalitarian. In particular, it is an excuse that obfuscates and creates the division that prevents tackling the very serious corruption scandals that have affected the Popular Party in Spain and the party of the Catalan President (formerly CDC and now PdECat).
2. The nation-state is obsolete. In the XXIst century none of our greatest problems can be solved with the old tool of the nation-state. Climate change, fiscal fraud, migrations and refugee waves, terrorism, financial instability... all of our greatest problems require transfers of sovereignty and coordination at a large scale, which can only be achieved through a European and global process of federalization.
3.Spain and Europe need reforms. Although Spain is a very decentralized country that belongs to the EU and the Euro-zone, there are legitimate demands of cultural recognition and about financial arrangements from Catalonia and there are serious shared institutional problems. A federalist reform is not only supported by a large part of Catalan citizens, but it also has strong allies in the rest of Spain and would have the obvious sympathy of European political leaders and governments of member states. Instead, Catalan secessionists have dramatically failed in their quest for international, and specially European, support. The federalist reform should include Constitutional reforms in Spain to transform the Senate into a territorial chamber (similar to Germany), to introduce a multi-lingual system at all levels (similar to Canada and Switzerland), to establish a more transparent system of territorial transfers and investments, and to clarify the responsibilities of each level of administration following the subsidiarity principle. Instead of fighting for the obsolete concept of territorial sovereignty, we should all accept that we live naturally in a multi-level democracy where the identification of one state with one nation, one flag, one currency, one language and one army has disappeared.
4. Behind the façade of a peaceful movement, Catalonia has seen disturbing episodes of intolerance, such as virtual mob attacks in the social networks (sometimes supported by Catalan government's press conferences) addressed to journalists, intellectuals, artists and others who have dared to raise their voice or even to express doubts about the secessionist process. The legal plans of the pro-independence leader and the majority in the Catalan Parliament (a narrow majority that does not represent a majority of votes, because of an electoral system that privileges rural areas) include attacks to the division of powers and checks and balances. In particular, in a transitional period, they expect the judicial power to be subject to the executive branch, in a mechanism that has been compared by experts to the one for which Poland has received a serious warning by the EU institutions. The narrow parliamentarian majority of the pro-secession groups is achieved because of the support of an extremist euro-phobic group, the CUP, whose youth wing has promoted violent attacks to tourists and also acts of bullying against political dissenters.
5. Self-determination referendums are not allowed in the immense majority of democratic constitutions in the world. The international consensus is that they should only take place in exceptional circumstances, and if they take place, they should be subject to very strict conditions, established by the Commission of Democracy through Law (the Venice Commission) of the Council of Europe. The unilateral referendum promoted by the Catalan government fulfils none of these conditions.
6. The Independence delusion in Catalonia is similar to the Brexit delusion in the UK. It is accompanied by exagerations and lies that are sold as facts, especially relative to the economic and financial gains, the attribution of all problems to an external enemy and the illusion that Independence is easy, inexpensive and requires no agreement with anyone. The rhetoric is also similar, and similar to other national-populist movements that have attracted voters recently in ther parts of the world: "the will of the people, freedom, democracy, sovereignty..."
7. The pro-secession movement and its political use by the Catalan government has created a deep social division in Catalonia, in what had been an example of a diverse and tolerant society. The last example of the attempts to dig deeper into this internal division, and the sometimes artificial division between a falsely homogeneous Catalonia and the rest of the Spanish society was the manipulation of the social reaction to the terrorist attacks of August 17th in Barcelona and Cambrils, as explained by Roberto Toscano in La Repubblica. Instead, the federalist movement emphasizes the many links of Catalans with Spaniards: we share families, history, problems, businesses, sports idols and competitions. And most of us thank the immense solidarity of many Spaniards after the terrorist attacks and want to share our links more broadly now in a united and more democratic Europe.