Sunday, February 17, 2013

Corruption, violence and economics

I am re-reading a book that is now some years old but that is very revealing of the interconnections between spheres of social interaction that usually receive a separate treatment. The book is  by Raymond Fisman and Edward Miguel and summarizes the results of a number of empirical studies by both economists that have to do with the relationship between corruption and economics or between violence and economics. For example, one of the chapters is related to the corporate connections of the Suharto family in Indonesia, and how the firms that were connected suffered in their stock price from events related to the illness of the dictator. The first chapter reflects on how different nations that were in the third world just 30 or 40 years ago have now diverged dramatically in terms of income per capita. For example, Kenya remains as poor as when it became independent, whereas Korea, which had the same development level as Kenya 40 years ago, now enjoys a level of development similar to Japan or to European countries. Although it is very difficult to establish causality, those countries that have not been able to develop are also countries that are mired in corruption and violence. This reflects a broader interaction in my view, the one between democratic quality, the management of identities and economic development. One can see it also through the impact of economic crises, as explained in the last book by Gary Gorton: those countries that suffer the most serious economic crises are also countries that easily fall into ethnic or identity conflicts and where crises coincide with corruption scandals. For example, countries that receive external aid to develop may spend these resources in spectacular infrastructures that are far away from the needs of the people, or may fail to agree on which are the projects that are more efficient, that is, that maximize the joint welfare of all the economy, instead of only a part of it. Corruption and ethnic conflict are social issues, as is economic development.

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