Friday, May 27, 2016
Getting to Sweden? Not with a big bang
In Spain it has become fashionable to argue that we live in a climate of systemic corruption and clientelism, and that the solution is a big bang of simultaneous reforms in a short period of time. The correct part of the argument is probably that the difficulties of reforming corruption come from a collective action problem: it is only individually rational to avoid corruption if everybody else does the same. However, this is where the problems start if we apply the argument to Spain or to other developed countries. First, I'm sorry to say that in Spain corruption is not systemic. One can go about with his life on a daily basis without facing corruption: the police is not corrupt and the burocracy is not corrupt, which does not mean that they are perfect. Teachers are not corrupt: we grade exams as fairly as we can. Most public things in Spain are not for sale. There is some corruption in the link between politics and business (but most politicians and bussiness people are not corrupt), and there is corruption inside some industries. There is also a tax evasion problem, which you realize is not a particularly Spanish problem once you read the book by Zucman on the topic. Therefore, in Spain you do not need to change everything to eliminate corruption. It follows that what is needed is to spread the influence of the parts of society (the majority) that are not corrupt. The typical example given to argue that we need a big bang is the transition in Sweden from a very corrupt country to one of the most decent in the world. One famous Spanish economist gave the example of the change in traffic rules in Sweden: in the first half of the XXth century, it seems that they switched from driving on the left to driving on the right from one day to the other. Well, I checked if the same happened in reforming corruption, and the answer is no. Reforming corruption took time, probably more than one century. The article "Getting to Sweden" by Rothstein and Teorell takes two parts, because it needs to cover many decades. Sweden started to reform corruption after losing a war (against Russia, by which they lost Finland) made most agents aware that they had to change habits. The authors show proofs that the Swedish changed first the social norms and subsequently they changed formal rules. It took time. Then in the twentieth century, because of a political coalition between employers and low wage workers (no technocrat designed the system), they centralized collective bargaining and achieved salary compression, which is at the root of current equality levels. In addition to that, they have a very generous system of redistribution that is based on good third party information, broad tax bases and a good combination of efficiency and equity (for example, public goods and services complementary of work). The fact that today they are a relatively homogeneous society with high levels of social capital is probably a product of their fair redistributive and efficient system, which in itself also reduces incentives for corruption. Therefore reforming corruption perhaps also requires improving distribution of income, power and resources. Reforming traffic rules is much easier: it is a purely common interest efficiency problem.