Friday, September 22, 2017

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.

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