Earlier this month, we asked if a country’s perceived graft can predict its sovereign debt problems, mentioning that Greece ranks worst in the Eurozone on the corruption perception index. Next for the dunce chair, we said, comes Italy.
The next day, as if on cue, the Dow fell 389 points because of the Italian job.
That brought a few comments our way.
One reader said our correlation between graft and debt was clever, others called it fiddle faddle (we thought of it as clever fiddle faddle, so everyone was right).
But a reader with a more serious turn of mind had this to say:
Regarding graft as a predictor of a country’s debt trouble, I think there probably is a relationship with their CPI score. It may be that large amounts of debt and perceived fiscal irresponsibility lead some people to assume the problem is due to corruption (as opposed to mismanagement or bad policy decisions) which then negatively effects their score. More debt leads to more allegations of corruption = lower CPI score. Perhaps the Irish are just more forgiving.
Whether graft causes debt problems, or whether debt just looks like graft, we don’t really know. But we say again, corruption is never a victimless crime.