We’ve all heard the question before: Does corruption work as grease in the wheels or as sand?
The debate had its origin in Nathaniel H. Leff’s paper from 1964 “Economic Development Through Bureaucratic Corruption,” and was soon popularized by Samuel Huntington in his 1968 book Political Order in Changing Societies.
The main idea is straight enough, positing that corruption can be compatible, and even serve, economic growth in conditions of high bureaucratic red tape by facilitating the efficient allocation of resources in a patter similar to regular market mechanisms. This was the grease-in-the-wheels theory to the role of corruption in economies affected by overregulation.
Huntington stated that “in terms of economic growth, the only thing worse than a society with a rigid, overcentralized, dishonest bureaucracy is one with a rigid, overcentralized, honest bureaucracy,” essentially opening a theoretical cleavage in the treatment of corruption that would remain latent until the emergence of systematic empirical data in the 1990s. However, with the appearance of breakthrough studies such as Paolo Mauro’s “Corruption and Growth” (pdf), and the emergence of sources such as Transparency International’s Corruption Perceptions Index against which to test classic models, the grease-in-the-wheels idea was finally debunked and forever replaced by the certainty that corruption works as sand in the wheels of development.
Or so we like to think.
In a previous post for the FCPA Blog discussing the possibilities of what I called a unified theory of corruption, I made the point that “the single, most important problem that continues haunting the literature on corruption to this day is the fact that most researchers keep sampling specific behavioral forms but endorsing their results to the entire concept of ‘corruption’.”
The question of corruption’s relation to development seems to have partially being victim to the same condition affecting other areas of the field. Delving deeper into our corruption umbrella, we should have moved away from the general question of corruption working as grease or sand in the wheels, and instead consider — among other things — the effect of specific forms and areas of corruption, on particular developmental variables, under precise conditions.
I would like to elaborate here by addressing one scenario in particular: the relation between corruption, procedural justice, and distributive justice.
The discussion properly begins by challenging a paradigm, even if ringing of antiquated rhetoric: Could corruption in legal adjudication be compatible with a better allocation of resources when supporting distributive justice, regardless of its effects on procedural justice? Conversely, does corruption of justice inherently result in the misallocation of resources at the societal level? Or does it only (or particularly) do so in an open-market system?
Lest I be misunderstood, allow me to say that I by no means assert that corruption could have a positive effect on economic development — far from it. Research has been very clear in this respect. Rather, I posit that based on current knowledge, it does not automatically follow that all forms of corruption hinder general material well-being.
Let me explain.
Back in 1999, Donaldson and Dunfee’s book Ties That Bind made the compelling argument that corruption threatens a structural hypernorm concerning the efficient utilization of societal resources required for the attainment of justice and well-being. In doing so, the authors clearly supported contemporary results from the field of economics regarding the role of corruption. However, the point made revealed a rather different approximation to the matter, one that emphasizes the narrow applicability of efficiency concerns in regards to justice. Instead of working through a single connection, corruption would seem capable of providing at least two contradictory effects on the social attainment of justice and well-being.
Corruption’s effect on efficiency impacts a particular form of justice, namely procedural justice (seemingly by discouraging cooperative behavior, but also by increasing uncertainty and thus the costs of economic activity), and only if we first assume the existence of an agreed-upon form of adjudication that abolishes reciprocity between judge and parties (other forms of adjudication, specifically property adjudication, commonly follow market mechanisms, auctions being a case in point).
On the other hand, corruption is also commonly considered to affect substantive justice — the way we interpret and implement the concept of fairness, which is a much more nuanced and culturally-specific concept. However, it is in fact here where corruption can be found to have something else to say about the efficient allocation of resources.
In “Social Morality and Individual Ideal” (1961), P. F. Strawson stated (in line with recurrent tenets of moral philosophy) that “the abstract virtue of justice, some form of obligation to mutual aid and to mutual abstention from injury… will be a logically or humanly necessary feature of almost any conceivable moral system.” I naturally concur. However, it is not all that clear that Strawson’s argument challenges corruption as an incompatible activity.
Let’s consider today’s rising economic inequality, which in many ways stems from the type of liberal policies adopted in past decades, not just regarding deregularization, but most importantly those involving labor markets and tax systems. Even when such decisions were implemented following due process (i.e. in line with the principle of procedural justice), the results have in some cases seriously damaged the fair allocation of societal resources to the detriment of entire communities (i.e. affecting teleological concerns of distributive justice).
Could corruption work as a corrective measure? Provided certain conditions, certainly. Would it affect the efficient allocation of those resources? Perhaps, but it would most likely do so on the condition that we had a well-developed open-market system to begin with; otherwise, if the level of efficiency provided by such system is already missing, we might as well aim for distributive justice even if it requires tolerance of certain level of corruption.
So far the discussion has been highly theoretical, and requiring a number of assumptions to hold true regarding the conditions required for corruption to be compatible with distributive justice. The situation doesn’t improve when considering that, in order for this connection to be viable, we also need the presence of a judiciary supportive of social justice and impervious to the influence of more powerful economic actors. Otherwise, how could corruption support redistribution if Big Money always trumps Little Money? With this, I would seem to have run against an insurmountable obstacle and be ready to give up on the whole idea.
However, the attainment of the above condition is actually one of the things spelled by the growing dominance of ethics management as paradigm in the public sector. To elaborate further, I propose that the combination of a strong ethics program in the judiciary, combined with the stagnation of wages for the operators of justice, could very well develop into a distributive pay-to-play system in poor countries where judges gain a moral incentive to support redistributive demands but lack the financial security to do so without requiring illegal payments.
Indeed, the weight of distributive justice can clearly be felt in some of the writings about ethics management, such as U4’s brief “Teaching ethics in highly corrupt societies: Concerns and opportunities,” which says, “In the context of endemically corrupt societies, the officials who participate in ethics and integrity training need to recognize how, in an even-handed, just, and ethical public governance system, they would have a greater potential to achieve more predictable and fair access to goods and benefits.”
This is not to say that ethics management is detrimental to the control of corruption (far from it!), but to point out the possibility of finding unexpected interactions between integrity and corruption.
Therefore, and to put it shortly, it is theoretically possible that the rise and dissemination of public offices dedicated to ethics management in the judiciary — particularly those that go above and beyond a traditional compliance approach and subscribe to the integrity approach — might be in its way to introducing a new element to an idea most of us thought dead and buried. To reject this scenario prima facie would be to argue against the relevance of adequate remuneration or the impact of ethics training in controlling corruption.
Thus, the possibility of compatibility between corruption and distributive justice under conditions of forsaken market efficiency is an issue that still requires resolution if we aim to improve the level of effective implementation of anti-corruption policies in developing countries.
Thirty years ago Robert Klitgaard wrote in his now-classic Controlling Corruption that “policies to crack down on corruption have costs in terms of the organization’s effective performance of its primary mission. The wise policymaker will consider these costs as well as the benefits of reduced corruption. The ideal level of anti-corruption efforts will be short of the maximum; and the optimal level of corruption will not, in practice, be zero.”
There is no apparent reason to refrain from testing this assumption through the lens of social justice. If the above discussion holds up to the test of theoretical inquisition, a new and updated round of empirical research might be in order.
Joseph Pozsgai-Alvarez, pictured above, is International Associate at the University of Tsukuba, Japan. He has served as external consultant to the Office of the Prime Minister of Peru on matters of ethics, transparency, and access to information, and is currently engaged in the development of the Daily Corruption: News Feed & Database project with NGOs in Latin America and Africa. His topics of research include corruption tolerance, the politics of anti-corruption, and integrity management. He holds a PhD in Political Science from the University of Tsukuba. He can be contacted here.