So Is Corruption the Problem or Not? Moses Naim’s Curious Inconsistency

OK, this may not be the most important thing in the world, but I noticed it and can’t help pointing it out:

Here’s Moses Naim (who humbly describes himself as “an internationally renowned columnist and commentator”) writing in The Atlantic last May about what he sees as the big oversight in Thomas Piketty‘s surprise bestseller on economic inequality, Capital in the Twenty-First Century:

[T]he problem [of inequality] requires a more complete diagnosis [than Piketty provides]. It is not accurate to assert that in countries like Russia, Nigeria, Brazil, and China, the main driver of economic inequality is a rate of return on capital that is larger than the rate of economic growth. A more holistic explanation would need to include the massive fortunes regularly created by corruption and all kinds of illicit activities. In many countries, wealth grows more as a result of thievery and malfeasance than as a consequence of the returns on capital invested by elites….

Corruption-fueled inequality flourishes in societies where there are no incentives, rules, or institutions to hinder corruption. And having honest people in government is good, but not enough. The practices of pilfering public funds or selling government contracts to the highest bidder must be seen as risky, routinely detected, and systematically punished.

Most of the roughly 20 nations from which Piketty forms his analysis classify as high-income countries and rank among the least-corrupt in the world…. Unfortunately, most of humanity lives in countries where … dishonesty is the primary driver of inequality. This point has not attracted as much attention as Piketty’s thesis. But it should.

All well and good. But here are Naim’s thoughts on the global anticorruption movement (from Foreign Policy) in March 2005:

Corruption has too easily become the universal diagnosis for a nation’s ills. If we could only curtail the culture of graft and greed, we are told, many other intractable problems would easily be solved…. [But] putting an end to the bribes, kickbacks, and payoffs will not necessarily solve any of the deeper problems that afflict societies. In fact, this false belief can make it harder, if not impossible, to rally public support for other indispensable efforts. Necessary tax reforms, for example, become impossible to pass when the general assumption is that any new public revenues will inevitably evaporate in corrupt hands.

The corruption obsession also crowds out debate on other crucial problems. A country’s bankrupt educational system, malfunctioning hospitals, or stagnating economy cannot compete with headlines about the latest corruption scandal. These problems may be aggravated by corruption, but they are created by conditions that often have little to do with the behavior of dishonest government officials…. Inevitably, the public’s understanding of what it would take to tackle other national priorities becomes clouded by the corruption obsession….

There is no doubt that corruption is a scourge. But there is also no doubt that many countries crippled by corruption are not sinking…. China, India, and Thailand are not only not sinking, they are prospering despite widespread corruption.

… Simply telling these countries to shake off the shackles of corruption — as foreign investors, politicians, leaders of multilateral institutions, and well-known journalists so often do — is worse than no advice at all….

So, is corruption the elephant in the room that Piketty and others overlook? Or is corruption an “obsession” that has little to do with the fundamental causes of the economic and social problems afflicting many countries? (Oh, and doesn’t simply declaring, in a prominent magazine, that “dishonesty is the primary driver of inequality” and that corrupt practices “must be [made to] be seen as risking, routinely detected, and systematically punished” seem a whole lot like “[s]imply telling []countries to shake off the shackles of corruption” — which might be “worse than no advice at all,” especially when the advice comes from a self-described “well-known journalist[]”?)

Three hypotheses to account for the apparent tension:

Hypothesis 1: Naim’s views changed between 2005 and 2014 due to his careful evaluation of the evidence.

Hypothesis 2: There is in fact no contradiction between his 2005 and 2014 positions, and my belief that there is derives from a misreading of the commentaries.

Hypothesis 3: The consistent principle that runs through both pieces is that whatever ideas are gaining a widespread following must be criticized as shallow, incomplete, and a distraction from the real issues. So: If everyone is talking about corruption, they should be talking about tax reform. And if everyone is talking about tax reform, they should be talking about corruption.

What do you think is the most plausible?

3 thoughts on “So Is Corruption the Problem or Not? Moses Naim’s Curious Inconsistency

  1. Hypothesis 3 !

    Even a casual reading of the site he founded, Foreign Policy, reveals a point of view that, as he stated in 2005, corruption is a third world problem, not first world.

    Awareness has of course risen since then about first world complicity and active participation in corrupt tax havens (take a bow Delaware),. And while there are recent promises of law change, there is little evidence that these are being enacted locally, let alone acted upon.

    He does have a point where he states that solving corruption is not the be all and end all.

    Anyone who has attended an NGO meeting will know that 10 completely honest people can have 10 different views about how matters should proceed. Honest disagreement may also produce inefficiency and waste – perhaps even more than corruption.

    But corruption stops us from getting to those honest disagreements in the first place. It is important.

  2. People in the third world identify corruption as the main issue and I don’t mean Nairobi taxi drivers but the people who see project budgets disappear or the projects performed shoddily because of the inherent corruption in them.

    Tax increases or reforms as the solution disqualify the individual mentioned as a credible analyst. But his readership would be more comfortable sitting in meetings discussing tax reform than the looting of the fiscus or aid. Need a bit of stomach to sit down and say, right, what happened to the money you thieving rascals. Collusion in corruption is not just the fault of big business but also aid and policy makers.

    Increase of taxation results in an increase of corruption anyway.

  3. I am shocked that Matthew would suggest that a member of the Washington commenatariat class would take a contrarian position to garner attention. Perhaps this technique is practiced elsewhere? Say among those who write for American law reviews? But surely not in the Washington community.

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