The “Big Government Causes Corruption” Zombie Shambles On

I don’t make a practice of responding to opinion columns in mainstream newspapers, especially when they’re not specifically or primarily about corruption. But the opening of Bret Stephens’ piece in yesterday’s New York Times caught my eye, mainly because the column used corruption in the Greek health care system as the “hook” for an argument that President Biden’s ambitious plans for an expanded social safety net will lead to American decline. Here’s how Stephens opens his column:

Years ago, Alexis Tsipras, the party leader of Greece’s Coalition of the Radical Left, surprised me with a question. “Here in the United States,” the soon-to-be prime minister asked me over breakfast in New York, “why do you not have this phenomenon of passing money under the table?”

The subject was health care. Greece has a public health care system that, in theory, guarantees its citizens access to necessary medical care.

Practice, however, is another matter. Patients in Greek public hospitals, Tsipras explained, would first have to slip a doctor “an envelope with a certain amount of money” before they could expect to get treatment. The government, he added, underpaid its doctors and then looked the other way as they topped up their income with bribes.

Take a close look at any country or locality in which the government offers allegedly free or highly subsidized goods and you’ll usually discover that there’s a catch.

What is the point of opening with this anecdote (other than not-so-subtly alerting the reader that the author is the sort of important person who has chit-chats with world leaders)? The implication, so far as I can tell, seems to be that countries that provide free or heavily subsidized social welfare benefits tend to be more corrupt.

There is, however, an important problem with this argument: It’s not true.

To be sure, there are plenty of government-run programs, in the health sector and elsewhere, that are rife with corruption. But the claim that governments that provide more generous social welfare programs (funded, typically, by higher taxes) are generally more corrupt flies in the face of the best available evidence. As I’ve written about on this blog before (see here and here), and discussed in other work, in fact one of the most consistent and robust findings in the cross-national research on corruption’s causes and consequences is that, when controlling for other factors, countries with larger governments (that is, those where government spending and/or revenue is a larger share of GDP) have significantly lower levels of (perceived) corruption. So Stephens’ insinuation that government efforts to provide free or heavily subsidized health care (or child care or other welfare) tend to produce higher levels of corruption is just not accurate.

Indeed, Stephens seems to have missed or misunderstood one of the most important aspects of his anecdote: The fact that the Greek health care system is rife with “under the table” payments – while other countries with national health coverage, like Sweden and the UK, do not have this problem – is due in substantial part to the fact that the government underpays its doctors. In other words, the problem here is not that the Greek government is spending too much on health care, but that it’s spending too little, thus fostering the creation of a shadow private market in what’s supposed to be a public system. This is a problem we see in plenty of other countries, including in much of the developing world: Governments tout free or heavily subsidized public health services, but do not spend nearly enough on them, leading to shadow markets – not only “under the table” payments, but, perhaps worse, extremely high rates of absenteeism among government health care providers, who have much more lucrative sidelines providing private health care services when they’re supposed to be at public health clinics (see here and here). But again, the problem here is not that public spending on the health care system is too high, but rather that it is too low. Sure, we could get rid of this “corruption” by eliminating public provision of health care, thus replacing an illegal market with a legal market. But it’s hard to see why that would be so much better.

Perhaps Stephens recognizes at some level that his Greek health care corruption anecdote actually doesn’t work so well as an indictment of President Biden’s ambitious social welfare plans. After all, most other Western democracies have more generous social welfare programs than does the United States, and these countries are typically quite clean – many of them cleaner than the U.S., if one takes seriously Corruption Perceptions Index rankings. Perhaps this is why Stephens quickly pivots away from his opening insinuation that government health care systems tend to be corrupt, suggesting more broadly that government spending on social welfare comes with “a catch.”

The alleged “catches,” by the way, are a hodgepodge of inapposite anecdotes and misleading statistics. We are told, for example, about extremely long waiting times for rent-controlled Stockholm apartments (based on an article from five years ago, which focused not on government welfare spending, but rather on rent control and similar mandates, which have nothing to do with President Biden’s proposed social programs); about the fact that there aren’t enough slots in France’s “fantastic” subsidized day care (which would seem, again, to be an illustration of the government spending too little, not too much, on social programs); and about long wait times in the British National Health Service (an admittedly important problem with that particular system, but one that is not representative of national health systems overall, which generally compare favorably with the U.S. system when it comes to wait times). We also get the absurd suggestion that Europe’s generous social safety net is why R&D spending as a percentage of GDP (so-called “R&D intensity”) is lower in the EU than it is in the US. (Never mind the fact that, as the linked source shows, when one disaggregates the EU countries, Germany, Sweden, Austria, Denmark, and Belgium all have higher R&D intensity than the U.S., while the EU countries that bring the overall average down are places like Ireland, Latvia, and Slovakia, all of which have lower per capita social welfare spending than does the United States.) We’re also told that France, which spends more on social welfare than any other developed nation, is “an unhappy place” (the insinuation of a causal relationship is clear) – despite the fact that, at least if one believes the global survey data, average happiness in France is not much lower than in the United States, and the country that top the happiness list – Finland – spends only slightly less than France on social programs. Stephens even goes so far as to assert that the reason Europe’s overall share of the world economy has been shrinking since 1960 (from 36% to 10%, according to the linked source) is is that “big social safety nets … come at the expense of risk-taking and economic dynamism.” Never mind the fact that the U.S. share of the global economy has also shrunk dramatically over that same time period (from 40% to 24%). These declining shares of overall output are due not to a lack of “dynamism,” but largely to a combination of rapid growth in parts of the developing world (especially in Asia) and demographic trends (fewer people means less output, though not lower per capita wealth, which has remained high in both the US and Europe). Really, Stephens’ whole column is like a Master Class in smug, tendentious ignorance.

But I’m getting away from my main point, and my own area of (supposed) expertise. Let’s put aside for now all the other claims in the piece about how making sure that working parents can afford day care will turn America, in Stephens’ words, into “a kinder, gentler place of permanent decline.” Let’s focus specifically on the corruption issue. Stephens opens his piece with a suggestion (albeit one that he quickly abandons when he gets into the substance of his argument) that larger governments are typically more corrupt – that illicit private markets will inevitably, or at least typically, take root whenever the government promises to offer free or subsidized social services. That claim is what Stephens’ fellow NYT columnist Paul Krugman might call a Zombie Idea: No matter how many times it’s been bludgeoned by evidence, it refuses to die.

3 thoughts on “The “Big Government Causes Corruption” Zombie Shambles On

  1. Matthew,

    Excellent work!!

    Best regards,

    Matthew H. Murray Adjunct Professor Columbia University School of International and Public Affairs & Harriman Institute Co-founder *New Directions in Anti-Kleptocracy Forum* *************************** email: matthew.murray@columbia.edu cell: +1(703)626-7151 twitter: @MatthewHMurray1

    On Tue, May 4, 2021 at 10:00 AM GAB | The Global Anticorruption Blog wrote:

    > Matthew Stephenson posted: ” I don’t make a practice of responding to > opinion columns in mainstream newspapers, especially when they’re not > specifically or primarily about corruption. But the opening of Bret > Stephens’ piece in yesterday’s New York Times caught my eye, mainly becaus” >

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  3. Pingback: This Week in FCPA- Episode 251 -It’s a New Dawn edition - Compliance ReportCompliance Report

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