Social Distancing Reduces Corruption Too

Together with a trio of Chinese scholars, Boston University Professor Raymond Fisman offers the latest evidence on the value of social distancing. Their research, in the July issue of the American Economic Journal: Applied Economics (here, prepublication version here), is the first rigorous, quantitative test of a result suggested by case studies of small countries (Guatemala), small towns (Fall River, Massachusetts), and small professional circles (Chicago judges). The greater the distance between those who enforce the anticorruption laws and those likely to violate them, the more likely it is the laws will be enforced.

“Social distance” to public health authorities means the actual physical space that individuals should maintain between on another (six feet for Americans, two meters for everyone else) to prevent the spread of Covid-19. Applied to the findings of Fisman and colleagues and the case studies, it means more than how far apart investigators, prosecutors, auditors, and others responsible for enforcing anticorruption laws stand physically from those whom they police. It means too the absence of school and neighborhood ties, different circles of friends, and the lack of other relationships that would make an individual hesitant to question another’s conduct let alone investigate or arrest them. In short, when evaluating social distance in the anticorruption world, “social” comes with a capital S.

Consider what Professors Fisman and his colleagues Professors Chu, Tan, and Wang found in their study of Chinese auditors.

They studied whether provincial chief auditors in China went easier on local prefecture governments in their hometowns. Everything else equal, they report that hometown auditors found 38 percent less in questionable expenditures than when an auditor was not from the same town as those audited. “This hometown effect is similar throughout the auditor’s tenure and is diminished for audits ordered by the provincial Organization Department as a result of the departure of top city officials.”  That the social distance or lack of it affects the enforcement of auditing standards is buttressed by their review of the accounting practices of businesses owned by local governments.  Abuses are higher when a hometown auditor is in charge of auditing them.

The authors innovative, rigorous use of empirical data to show the impact an absence of social distance has on enforcing anticorruption norms confirms the case studies cited above.  In the small town of Fall River, Massachusetts (population 89,388), corruption was rampant thanks the close ties between town officials who should have been policing one another.  In both the small country of Guatemala (16 million) and the small circle of Chicago judges (360), corruption was only brought under control when socially distanced enforcement agents (UN special prosecutor; federal investigators and prosecutors) were introduced.

Among members of the American public health community, Dr. Anthony Fauci did more than anyone else to convince citizens of the importance of social distancing while the pandemic raged. The anticorruption community needs its own Fauci.

1 thought on “Social Distancing Reduces Corruption Too

  1. Addendum. Social distancing required even for large countries?

    EU to seize control of bloc’s fight against money laundering.
    Joe Barnes, Daily Express, 7 July 2021

    The European Commission wants new control with direct supervisory powers because a number of member states are reluctant to use the current EU provisions to fight money laundering. The Anti-Money Laundering Authority should be operational by 2024 with direct supervisory powers over cross-border financial firms two years later. The EU agency will be allowed to slap fines running into millions of euros on firms that breach money-laundering rules, according to the Financial Times.
    Eurocrats will present legislation that is their most ambitious plot yet to tackle illicit finance in the wake of many scandals across the bloc. There are hundreds of billions of euros of suspicious transactions every year across the EU, but the response to tackle the issue has always been patchy. Top officials often complain that national governments don’t properly implement the existing anti-money laundering directives that are in place.

    The Commission’s aim is to bolster cooperation between national authorities and improve cross-border flows of information to financial services intelligence units.

    https://www.riskscreen.com/kyc360/news/eu-to-seize-control-of-blocs-fight-against-money-laundering/?utm_source=ActiveCampaign&utm_medium=email&utm_content=Daily+News+Feed&utm_campaign=KYC360+Daily+News+Mailer

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