Tag Archives: government size

The “Big Government Causes Corruption” Zombie Shambles On

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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.

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Can U.S. History Teach Us Anything Useful About the Fight Against Corruption in the Developing World Today?

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A little while back I attended a very interesting talk by California Supreme Court Justice Mariano-Florentino Cuellar about a paper of his, co-authored with the political scientists Margaret Levi and Barry Weingast, entitled “Conflict, Institutions, and Public Law: Reflections on Twentieth-Century America as a Developing Country.” It’s a short, provocative paper, well worth reading for a number of reasons, but what I really want to focus on here is less the substance of the paper itself than the broader theme, captured by the paper’s subtitle, that it may be valuable to think about the pre-World War II United States as not so different from modern developing countries. Most relevant for readers of this blog, it may be worth looking to U.S. history (and the history of other developed countries) to better understand the process by which endemic public corruption may be brought under control.

The Cuellar-Levi-Weingast paper itself touches on, but doesn’t really delve into, this issue. Nonetheless, it got me thinking about three features of the historical U.S. struggle against systemic corruption—a struggle that, while certainly not complete, does appear to have successfully transformed the United States from a system where corruption was the norm (with some happy exceptions) to one where integrity is the norm (with some unhappy exceptions). Importantly, each of these three observations casts doubt on prominent claims in the modern debate about fighting corruption in the developing world: Continue reading →

Further Thoughts on Government Size and Corruption: Why Do Patterns Across U.S. States Look So Different from Patterns Across Countries?

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In a couple of posts (here and here) last fall, I discussed the relationship between government size (usually measured by the ratio of government expenditures to GDP, or occasionally by public sector employment rates) and corruption. The main takeaway from the cross-country data is that, in apparent contradiction to the “big government causes corruption” hypothesis, government size is, if anything, negatively correlated with perceived corruption, as measured by the Corruption Perceptions Index (CPI) or similar sources. While that evidence does not decisively refute the claim that larger governments are more prone to corruption—the relevant studies have important limitations, and it’s at least possible that the result is due to reverse causation—it certainly seems to suggest that, when it comes to fighting corruption, too-small governments are probably a more significant problem than too-large governments.

Most of the research on the relationship between government size and corruption relies on international comparisons. But some work has performed single-country studies, attempting to identify the relationship between government size and corruption across sub-national jurisdiction. Some of this work reaches results that are largely consistent with the international research. For example, a recent analysis of 290 Swedish municipalities found that those municipalities with higher public expenditure levels had lower corruption, as reported in an anonymous survey of senior politicians and civil servants. But other research—particularly research on the United States—has found the opposite result: Within the U.S., when controlling for a number of other economic and demographic factors, states with larger public sectors seem to have higher corruption. What’s going on here? Continue reading →

Larger Governments Have Less Corruption (Part 2 – Possible Explanations)

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In my last post, I argued that the familiar hypothesis—advanced by Gary Becker and others—that big governments are associated with more corruption is inconsistent with the available cross-country empirical evidence. In fact, though the results of different studies are not entirely consistent, the weight of the evidence seems to suggest that (controlling for other possible correlates), countries that have larger governments—defined primarily as those that have higher levels of government spending as a percentage of GDP—have lower levels of perceived corruption, as measured by the familiar indexes, such as Transparency International’s Corruption Perceptions Index (CPI). Again, there are some questions about the robustness of this negative correlation—some studies find that it is statistically significant, while others do not—but there’s enough supporting evidence that I think it’s fair to (tentatively) treat this correlation as genuine.

Perhaps in hindsight this shouldn’t be so surprising. Putting aside multiple regression and other fancy statistical techniques, if one just eyeballs the CPI “league table,” it’s clear that the group of countries that consistently score near the top of the rankings include lots of countries—particularly countries in Northern and Western Europe—with quite large governments (such as Denmark, Sweden, Belgium, Norway, the Netherlands, Finland, and Iceland), while the bottom of the CPI list includes countries with very small governments. (Even if one excludes barely functioning states, like Somalia, the bottom group in the CPI includes small-government states like Bangladesh, Cambodia, Haiti, Russia, and the Central African Republic). Of course, this by itself doesn’t tell us much, especially given the well-established correlation between GDP and the government spending/GDP ratio—but, again, multiple regression techniques that control for GDP and other factors show that the positive correlation is genuine, and the handful of favorite examples often trotted out to suggest that small governments are the key to lower corruption (like Singapore and Hong Kong) are in fact statistical outliers.

So let’s assume that, as most studies seem to show, there’s a negative correlation between the government spending/GDP ratio and perceived corruption. What’s the explanation for this?

The short answer is that I don’t know, and I’m not aware of any research that really nails this down. But here are a few possibilities, some cribbed from existing papers, others based on my own wild speculations: Continue reading →

Larger Governments Have Less Corruption (Part 1 – The Evidence)

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Many people believe that one of the most important root causes of public corruption is “big government.” This view was perhaps captured most famously and most succinctly by Gary Becker, the late Nobel Laureate economist, who declared (in a couple of memorable op-ed headlines), “If you want to cut corruption, cut government” and “to root out corruption, boot out big government.” Professor Becker was not what you would call cautious or circumspect in advancing this claim: He insisted that “instituting large cuts in the scope of government is the only surefire way to reduce corruption,” and that without such cuts even the most well-intentioned anticorruption reforms and crackdowns would fail, because “corruption always reemerges wherever governments have a major impact on economic conditions.” Though Professor Becker was perhaps the most blunt (and famous) advocate for this view, many others have taken this position. (See here, here, here, and here.) Indeed, a while back I attended an anticorruption conference at which a former senior minister of a European country (whose identity I cannot disclose due to the conference’s confidentiality rules) declared that the key to reducing corruption in his country was the decision to drastically shrink the public sector, slashing taxes, public spending, and the overall size of government–and this ex-official called on other countries to follow that advice as well.

But before we go charging ahead advising countries that the only way that they can get their corruption problem under control is to cut their governments, it might make sense to assess whether the available empirical evidence actually supports Becker’s hypothesis. Is it true that (all else equal) countries with larger governments have more corruption, compared to countries with smaller governments?

The answer is no. If anything, the evidence cuts in the opposite direction. Continue reading →