The economics of corruption

The main political parties in Spain are forcefully wrestling to escape unscathed from huge scandals undermining citizens’ confidence. Other countries on this side of the Rhine have witnessed similar cases of corruption and misconduct. Even a sizeable number of UK MPs shocked the public for their lavish and immoderate profligacy in charging their personal expenses to taxpayers.

Swiftly addressing any wrongdoing or improper conduct should stand as a must in preserving the core faith in the institutions. Unfortunately, offenders tend to wait till the Courts deliver their final rulings. Waiting for Justice to perform its duty runs too often as a time-buying device to dilute political responsibilities.

Parties should engage in thorough cleaning-up exercises instead of speculating on the chances the opacity of this kind of petty crime might fail to undergo a severe penalty. Raising the moral standards can only be achieved should voters and politicians alike regard it as a pressing need.

But corruption and mismanagement should not only be tackled on ethical grounds. They exert a devastating effect on the economy. Whenever market agents become aware they have to disburse non-statutory “commissions” for the award of public procurement or concession contracts, licenses and the ramping number of discretionary green lights, the fair allocation of resources is put at jeopardy. The more so when the “winners” are chosen out of their close links to those holding the strings.

The obvious answer would be to introduce an even playing field in corruption charges. Much benefit would derive should bribes be subject to open tendering, much in the same way the rotten boroughs were sold to the best bidder in the XVIII-century nonchalant England. It wouldn’t enlighten political life but at least it would offer an even playing field in business-related activities, the essence of any market economy. The nagging thing is that this course of action might be deemed to be illegal, unless it was widely accepted by all stakeholders.

So, the only plausible answer lies in getting rid of such unwarranted extra-costs. A difficult goal unless parties refrain from engaging in far too expensive election contests and those eager to make a career out of the highly unreliable political job are ready to step down at no personal benefit.

You might be rich enough to pay little attention at your representation salary. As in the US where open corruption is mainly confined to badly paid officers endowed with wide arbitrary power. The ancient Greeks and Romans followed a similar pattern with some (limited) success. But preserving political tasks to the well-off seems to depart from the egalitarian credo enshrined from the French revolution onwards.

The Nordic countries have settled this issue in a rather smooth way. When Mr Joergensen retired after a long period serving as Danish Chancellor and PM, he dwelt in his bus-driver modest co-operative home, offering Southern counterparts a practical lesson on how to behave decently. He didn’t delivered fatly-paid speeches, nor was he tempted to become member of any highly-remunerated Board of Directors. Serving the public is a life-long profession that should never get stranded in the pitfall traps of money.

About the Author

JP Marin Arrese
Juan Pedro Marín Arrese is a Madrid-based economic analyst and observer. He regularly publishes articles in the Spanish leading financial newspaper 'Expansión'.

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