CORRUPTION Syndromes of Corruption

122 Syndromes of Corruption
weakness of formal institutions. But Oligarch and Clan corruption feeds
upon and reinforces pervasive insecurity, and unpredictable corruption is
the most damaging of all in development terms (Johnson, Kaufmann, and
Zoido-Lobatón,1998; Campos, Lien, and Pradhan, 1999). Investors are
likely to insist on short-term gains rather than planning for the long haul –
or will stay out of a country altogether (Keefer, 1996). Safer institutions
and more sustainable returns abroad encourage capital flight. A lack of
orderly development does not, however, mean an absence of politics and
markets (O’Donnell, 2001); much activity will take place outside the formal
system. Black-market businesses are difficult to tax, to regulate, and to
restrain so that legitimate enterprises may flourish; political parties and
civil society may be similarly preempted by private followings. Inefficient
and undemocratic as those illicit activities may be, they can be more
rewarding than legitimate alternatives. Therefore, further economic and
political liberalization in the absence of strong institutions may only add
more fuel to the fire (Satter, 2003). The rule of law can become a fiction in
an Oligarchs and Clans setting, while the expectation of corruption and
violence becomes a kind of self-fulfilling prophecy (Leitzel, 2002:41).
Oligarchs and Clans: three cases
Russia, Mexico, and the Philippines all fit this profile in somewhat
differing ways. Russia saw the fall of a dictatorial (if ossified) state and a
planned economy that had sustained development in some respects while
impeding it in many more. Mexico’s most recent liberalization has been
political: Vicente Fox’s presidential victory in 2000 was the first national
defeat for the Institutional Revolutionary Party (Partido Revolucionario
Institutional, or PRI) since its founding seventy-one years before. But
during the 1980s the state’s role in the economy was cut back significantly
(Levy and Bruhn, 2001: 165–179). Economic liberalization in the
Philippines intensified during the early 1990s (Ringuet and Estrada,
2003: 237–239), although its pace has slowed in recent years (Montesano,
2004: 98–99); political liberalization dates from the ‘‘People Power’’
revolution of 1986. All three countries – Russia most of all – offer major
economic opportunities based on natural resources, emergent domestic
markets, and, particularly in Mexico, manufacturing. They are middleincome
countries (the Philippines perhaps excepted) and their Human
Development scores reflect a similar ranking. However, table 6.1 also
indicates institutional weaknesses, less pronounced in Mexico (a transitional
case in terms of corruption syndromes, as we shall see) but very
serious in Russia. Ratings for institutional and social capacity are well
below those seen in the Elite Cartel cases – not to mention those for