CORRUPTION Syndromes of Corruption

26 Syndromes of Corruption
connections rather than open, honest decisionmaking. Political machines,
for example, are electoral monopolies giving bosses the discretion to
reward their backers and punish their enemies, with little fear of being
called to account for their actions. Discretion in the absence of accountability
is antithetical to strong and effective political and market institutions:
boundaries between politics and the economy, or between public and
private interests, are weakened or subverted. So are rules of fair play,
making access to decisionmakers a marketable commodity. Connections
and boundaries between wealth and power will be controlled by corrupt
officials and their cronies, not by laws or accountable agencies. Markets
as well as politics and policy can become distorted: in South Korea,
for example, politically favored industrial combines (chaebols) received
preferential interest rates and access to credit while those refusing to send
cash to the Blue House (Korea’s presidential residence) were left to fend
for themselves in much more expensive capital markets, and suffered
official harassment (Moran, 1999; Kang, 2002a). Serious corruption
thus reflects and perpetuates weaknesses in participation and institutions,
the prospect of corrupt benefits creates incentives to undermine both, and
the result is that further corruption is facilitated while opposition to it
becomes difficult – or even dangerous.
Economic consequences
The economic costs of corruption can be seen in both individual transactions
and their extended consequences (Rose-Ackerman, 1999: ch. 2;
Rahman, Kisunko, and Kapoor, 2000; Moreno, 2002). By substituting
illegitimate payments and preferments for free exchange and a fluid
system of market-clearing prices, corruption introduces and rewards
inefficiency in dealings between the state and private interests (Elliott,
1997b; Seyf, 2001; Rose-Ackerman, 2002) and preempts competition
among firms. In the short term, corrupt influence may seem cheap and
expeditious, compared to routing complex and expensive bids through
legitimate channels. But bribes and extortion payments are an expensive
way to obtain results for which one already qualifies, or that could be the
rewards of efficiency. Resources are diverted into corrupt payments while
the costs of negotiating with agencies, providing data, filling out forms,
allowing inspections, and awaiting outcomes are actually compounded as
officials contrive new requirements and delays. Corruption tends to be
more extensive, and aggregate growth and investment lower, in countries
with extensive bureaucratic delays, and there is no evidence that corruption
‘‘cuts through red tape’’ (Mauro, 1998; Mauro, 2002; see also
La Porta, Lopez-de-Silanes, Shleifer, and Vishny, 1999; Gupta, Davoodi,