CORRUPTION Syndromes of Corruption

28 Syndromes of Corruption
low levels of competition, poor anti-trust policies and enforcement, and
markets dominated by a few large firms (Ades and Di Tella, 1994). Elliott
(1997b), Ades and Di Tella (1999), and Blake and Martin (2002) find a
negative relationship between corruption and the overall openness of
an economy. Some of the most serious harm is done to small businesses
that might otherwise be protected by strong institutions and rules of
fair play: many are forced into the informal sector (Kaufmann and
Kaliberda, 1996; Rose-Ackerman and Stone, 1996) and their potential
for offering marginal groups a stake in the economy is lost. For those
reasons so-called ‘‘petty corruption’’ should be seen as a serious concern
(Elliott, 1997b), not just as an echo of illicit dealings at higher levels.
Extensive corruption tends to be associated with widespread, persistent
poverty, though here causality runs in both directions (UNDP, 1997).
Some countries remain poor because they are corrupt, but they may also
have extensive corruption because they are poor. Where legitimate alternatives
are scarce the incentives to make and demand payments can be all
the more intense. Meanwhile, corrupt deals are unlikely to contribute to
growth: beyond a certain point where payments make up for low salaries
(a complex issue: see Besley and McLaren, 1993), illicit returns are likely
to be spent on luxury goods or to flow out of corrupt countries toward
economies offering better returns and safe numbered bank accounts.
Affluence is not, by itself, evidence that a country does not have
significant corruption problems (Kang, 2002a) – nor is democracy.
Moreover, GDP trends by themselves are a decidedly incomplete measure
of a society’s wellbeing, and focusing only on domestic economic
consequences would give many affluent countries a ‘‘pass’’ on corruption
issues that they may not have earned. Indeed, chapters 4 and 5 will
discuss several established democracies in which politicians trade in
bureaucratic or legislative access made all the more valuable by the
strength of the institutions involved. In less-institutionalized democracies,
we shall see that corruption helps a range of elites build networks and
secure their positions. They may then pursue growth-oriented policies
relatively effectively, but that is by no means guaranteed. I will suggest
that spurring economic growth in that way can have significant costs
later on.
Implications for political development
Open, competitive political processes – including but not limited to
elections – are also undermined by corruption (Doig and Theobald,
2000; Moreno, 2002; but see also Lipset and Lenz, 2000). Two of the
three political opportunities seen by Dahl (1971) as essential to the