Judicial ReEngineering

Size of Public Sector
Extensive and diverse public spending is, in itself, inherently at risk of cronyism, kickbacks, and
embezzlement. Complicated regulations and arbitrary, unsupervised official conduct exacerbate
the problem. This is one argument for privatization and deregulation. Opponents of privatization
see the argument as ideological. The argument that corruption necessarily follows from the
opportunity is weakened by the existence of countries with low to non-existent corruption but
large public sectors, like the Nordic countries. However, these countries score high on the Ease
of Doing Business Index, due to good and often simple regulations, and have rule of law firmly
established. Therefore, due to their lack of corruption in the first place, they can run large public
sectors without inducing political corruption. Recent evidence that takes both the size of
expenditures and regulatory complexity into account has found that high-income democracies
with more expansive state sectors do indeed have higher levels of corruption.
Like other governmental economic activities, also privatization, such as in the sale of
government-owned property, is particularly at the risk of cronyism. Privatizations in Russia,
Latin America, and East Germany were accompanied by large-scale corruption during the sale of
the state owned companies. Those with political connections unfairly gained large wealth, which
has discredited privatization in these regions. While media have reported widely the grand
corruption that accompanied the sales, studies have argued that in addition to increased operating
efficiency, daily petty corruption is, or would be, larger without privatization, and that corruption
is more prevalent in non-privatized sectors. Furthermore, there is evidence to suggest that
extralegal and unofficial activities are more prevalent in countries that privatized less.
There is the counterpoint, however, that industries with an oligarchy of companies can be quite
corrupt, with collusive price-fixing, pressuring dependent businesses, etc., and only by having a
portion of the market owned by someone other than that oligarchy, i.e. public sector, can keep
them in line. If the public sector company is making money and selling their product for half of
the price of the private sector companies, the private sector companies won't be able to
simultaneously gouge to that degree and keep their customers: the competition keeps them in
line. Private sector corruption can increase the poverty and helplessness of the population, so it
can affect government corruption, in the long-term.
In the European Union, the principle of subsidiarity is applied: a government service should be
provided by the lowest, most local authority that can competently provide it. An effect is that
distribution of funds into multiple instances discourages embezzlement, because even small sums
missing will be noticed. In contrast, in a centralized authority, even minute proportions of public
funds can be large sums of money.
Governmental Corruption
If the highest echelons of the governments also take advantage from corruption or embezzlement
from the state's treasury, it is sometimes referred with the neologism kleptocracy. Members of
the government can take advantage of the natural resources (e.g., diamonds and oil in a few
prominent cases) or state-owned productive industries. A number of corrupt governments have
enriched themselves via foreign aid, which is often spent on showy buildings and armaments.
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