The “Zero-Tolerance” Approach to Corruption Obscures Development Goals

In the context of development there are broadly speaking two normative reasons to tackle corruption: inequality and inefficiency. The bottom line is whether economic development, social mobility, and inequality will improve as the result of a particular policy. However, national and international anti-corruption discourse often presuppose that corruption is worth the expenditure of limited resources. In other words anti-corruption has become the end, rather a means to an end. Yet, other than the feeling of moral unease, what is the difference between a corrupt official and a lazy official? In each case money is wasted inefficiently. However, unlike other forms of inefficiency, corruption has been described as the “Public Enemy Number One” of developing world. There is no question that corruption is bad. My point is merely that prioritizing anti-corruption policy may not the optimal course of action for every country every time. Similarly when foreign countries instigate FCPA-type actions, some analysis ought to be done on the impact of legal action for the host country.

Corruption reduces social welfare through its impact on equality and efficiency. As such the anti-corruption discourse should be pragmatic rather than ideological. To the contrary, it seems that the international community has by and large decided that corruption is an “inherent wrong” and merits a “zero tolerance” approach. Not only is corruption one of the few issues countries seem comfortable with enforcing extraterritorially. Even the World Bank, explicitly mandated not to interfere with domestic politics, takes an aggressive stance on corruption. Its internal anti-corruption enforcement mechanism, the Integrity Vice Presidency, consists of sophisticated investigative and adjudicative-like functions designed to sanction corrupt practices. In a recent press release World Bank Group President Kim called corruption the “Public Enemy Number One” in developing countries. Like much of the anti-corruption coverage in the media, the rhetoric was somewhat circular. Corruption is bad because “[e]very dollar that a corrupt official or a corrupt business person puts in their pocket is a dollar stolen from a pregnant woman who needs health care,” and therefore money should be poured into anti-corruption measures. However, isn’t it the case that every dollar spent on anti-corruption reforms has the opportunity cost of foregone medicine or education?

It is problematic that within the anti-corruption community there exist almost no critical discussion about the opportunity cost of anti-corruption measures. The normative question should be under what circumstance does anti-corruption policy aid development objectives. This pragmatic view of corruption is implied in Bill Gates’s open letter. (See Rick’s alternative take here and here). I think Gates agrees that there is no question that corruption is bad and that leakages due to corruption is undesirable. However, there will always be leakages in aid—through corruption, inefficiency, or something else. Huguette Labelle’s reply to Bill Gates, which claims that “to end poverty you have to end corruption” is at worse plainly wrong and at best extremely misleading. Indeed, framing corruption as “Public Enemy Number One” and advocating “zero tolerance” takes away from the reality that the direction of causality between corruption and growth is still disputed within the broader academic community. For instance, empirical analysis suggest that the precise impact corruption reduction has on economic growth depends on a variety of other conditions, such as the baseline institutional integrity.  Blanket statements like this could lead to the misallocation of limited developmental resources. The international community has fallen for the “silver bullet” approach before —  free trade and education both come to mind. Misapplied advocacy will fail to resolve the underlying problems, and the failure often results in disappointment and disillusion with the newest “silver bullet”— an ultimately undesirable turn for the anti-corruption discourse.

To echo Matthew’s comment on Huguette Labelle, the interactions between corruption and development goals are complex. I do sympathise with Transparency International’s position, however I also believe that discussion is valuable and will lead to more effective policies. In future posts I hope to explore some of the issues flagged here in more depth.