(Assignment 1) Peru – Two decades of differing syndromes - Diana Evangeline

Peru suffered from serious economic and political instability during 1988-1990 with hyperinflation and social hardships. The situation was ideal for an authoritative Fujimori government to come to power in 1990 and Alberto Fujimori proved adept at bringing the situation under control with his neoliberal macroeconomic policy changes, popularly known as the ‘Fujishock’. However, after almost ten years in power, the Vladi-videos shook the country with allegations of his corruption, embezzlement of public funds and abuse of power. The Vladi-videos were basically records showing Vladimiro Montesinos, the intelligence service head, offering bribes to opposition parties, television-channel owners, etc., which revealed a decade of corruption that was aimed at disrupting the very means of checks and balances in a democracy – the media and the political opposition.

What follows this authoritative regime in the present Peru day is again worth noting. All the recent instances of corruption reported come from a more local level. There has been a worrying growth of the illegal economy and the increased decentralization of the government seems to have been a contributing factor.^[i] The Alejandro Toledo government that took over from Fujimori called for the election of 25 (initially thirteen) regional governments that would then be directly involved in the economic development of their specific region. With decentralization, the leaders at the upper levels of governance could denounce responsibility for what happens at the lowest levels.

Michael Johnston, in his analysis of the syndromes of corruption, places Peru under the ‘Oligarchs and Clans’ syndrome which is characterized by ‘rapid and significant liberalization of politics, economies, or both, yet their institutions and civil societies are very weak’.[ii] However, Johnston points that in this syndrome, corruption takes place at multiple levels but more importantly ‘involve a relatively small number of elites and their extended personal clans’ which is consistent only with the first decade of Fujimori’s rule. The second decade however has seen a greater amount of corruption from the decentralized wings of the government.  

A study conducted on the Vaso de Leche (glass of milk) program in trying to track the spending of public funds from budgeting to the final consumption of the milk by the beneficiaries in their households reveals that only about twenty-nine cents of each dollar spent by the central government reaches the beneficiaries.[iii] It points that the around forty percentage of the leakage takes place at the final stage of transfer from the municipality to the beneficiary with almost no significant leakage at the top most levels. The Peruvian case thus puts into question the argument on decentralizing governance and focusing on civil society and participatory models of governance and Aristotle’s idea that ‘to remove oneself from politics and avoid one's responsibilities to the collectivity, to detach one's power from the polis, was to leave the common life more vulnerable to external and internal forces of decay and destruction’.[iv]

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[i] Divide and Bribe, http://www.economist.com/news/americas/21623706-corruption-and-political-fragmentation-threaten-perus-democracy-divide-and-bribe

[ii] Michael Johnston, Syndromes of Corruption, 2005

[iii] Jose Lopez-Calix, et.al., Local Accountability and the Peruvian Vaso de Leche Program, 2009

[iv] Peter Euben, On Political Corruption, 1978

(Assignment 1) Virtue and Corruption in Russia - Charlotte

The Oligarchs and Clans in Russia accumulated state wealth during the move from a planned to a market economy. State assets were privatized, and so they were in the hands of a few business clans.  Most of the significant instances of corruption in Russia happened during this period and is described as "Catastroika"[i] – as a major economic collapse causing widespread inequality, unemployment and organized crime.  Reconstruction of the state meant a weakening authority and institutional capacity, which furthered corruption and violence.

The problem was identified to have Soviet roots, emerging from the powerful state machine with an authoritative and corrupt bureaucracy, which was answerable to no one. (Johnston, 2005) Some of the most prominent cases which came to light include the case of Mikhail Khodorkovsky, the richest ‘‘oligarch’’ in 2003, who amassed considerable wealth through control of Siberian oil fields while privatizing state assets. Similarly, Oleg Deripaska was part of the takeover of the aluminum industry and Boris Berezovsky maintained Aeroflot airlines and a television network. Selective anti-oligarch measures happened till 2004 but corruption was so rampant that its evidence became a saleable commodity. “Kompromat”, or ‘compromising materials’ is widely used as an effective threat to extract rents for covering up the case of corruption.  (Johnston, 2005)

Following the Greek tradition, which characterizes the ideal state of affairs as opposed to the decay and decomposition that is signified by corruption, we cannot evade the moralizing and normative tone underlying the word.[ii] MacIntyre puts forward that politics should be a pursuit of certain “goods of excellence” – agreement on values, say, “non-corrupt” which forms the basis of the social contract, which would lead “goods of effectiveness” - the benefits achieved by the society as a whole as a result of practicing the virtues, say, reduced inequality. (Knight, 1998)

In some sense, there is an indication towards the general state of lawlessness and insecurity, the inefficiency of the legal and state apparatus and also a decay of an “older normative framework” such as interpersonal relationships and trust, in the midst of rapidly expanding economic potentials in Russia. (Johnston, 2005) This could point to a shift in the understanding of the “goods” and “excellence” in the Aristotelian sense, since the political, social and economic life places certain constraints on (and in the Marxian understanding, determines) the virtues, “goods”, ideas and ethics held by a society, which in turn influences these spheres.

Citations:

·      Johnston, Michael. Syndromes of corruption: wealth, power, and democracy. Cambridge University Press, 2005.

·      Knight, Kelvin. The MacIntyre Reader. Notre Dame: University of Notre Dame Press, 1998.

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[i] See  Milne, Seumas, “Catastroika has not only been a disaster for Russia” in The Guardian, 16, August, 2001.

http://www.theguardian.com/world/2001/aug/16/russia.comment

[ii] See Mulgan, Richard “Aristotle on Legality and Corruption” in “Corruption: Expanding the Focus”, ed. Manuhuia

Barcham, Barry Hindess, Peter Larmour. Published by ANU E Press, 2012.

http://press.anu.edu.au/apps/bookworm/view/Corruption%3A+Expanding+the+focus/9901/ch02.html#toc_marke

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(Assignment 1) CORRUPTION IN THE USA → FROM THE PERSPECTIVE OF ECONOMIC WARRIORS - Chandrasekar N

Jean Cartier-Bresson of the University of Versailles writes in the OECD Observer that “Corruption… occurs at those points where the political, bureaucratic and economic interests coincide.”

What does he mean by this? While there are a lot of fancy economic terms like “adverse selection”, “moral hazard”, “conflict of interest” and “rent-seeking behavior” which can be thrown around in situations like these, it comes down to the fact that “public agents”, meaning politicians, bureaucrats etc, are in a position where they can exercise discretionary power by allocating items of value, like contracts, coal, 2G spectrum and so on.

Prof. Cartier-Bresson explains this in very simple terms. Bribe payers want to maximize their expected gains (eg.by being allocated a lucrative contract), or to reduce expected costs, (eg. illegal reductions in taxes). Public officials and politicians would want to maximize their earnings. This is accomplished through bribery.

I shall give three examples. Two from real life, and one fictional

The first is the Kids For Cash scandal which broke in 2008 in Luzerne County in Pennsylvania. One of the court judges is alleged to have taken 1 million dollars in bribes from juvenile prisons to fill their cells with children who came before him in court. He was sentenced to 28 years in prison in 2015.

He had apparently sentenced children to extended stays in juvenile prison for such trivial reasons such as making fun of a school principal on Myspace, trespassing in an empty building, and shoplifting DVDs from Wal-mart.

These juvenile prisons were run by private companies and are becoming more and more popular across the US as private players claim they can run prisons at a cheaper rate than the state can. Apparently the judge had used his discretionary power to dismantle the state-run juvenile prison and allocated a contract to a private player instead.

The second is the US Air Force Tanker Contract Controversy. In 2004, a former Pentagon procurement staffer pled guilty to inflating the price of a contract to purchase aerial refueling tanker aircraft to favour Boeing,

She had asked Boeing to give jobs to her son-in-law and later took on a job at Boeing herself after retirement, with a big signing-on bonus. She was sentenced to prison for corruption and had to pay a fine.

The third example is from True Detective Season 2 (2015). True Detective is an American crime drama series. The second season is set in the fictional town of Vinci, California, and is about four police officers and a mafia boss, who are trying to solve the murder of a corrupt city official.

The mafia boss had paid a substantial bribe to the dead official so that his company would get first preference to buy the land that fell under a proposed high speed rail line.

His scheme was to dump toxic waste on the land to reduce its value, buy it at a low price, and sell it to the federal government at a higher rate when it started to build the rail line.

The fictional town of Vinci is apparently based on the town of Vernon, California, which is notorious for corruption.

(Assignment 1) INDONESIA: CORRUPTION IN SUHARTO’S REGIME - Avienaash

Corruption, in terms of private gains were rampant during the regime of Suharto, the then president of Indonesia. But at the same time the economy was growing at an impressive rate of 8 per cent (1977-97) and net capital inflow was showing positive signs. Indonesia was renowned as one of the ‘Asia Tigers’ and ‘high growth developing economy (HGDE)’. Corruption at all levels were explicit and hence all that the international investors had to do was to include the expenditure of rent seeking in their business plan. As against the standard argument of corruption leading to inefficient allocation of resources and pushing out the investors, corruption in Indonesia was beneficial to the investors in terms of lax labour and environmental regulations. Hence corruption was a positive incentive for investors.

The level of corruption was top down. In other words the president and his close associates will gain larger share of the political spoils while the lower level state officials would gain the least.  For instance the top bureaucrats would create a monopoly market using the policy instrument of regulation and this market would be exploited by the children of Suharto (e.g. Telecom). Foreign investors were allowed to do business only when they had sold their shares to Suharto inc. that is approvals are faster when the family members of the president were on board of the company.

The formal state framework was ineffective and lagging in its targets. While the informal, personal political network comprising of president, his associates, would be politicians, local elites, top civil servants and retired military men was effective but was corrupt. The loyal officials of President would super see work limits of their subordinates. Anyone demanding more bribers or demanding bribes without the knowledge of higher officials would be publicly punished hence creating fear among others. This made sure that rent seeking did not interfere with the economic objectives.

Everyone within the network had a strong incentive not to go against it. The key feature of this system is patronage. The top bureaucrats were kept on board by job based incentives and official rewards. The military men were loyal and were interested in making a profit. Military was the fundamental aspect of this network. Military budgets and establishments were the main source of money laundering. The low level state officials and judges were happy to supplement their low income with small amount of bribes. People of Indonesia found it costly to revolt against corrupt officials for the fear of losing the economic opportunities (due to the higher growth rate in the manufacturing sector).

(Assignment 1) SYNDROME OF CORRUPTION: OLIGARCHS AND CLANS - Ashish

In this essay I’ll be looking at few corruption cases in Pakistan, examine its patterns and relate it to the syndrome of “oligarchs and clans”.

In Pakistan corruption is rampant. Owing to high corruption, Pakistan has always maintained a low score in the ranking of Transparency International, with its latest rank being 126 out of 174 countries (2014). Some of the popular corruption cases in Pakistan are:

Firstly, corruption during nationalisation of economic process. To revitalise the stagnant economy, Zulfikar Ali Bhutto introduced a planned economic system. The nationalisation programme brought entire private industrial corporations under the government control. This opened the door for corrupt political practices to penetrate into the nation’s economic planning process. Few powerful groups and individuals hijacked the major industries and tried to accumulate wealth by redistributing favours to their allies.

Secondly, after failed attempt of nationalisation Pakistan switched to denationalisation. During denationalisation process, current PM Nawaz Sharif made undue gains. It is often alleged that Sharif was favoured because of his close relationship with the military dictator at the helm. His conglomerate Ittefaq Group of Industries was one among the very few industries that was decentralised and returned to its owners. 

Third, the Rental Power Project Scam. In 2006, several cases of bribery were reported in the Rental Power Projects (RPP) where top level ministers were involved. Allegations were also levied against former prime minister Raja Pervez Ashraf which earned him the nickname “Raja Rental”.

The above 3 cases of corruption fits well in the syndrome of “oligarchs and clans” in its perpetuation of corruption. Pakistan’s governance resembles plutocracy where the top position is often occupied by the wealthy elite.  This gives unfair advantage to the few elite to establish control on the government and extract personal gains. Adding to this, highly unstable regime in Pakistan provides further breeding ground for exploitation by the vested interests. Thus, few powerful oligarchs and clans contend over major stakes, grant favour and get benefit in return.

Pakistan is also plagued by weak and unpredictable institutions which is characteristic of oligarchs and clans. Corruption runs high in institutions like the judiciary, police and army. As a result there is trust deficit in these institutions. Weakness of institutions and law enforcement agencies further contributes to violence and corruption.

In a situation like this, relatively vocal and powerful media played an active role in exposing corruption. However, characteristic of oligarchs and clans, people who try to expose corruption often risk their life. Death of many parliamentarians, journalists and whistle blowers in Pakistan confirms this feature.

Therefore, corruption in Pakistan is a good example of oligarchs and clans where corruption is deeply entrenched among the few elites, marked by weak institutions, lack of public trust and threat to life of whistle blowers. 

REFRENCES

·      https://www.transparency.org/

·      Mohiuddin (2007): The Economy of Pakistan, "The Nationalization and Authoritarian Populism Under Zulfikar Ali Bhutto; 1971-1977"

·      Abbasi, Ansar. "US starts probe into rental power projects scam". The News International

·      Johnston, Michael (2005): Syndromes of Corruption (Cambridge University Press)