Corruption and Political Development

Corruption and Political Development: A Cost-Benefit Analysis Author(s): J. S. Nye Source: The American Political Science Review, Vol. 61, No. 2 (Jun., 1967), pp. 417-427 Published by: American Political Science Association Stable URL: http://www.jstor.org/stable/1953254 . Accessed: 20/04/2013 08:42 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. . American Political Science Association is collaborating with JSTOR to digitize, preserve and extend access to The American Political Science Review. http://www.jstor.org This content downloaded from 121.33.190.146 on Sat, 20 Apr 2013 08:42:50 AM All use subject to JSTOR Terms and Conditions CORRUPTION AND POLITICAL DEVELOPMENT: A COST-BENEFIT ANALYSIS* J. S. NYE Harvard University "Private Vices by the dextrous Management of a skillful Politician may be turned into Publick Benefits." -Bernard Mandevilie, 1714 1. THE STUDY OF CORRUPTION IN LESS DEVELOPED COUNTRIES Corruption, some say, is endemic in all governments.' Yet it has received remarkably little attention from students of government. Not only is the study of corruption prone to moralism, but it involves one of those aspects of government in which the interests of the politician and the political scientist are likely to conflict. It would probably be rather diffi- cult to obtain (by honest means) a visa to a developing country which is to be the subject of a corruption study. One of the first charges levelled at the pre- vious regime by the leaders of the coup in the less developed country is "corruption." And generally the charge is accurate. One type of reaction to this among observers is highly moralistic and tends to see corruption as evil. "Throughout the fabric of public life in newly independent States," we are told in a recent work on the subject, "runs the scarlet thread of bribery and corruption . . ." which is like a weed suffocating better plants. Another de- scription of new states informs us that "cor- ruption and nepotism rot good intentions and retard progressive policies."2 Others have reacted against this moralistic approach and warn us that we must beware of basing our beliefs about the cause of coups on post-coup rationalizations, and also of judging the social consequences of an act from the * The author is indebted to Samuel P. Hunting- ton, Leon Lindberg and Robert Erwin for reading an earlier version of this paper. 1 C. J. Friedrich, AMan and His Government (New York, 1963), p. 167. See also "Political Pathology," The Political Quarterly, 37 (January- March, 1966), 70-85. 2 Ronald Wraith and Edgar Simpkins, Corrup- tion in Developing Countries (London, 1963), pp. 11, 12. K. T. Young, Jr., "New Politics in -New States," Foreign Affairs, 39 (April, 1961), at p. 498. motives of the individuals performing it.' Under some circumstances Mandeville is right that private vice can cause public benefit. Corruption has probably been, on balance, a positive factor in both Russian and American economic development. At least two very im- portant aspects of British and American po- litical development-the establishment of the cabinet system in the 18th century and the national integration of millions of immigrants in the 19th century-were based in part on corruption. As for corruption and stability, an anthropologist has suggested that periodic scandals can sometimes "lead to the affirmation of general principles about how the country should be run, as if there were not posed im- possible reconciliations of different interests. These inquiries may not alter what actually happens, but they affirm an ideal condition of unity and justice."4 However, the "revision- ists" who echo Mandeville's aphorism often underestimate tastes for moralism-concern for worthiness of causes as well as utilitarian consequences of behavior. There is always the danger for a corrupt system that someone will question what it profits to gain the world at the price of a soul. The purpose of this paper is less to settle the difference between "moralists" and "revisionists" about the general effect of corruption on development (although a tenta- tive conclusion is presented) than to suggest a means to make the debate more fruitful. After discussing the problem in the usual general 3 See, for example: Nathaniel Leff, "Economic Development Through Bureaucratic Corrup- tion," The American Behavioral Scientist, 8 (November, 1964), 8-14; David H. Bailey, "The Effects of Corruption in a Developing Na- tion," The Western Political Quarterly, 19 (De- cember, 1966), 719-732; J. J. Van Klaveren in a "Comment" in Comparative Studies in Society and History, 6 (January, 1964), at p. 195, even argues that "recent experience in the so-called underde- veloped countries has most vividly brought home the fact that corruption is not a mass of inco- herent phenomena, but a political system, capable of being steered with tolerable precision by those in power." 4 Max Gluckman, Custom and Conflict in Africa (Oxford, 1955), p. 135. 417 This content downloaded from 121.33.190.146 on Sat, 20 Apr 2013 08:42:50 AM All use subject to JSTOR Terms and Conditions 418 THE AMERICAN POLITICAL SCIENCE REVIEW terms of possibility, we shall turn to more spe- cific hypotheses about probability. This paper is concerned with the effects of corruption, but a word should be said about causes to dispel any impression that corruption is a uniquely Afro-Asian-Latin American problem. I assume no European or American monopoly of morals. After all, Lord Bryce saw corruption as a major American flaw and noted its outbreak in "virulent form" in the new states in Europe.5 Yet behavior that will be considered corrupt is likely to be more promi- nent in less developed countries because of a variety of conditions involved in their under- development-great inequality in distribution of wealth; political office as the primary means of gaining access to wealth; conflict between changing moral codes; the weakness of social and governmental enforcement mechanisms; and the absence of a strong sense of national community.' The weakness of the legitimacy of governmental institutions is also a con- tributing factor, though to attribute this en- tirely to the prevalence of a cash nexus or the divergence of moral codes under previous colonial governments or to the mere newness of the states concerned may be inadequate in light of the experience with corruption of older, non-colonial less developed states such as Thailand or Liberia. Regardless of causes, however, the conditions of less developed countries are such that corruption is likely to have different effects than in more developed countries. Most researchers on developing areas gather some information on corruption, and this paper will suggest hypotheses about the costs and benefits of corruption for development that may lure some of this information into the open. However, in view of the fact that generalizations about corruption and develop- ment tend to be disguised descriptions of a particular area in which the generalizer has done field work, I will state at the outset that generalizations in this paper are unevenly based on field work in East Africa and Central America and on secondary sources for other areas. Definitions pose a problem. Indeed, if we define political development as "rational, modern, honest government," then it cannot 5James Bryce, Modern Democracies (New York, 1921), Vol. II, p. 509. 5 Colin Leys, "What is the Problem About Corruption?" Journal of Modern African Studies, 3, 2 (1965), 224-225; Ralph Braibanti, "Reflec- tions on Bureaucratic Corruption," Public Ad- ministration, 40 (Winter, 1962), 365-371. coexist with corruption in the same time pe- riod; and if corruption is endemic in govern- ment, a politically developed society cannot exist. "Political development" is not an en- tirely satisfactory term since it has an evalua- tive as well as a descriptive content. At least in the case of economic development, there is general agreement on the units and scale by which to measure (growth of per capita in- come). In politics, however, there is agreement neither on the units nor on a single scale to measure development.7 Emphasis on some scales rather than others tends to reflect an author's interests. In this author's view, the term "political development" is best used to refer to the re- curring problem of relating governmental structures and processes to social change. It seems useful to use one term to refer to the type of change which seems to be occurring in our age ("modernization") and another to refer to capacity of political structures and processes to cope with social change, to the extent it exists, in any period.8 We generally assume that this means structures and pro- cesses which are regarded as legitimate by relevant sectors of the population and effective in producing outputs desired by relevant sec- tors of the population. I assume that legiti- macy and effectiveness are linked in the "long run" but can compensate for each other in the "short run."9 What constitutes a relevant sector of the population will vary with the period and with social changes within a period. In the modern period we tend to assume that at least a veneer of broad participation is es- sential for establishing or maintaining legiti- macy. In other words, in the current period, political development and political moderni- zation may come close to involving the same things. In this paper, political development (or decay) will mean growth (or decline) in the 7 Nor, by the nature of the subject, is there likely to be. In Pye's words, "no single scale can be used for measuring political development": Lucian Pye (ed.), Communications and Political Development (Princeton, 1963). See also Lucian Pye, "The Concept of Political Development," The Annals, 358 (March 1965), 1-19; Samuel Huntington, "Political Development and Political Decay," World Politics, 17 (April, 1965), 386-430; Robert Packenham, "Political Development Doc- trines in the American Foreign Aid Program," World Politics, 18 (January, 1966), 194-235. 8 See Huntington, op. cit., 389. 9 S. M. Lipset, Political Man (Garden City, 1959), 72-75. This content downloaded from 121.33.190.146 on Sat, 20 Apr 2013 08:42:50 AM All use subject to JSTOR Terms and Conditions CORRUPTION AND POLITICAL DEVELOPMENT 419 capacity of a society's governmental structures and processes to maintain their legitimacy over time (i.e., presumably in the face of social change). This allows us to see develop- ment as a moving equilibrium and avoid some of the limitations of equating development and modernization. Of course, this definition does not solve all the concept's problems. Unless we treat development entirely ex post facto, there will still be differences over evaluation (legiti- mate in whose eyes?) and measurement (na- tional integration, administrative capacity, institutionalization?) as well as what con- stitutes a "long" and "short" run. Thus we will find that forms of corruption which have bene- ficial effects on economic development may be detrimental for political development; or may promote one form of political' development (i.e., defined one way or measured along one scale) but be detrimental to another. We shall have to continue to beware of variations in what we mean by political development. (Al- ternatively, those who reject the term "politi- cal development" can still read the paper as relating corruption to three problems of change discussed below.) The definition of corruption also poses se- rious problems. Broadly defined as perversion or a change from good to bad, it covers a wide range of behavior from venality to ideological erosion. For instance, we might describe the revolutionary student who returns from Paris to a former French African country and accepts a (perfectly legal) overpaid civil service post as "corrupted." But used this broadly the term is more relevant to moral evaluation than political analysis. I will use a narrower defini- tion which can be made operational. Corrup- tion is behavior which deviates from the formal duties of a public role because of private-re- garding (personal, close family, private clique) pecuniary or status gains; or violates rules against the exercise of certain types of private- regarding influence.'0 This includes such be- havior as bribery (use of a reward to pervert the judgment of a person in a position of trust); nepotism (bestowal of patronage by reason of ascriptive relationship rather than merit); and misappropriation (illegal appropri- ation of public resources for private-regarding uses). This definition does not include much be- havior that might nonetheless be regarded as offensive to moral standards. It also excludes any consideration of whether the behavior is in the public interest, since building the study of 10 The second part of the definition is taken from Edward C. Banfield, Political Influence (Glencoe, Ill.: Free Press, 1961), p. 315. the effects of the behavior into the definition makes analysis of the relationship between cor- ruption and development difficult. Similarly, it avoids the question of whether non-Western societies regard the behavior as corrupt, pre- ferring to treat that also as a separate variable. To build such relativism into the definition is to make specific behavior which can be compared between countries hard to identify. Moreover, in most less developed countries, there are two standards regarding such behavior, one in- digenous and one more or less Western, and the formal duties and rules concerning most public roles tend to be expressed in terms of the latter." In short, while this definition of cor- ruption is not entirely satisfactory in terms of inclusiveness of behavior and the handling of relativity of standards, it has the merit of de- noting specific behavior generally called cor- rupt by Western standards (which are at least partly relevant in most developing countries) and thus allowing us to ask what effects this specific behavior has under differing conditions. II. POSSIBLE BENEFITS AND COSTS Discussion of the relation of corruption to development tends to be phrased in general terms. Usually the argument between moralists and revisionists tends to be about the possibil- ity that corruption (type unspecified) can be beneficial for development. Leaving aside questions of probability, one can argue that corruption can be beneficial to political de- velopment, as here defined, by contributing to the solution of three major problems involved: economic development, national integration, and governmental capacity. 1. Economic Development. If corruption helps promote economic development which is generally necessary to maintain a capacity to preserve legitimacy in the face of social change, then (by definition) it is beneficial for political development. There seem to be at least three major ways in which some kinds of corruption might pro- mote economic development. a. Capital formation. Where private capital is scarce and government lacks a capacity to tax a surplus out of peasants or workers openly, corruption may be an important source of l1 See, for example: M. G. Smith, "Historical and Cultural Conditions of Political Corruption Among the Hausa," Comparative Studies in Society and History, 6 (January, 1964), at p. 194; Lloyd Fallers, "The Predicament of the Modern African Chief: An Instance from Uganda," American Anthropologist, 57 (1955), 290-305. I agree with Bayley on this point: op. cit., 720-722. This content downloaded from 121.33.190.146 on Sat, 20 Apr 2013 08:42:50 AM All use subject to JSTOR Terms and Conditions 420 THE AMERICAN POLITICAL SCIENCE REVIEW capital formation. There seems to be little question about the effectiveness of this form of taxation-Trujillo reputedly accumulated $500 million and Nkrumah and relatives probably more than $10 million.'2 The real question is whether the accumulated capital is then put to uses which promote economic development or winds up in Swiss banks. b. Cutting red tape. In many new countries the association of profit with imperialism has led to a systematic bias against the market mechanism. Given inadequate administrative resources in most new states, it can be argued that corruption helps to mitigate the conse- quences of ideologically determined economic devices which may not be wholly appropriate for the countries concerned.'3 Even where the quality of bureaucrats is high, as in India, some observers believe that "too much check- ing on corruption can delay development. Try- ing to run a development economy with triple checking is impossible.'4 Corruption on the part of factory managers in the Soviet Union is sometimes credited with providing a flex- ibility that makes central planning more effec- tive. c. Entrepreneurship and incentives. If Schumpeter is correct that the entrepreneur is a vital factor in economic growth and if there is an ideological bias against private incentives in a country, then corruption may provide one of the major means by which a developing country can make use of this factor. This be- comes even more true if, as is often the case, the personal characteristics associated with entrepreneurship have a higher incidence among minority groups. Corruption may pro- vide the means of overcoming discrimination against members of a minority group, and allow the entrepreneur from a minority to gain access to the political decisions necessary for him to provide his skills. In East Africa, for instance, corruption may be prolonging the effective life of an important economic asset- 12 A. Terry Rambo, "The Dominican Re- public," in Martin Needler (ed.), Political Systems of Latin America (Princeton, 1964), p. 172; New York Times, March 5, 1966. Ayeh Kumi's quoted statement has almost certainly greatly under- estimated his own assets. 13 On the economic problems of "African socialism," see Elliot Berg, "Socialism and Economic Development in Tropical Africa," Quarterly Journal of Economics, 78 (November, 1964), 549-573. 14 Barbara Ward, addressing the Harvard Center for International Affairs, Cambridge, Mass., March 3, 1966. the Asian minority entrepreneur-beyond what political conditions would otherwise allow. 2. National Integration. It seems fair to as- sume that a society's political structures will be better able to cope with change and preserve their legitimacy if the members share a sense of community. Indeed, integration is some- times used as one of the main scales for mea- suring political development. a. Elite integration. Corruption may help overcome divisions in a ruling elite that might otherwise result in destructive conflict. One observer believes that it helped bridge the gap between the groups based on power and those based on wealth that appeared in the early nationalist period in West Africa and allowed the groups to "'assimilate each other." Cer- tainly in Central America, corruption has been a major factor in the succession mechanism by integrating the leaders of