One of the many interesting and important points made by the development economist Ha-Joon Chang in his very readable (yes, really) book Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity (the American version appears to have a different title than the one I have in my hand here) is that corruption might increase after privatization or in forms of government ‘reform’ which give more prominence to market activities.
First, he points out that poorer countries are almost inevitably likely to have some level of corruption, since people’s votes or affections are more easily bought, public officials have lower salaries, social welfare is at a very low level and the ability of the state to track economic activities is very limited, meaning that since no one is watching, the temptation to cheat a little here or there will be much higher. Second, he describes how the current orthodoxy among the neo-liberals of the world is that corruption is the reason why, they allege, their policy prescriptions generally do not work and the attendant claim that reducing the ability of politicians to distribute resources will decrease corruption. However, he argues that the opposite is (or at least may be – he is that kind of thoughtful writer):
“Increased contracting out has meant more contracts with the private sector, creating new opportunities for bribes. The increased flow of people between the public and private sectors has had an even more insidious effect. Once lucrative private-sector employment becomes a possibility, public officials may be tempted to befriend future employers by bending, or even breaking, the rules for them. They may do this even without being paid for it right away (p.169).”
So, if what Mr Chang argues is true, then it would be expected that a pro-business administration would be associated with a higher level of corruption and would need to take additional steps to try to reduce it. The disbursement of a large stimulus package (deeply necessary in the current economic crisis) would seem to represent a similar situation – it is lucky that corruption is not always entirely bad …