Montag, Mai 04, 2009

Corruption or Politics As Usual...

A number of articles out there have pointed me to thinking about political corruption.

First of all, what is political corruption? According to Wiki, the narrow definition is that political corruption is the use of governmental powers by government officials for illegitimate private gain, whereby an illegal act by an officeholder constitutes political corruption only if the act is directly related to their official duties.

I refer to that as a narrow definition, as obvious corruption, such as bribery, extortion, embezzlement and nepotism are usually so obvious that politicians can only get away with these corrupt and corrupting practices in environments that are already severely corrupted, with the cities of Chicago and New Orleans coming readily to mind.

Patronage and cronyism is a greater problem, one that involves the principal-actor problem. I think the simplest way of showing this is to view it as a simple linear model:

total wage = base wage + intensity of incentive(unobserved effort+unobserved exogenous effects on decisions + importance of observed exogenous effects on decisions)


w = b + i(ue + uee + x)

For the corrupt politician, it is crucial to ensure that their efforts and effects on decisions be as large as possible, and that x be very modest. In other words, the incentive for a politician to be corrupt, given a certain level of certainty of being caught, lies in ensuring that his work remains unobserved, i.e. being the power behind the scenes.

This is particularly important when dealing with patronage and cronyism, political corruptions that are vastly more difficult to prove, especially when they become severely prevalent, such as in Chicago and New Orleans (and, to a lesser, extent, in many large US cities at the very least, such as Los Angeles, New York, San Francisco and the like).

What are these corruptions?

Political patronage is when politicians use state resources to reward political supporters. While political appointees, i.e. positions reserved for political supporters, are legitimate to ensure that bureaucracies implement political policies in a timely manner, it is another thing entirely when political supporters are granted state resources for their political support.

Cronyism is closely related and many distinctions may be rather fluid in the real world. Crony politics is when the key reason for political success and/or access to state resources are social contacts, rather than professional qualifications. Given the fluid nature of social contacts and professional qualifications, this is significantly harder to prove, if not observe. There are exceptions, to a certain extent: Enron's collapse was an example of crony capitalism, where mutual acquaintances share information is such a way that they can profit from them, such as knowing before hand about legislation, knowing in advance where infrastructure will be built, and making deals to take advantage of this information.

In both cases the costs are carried by the consumer or society in general: there's no clear victim as such, and those engaging in both generally tend to fail to see that they are doing anything wrong, as "no one" is hurt directly by their manipulation of markets and market distortions. Another justification is that "everyone" does it, hence it is an assumed privilege of office. Further, politicians will attempt to ensure that no one can investigate their friends or the politicians themselves, usually by packing the political appointees to the court system or the state prosecutors to ensure that no indictments are brought. Of course, having a passive or at least incompetent press doesn't hurt: it removes any pressure to reform or stop the corrupt practices.

Nonetheless: it's corrupt.

Now, why do I put this up?

This and this. Oh, and this as well.

In the first, we see how a political insider has used his political and business connections to wheel and deal his way to millions: he is corrupt in the sense that his success is due to social and political contacts. Without these contacts he would not have the money he has today.

In the second, we see how the general public is going to pay to reward political supporters of one party, providing subsidies to an otherwise bankrupt company in order to ensure that those supporters continue to have their jobs, despite the knowledge that these companies should be going through bankruptcy now, rather than continuing to be subsidized.

The third? How polticians are looking to prevent investigations before anyone even thinks of investigating, a preventive measure.

What makes this unsettling is that this is playing out right now, the country in question is the United States, and the politicians in question are Democrats to a person.

Of course, for them, it's just politics as usual.

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