Is Corruption always Bad?

Don't you love it when people start a blog post/speech/op-ed/paper with a leading question? You can almost always guess what their answer will be. My answer, perhaps to the dismay of other more conventional thinkers on the Middle East, is no, of course it's not always bad.

Generally, I detest the topic of corruption since it always gets wrapped around the shallow axis of naughty behavior (without much thought into why), but often it's hard to avoid, especially the past few days. Corruption seems to be the topic du jour in Iraq, for example, after Prime Minister Maliki canned his trade minister two days ago. Business Middle East is reporting that Baghdad plans to arrest up to 1,000 government officials on corruption charges and a committee (presumably appointed by Maliki?) will take over government purchases of grains and foodstuffs from the trade ministry. It was the purchases of food supplies that led to the minister's downfall after his family was accused of making millions of dollars in kickbacks from the purchases.

US policymakers, at least in previous administrations, loved to salivate over corruption in the Middle East, largely I think because of its ridiculous proportions. Think of former Saudi Ambassador to the US Prince Bandar's relationship with BAE. The now deceased King Fahd's vacation to Marbella, Spain, when he was pretty much a vegetable. Sultan Qaboos' perfume line (corruption or legitimate business?); the now deceased Moroccan King Hassan V's pantheon, I mean mosque, to his own piety in Casablanca, the building of which was quite Eva Peronish since he taxed all citizens to pay for his heated marble floors. Corruption exists, with or without oil, with or without monarchy.

From one economic point of view, corruption is always bad because it causes inefficiencies in the system. Money meant for one purpose is diverted to another purpose, largely for personal gains. Therefore losses occur. It takes twice, three times more money, for example, to get a project done if there wasn't corruption, all things being equal, because of the bribes and/or kick backs that need to be factored in when project planning. Of course, corruption is never just viewed from an economic perspective and more often than not in the US, it is viewed from a moral point of view. It's wrong to take things that aren't yours or so the argument goes. The US is especially good at this when formulating foreign policy and now has itself tied up in knots over Iraqi corruption (as if this should even be on our radar screens at this point with all the other problems plaguing the country.)

But here, I'd like to counter with Ted Stevens. Yes, that's right, the esteemed and almost convicted former senior senator from Alaska. Stevens was always pretty much shameless in arranging deals and promoting earmarks for Alaskan projects. From his perspective, there was no way that remote, politically unimportant Alaska would ever get funds for development if not for Stevens' hook and crook style. And he was probably right. You might argue that maybe county xx in Alaska should never have been developed to the extent it was, but that's kind of beyond the point. Steven's argument was essentially that even in our institutionally strong, fairly transparent democracy a little bit of corruption is needed to ensure that everyone gets a fair share of the pie. Few of us outside Alaska thought the argument had merit, but to the people of Alaska, Stevens was a hero.

I've always felt that, in line with how Stevens felt about Alaska, there was and is something to be said for the importance that corruption plays in wealth redistribution in institutionally-poor countries. It certainly isn't perfect and god knows that the wealthy or politically connected may benefit first and foremost from corrupt systems. But, at the end of the day, they are not the only ones who do. Take, for example, corruption in Saudi Arabia. Sure, the Al Saud benefit greatly from their opaque control over government and the oil resources. It's pretty well accepted that most of the princes receive generous stipends from the state by sole virtue of their family connection. Some of them may get a bit greedier and set up side deals for themselves, ala Bandar's alleged relationship with BAE. But the Al Saud don't actually keep all the money for themselves. Under them are large patronage networks that depend on the royal family for income or some measure of financial support. If not for these patronage networks, these people would go without. Same goes with the border guards who demand extra payment, etc. Corruption usually kicks in because the institutions that are meant to support societies are not strong enough to do so. Whether you call it filial loyalty, patronage, or survival of the fittest, corruption exists largely as a wealth transfer mechanism, providing the assets of the state to those who would otherwise not have access to them.

With this in mind, I would argue that the answer is not always mass arrests or the integrity commissions that the Maliki government has established (probably largely as a sop to the US) but in fact institution building to ensure that wealth transfer happens within government channels. Even then, though, strong institutions don't always ensure that the people who need the money get it. Just ask Ted Stevens.