The Benefits of Centralized Corruption
As the scandal over corruption in the Philippine Military continues to brew, the Office of the Philippine President released an announcement to the press effectively centralizing the procurement system of the Armed Forces of the Philippines. It is common knowledge that in the Philippine government, the most corrupt departments are those with big procurement departments and those involved in awarding licenses and permits. The military, the interior and local government, environment and natural resources, the public works and highways, and the education departments are frequently mentioned as belonging to the most corrupt offices.
A relative who's been in the government audit commission since Ferdinand Marcos' time tells me that corruption today is actually much worse that it was during Marcos's time. How can this be with the return of democracy, checks and balances, and the devolution and decentralization of central government powers? A friend of mine who wrote a journal article on corruption in economies in transition might have the answer. The true cost of corruption is not just the total amount of bribe that changed hand (that does not change the total amount of resources in the economy), it is the waste associated with "rent-seeking" activities by agents (investing resources and talent in corrupt practices that does not add to economic production when they can be employed elsewhere).
Don't get me wrong, centralized and decentralized corruption are both undesirable, the difference is in a centralized corruption set-up, the harm is smaller. A monopolist in corrupt practices is interested in generating higher total bribes, so if it was involved in receiving bribes throughout the chain of a government transaction it is in it's interest to control bribe taking in the lower levels because higher bribes at the lower levels would scare away influence buyers into completing the process, in the end lowering the total take of the monopolist-corrupt agent.
In contrast, a decentralized corrupt set-up gives incentive to corrupt officials in different levels of government and processeses to hike their bribes and corruption related activities since they alone benefit from it. They have no incentive to increase the total bribes taken during the entire process. There is no central enforcer to make them toe the line. The result: more corrupt activities in more levels of the government bureaucracy and more people encouraged to join the practice. Centralizing procurement in the Philippine Military might not be too bad at all.
A relative who's been in the government audit commission since Ferdinand Marcos' time tells me that corruption today is actually much worse that it was during Marcos's time. How can this be with the return of democracy, checks and balances, and the devolution and decentralization of central government powers? A friend of mine who wrote a journal article on corruption in economies in transition might have the answer. The true cost of corruption is not just the total amount of bribe that changed hand (that does not change the total amount of resources in the economy), it is the waste associated with "rent-seeking" activities by agents (investing resources and talent in corrupt practices that does not add to economic production when they can be employed elsewhere).
Don't get me wrong, centralized and decentralized corruption are both undesirable, the difference is in a centralized corruption set-up, the harm is smaller. A monopolist in corrupt practices is interested in generating higher total bribes, so if it was involved in receiving bribes throughout the chain of a government transaction it is in it's interest to control bribe taking in the lower levels because higher bribes at the lower levels would scare away influence buyers into completing the process, in the end lowering the total take of the monopolist-corrupt agent.
In contrast, a decentralized corrupt set-up gives incentive to corrupt officials in different levels of government and processeses to hike their bribes and corruption related activities since they alone benefit from it. They have no incentive to increase the total bribes taken during the entire process. There is no central enforcer to make them toe the line. The result: more corrupt activities in more levels of the government bureaucracy and more people encouraged to join the practice. Centralizing procurement in the Philippine Military might not be too bad at all.
posted by F @ 7:52 PM
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