COIN FLIP

Stop blaming poor countries’ poverty on corruption—sometimes it’s just bad luck

There was a time when the predominant view worldwide as to why poor people and countries were poor involved the circumstances they were in—they lacked the money for the roads, factories, and power that would spur industrialization, or the education and healthcare that would make them productive. But, in the rich world at least, views have shifted. Now it is a commonplace argument that the reason poor countries are poor is because of the moral failings of the people who live there—governance that doesn’t work, perhaps driven by a “culture of corruption.”

More than half of respondents in the UK suggested in a recent poll that that the single most important reason poor countries are poor is because of corrupt governments. That view of developing countries—and the implied moral superiority of richer countries—is corrosive. Just as “they are lazy” is a justification to slash domestic welfare programs, “they are corrupt” justifies opposing aid or trade reform that might improve prospects for the global poor. And it doesn’t hold up to scrutiny.

It is true that, on some measures, low-income countries are more corrupt than rich ones. Ask individuals if they have ever paid a bribe: according to Transparency International surveys, 10% of Americans say they have ever been asked to pay a bribe, alongside 6% of people in the UK. Compare that to 22% in Turkey, 33% in Pakistan, or over half of the population in countries including Senegal, Ghana, and the Democratic Republic of the Congo.

That said, bribery is only one facet of the corruption problem. When people around the world are polled about the overall level of corruption in business in their country, there is no relation between the level of corruption perceived and the GDP per capita of the country in which the question is asked. And when it comes to the media and political parties, people in richer countries are actually slightly more likely to say these institutions are corrupt or very corrupt than are citizens of poorer countries. In the US, 76% of the public thinks political parties are corrupt—that’s the same proportion as in Romania, Ghana, Pakistan, or the Democratic Republic of the Congo according to Transparency International’s surveys.

And survey respondents may have a point: there are lots of other ways to get politicians to abuse their position and do what you want beyond bribing them. You can buy favors through legal channels, for example. Between 1994 and 2009, during a period that Silvio Berlusconi was prime minister of Italy three times, his television station Mediaset received an estimated €1 billion ($1.1 billion in today’s dollars) of additional advertising revenue largely from companies operating in highly regulated sectors. Economist Stefano DellaVigna and colleagues estimated a similar value in returns to those companies from regulatory change over the same period. There have been numerous allegations of something similar going on with president Trump, of course. Or take a study by Andrew Eggars of Harvard and Jens Hainmueller of MIT looking at returns to serving in the UK Parliament: conservative MPs who narrowly won an election ended up twice as rich as those who narrowly lost, largely thanks to outside employment possibilities while they are MPs.

And in terms of stacking the system in favor of the few, the outcomes look similar in rich and poor countries: inequality is little different nor, that suggests, is the impact of policies and institutions in driving inequality. The top 10% of households in the US shared 44% of total post-tax income in 2004 (the figure is higher today). In the UK, the top 10% share more than a third of total household income. The average for the 78 developing countries with data from the World Bank over the last five years is a top income share of 32%. At the least, if poor countries are more corrupt than rich countries, the elite in those countries must be remarkably less effective at using corruption to concentrate wealth.

So, if it isn’t their moral failings, why are poor countries poor? Over twenty years ago, an all-star economic cast made up of Larry Summers, Lant Pritchett, William Easterly, and Michael Kremer, with research assistance from a young Sheryl Sandberg, wrote a paper looking at economic growth worldwide. The paper was titled “Good Policy or Good Luck?” and concluded that luck was more important than policies in determining growth rates across decades. “The finding that much variation in growth rates is due to random shocks should induce caution in attributing high growth rates to good policy (or to a good ‘work ethic’)” they warned. That conclusion still holds. It is long past time to give up a sense of moral superiority over people in developing countries and stop blaming the poor for their poverty.

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