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The Impact of Corruption on Regime Legitimacy: a Comparative Study of Four Latin American Countries Author(S): Mitchell A

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The Impact of Corruption on Regime Legitimacy: a Comparative Study of Four Latin American Countries Author(S): Mitchell A Southern Political Science Association The Impact of Corruption on Regime Legitimacy: A Comparative Study of Four Latin American Countries Author(s): Mitchell A. Seligson Source: The Journal of Politics, Vol. 64, No. 2 (May, 2002), pp. 408-433 Published by: Cambridge University Press on behalf of the Southern Political Science Association Stable URL: http://www.jstor.org/stable/2691854 Accessed: 14/12/2010 18:59 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=cup. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. Cambridge University Press and Southern Political Science Association are collaborating with JSTOR to digitize, preserve and extend access to The Journal of Politics. http://www.jstor.org The Impact of Corruption on Regime Legitimacy: A ComparativeStudy of Four Latin American Countries MitchellA. Seligson University of Pittsburgh Economists have long warned about the pernicious impacts of corruption,arguing that it increases transactioncosts, reduces investmentincentives, and ultimately results in reduced economic growth. Political scientists, on the other hand, ever the realists, have had a much more ambivalentview of the problem. Indeed, much classic literaturefocusing on the Third World saw corruption as func- tional for political development, enabling citizens to overcome intransigent,inefficient bureaucra- cies while increasing loyalty to the political system. More recent research, however, points in the opposite direction toward an erosion of public support for corrupt regimes. A series of serious methodological problems has preventedthe testing of these contradictoryassertions about the im- pact of corruption.This article uses national sample survey data, with a total N of over 9,000, from four Latin American countries to test the effect of corruption experiences on belief in the legiti- macy of the political system. It finds that independent of socioeconomic, demographic, and parti- san identification,exposure to corruptionerodes belief in the political system and reducesinterpersonal trust. The evidence seems clear, at least for these four countries, that corruption carries with it importantpolitical costs. Corruption provides immediate, specific, and concrete benefits to groups which might otherwise be thoroughly alienated from society. Corruption may thus be functional to the maintenance of a political system in the same way that re- form is. Samuel P. Huntington (1968, 64) C orruption, for many years a topic of limited interest in the academic and policy worlds, has recently received greater attention.' Most analysts believe that the ending of the Cold War has been responsible for this shift.2 The argu- I thank Sergio Diaz-Briquets for helping to initiate this project and to Andrew Stien and Orlando P6rez for their work on pretesting the corruptionbattery. Jim Morris and Ken Coleman made very helpful comments on an earlier version of this manuscript. 'Definitions of corruptionare many and varied, but the most commonly accepted one, and the one used in this article, is "abuse of public office for private gain." For an excellent review of the concept of corruption,see Williams (1999a). 2This argumentis made forcefully by Williams (1999b) in his introductionto a special issue on corruptionin the Third WorldQuiarterly. THE JOURNAL OF POLITICS, Vol. 64, No. 2, May 2002, Pp. 408-433 ? 2002 Southern Political Science Association The Impact of Corruptionon Regime Legitimacy 409 ment is that during the Cold War, the United States and its allies tolerated corrupt (often hyper-corrupt)regimes in the Third World, so long as those re- gimes took their side in the struggle against communism. Indeed, even prior to the Cold War, alliance politics overrode concerns about corruption, a policy FranklinDelano Roosevelt crystallized in his famous remarkabout the Somoza dictatorshipin Nicaragua: "He's a son-of-a-bitch, but he's our son-of-a-bitch." With the Cold War over, however, trade, neoliberal reforms, and anti-narcotics efforts dominate U.S. interests abroad.Along with the expansion of trade and economic reforms, however, have come unprecedented opportunities for cor- ruption. Trade and neoliberal privatization schemes can favor those who pay the biggest bribes, hamperingU.S. companies that are formally prohibitedfrom doing so. And the spread of narcotics traffic threatensto deepen the corruption of the police and judicial institutions of many nations. Economists have long warned of the pernicious impacts of corruption,argu- ing that it increases transactioncosts, reduces investment incentives, and ulti- mately results in reduced economic growth. Political scientists, ever the realists, have taken a much more ambivalentview of the problem. The early traditionin political science was dominatedby the functionalist school. The case that Hun- tington made in the epigraph quoted above represents a considerable body of writing by political scientists and sociologists that views corruptionin function- alist terms, especially in the developing world. More recently, however, now that democracies have emerged widely in the Third World, corruptionhas be- gun to be viewed quite differently,and it is seen as a threat to consolidation of those regimes. Economists have gathered some strong evidence on the negative impact of corruption on investment and growth in developing nations, and this article does not challenge that evidence. Political scientists, however, have been far more anecdotal in their claims regardingthe costs or benefits of corruptionin those nations. It is argued here that the apparentlyJanus-faced nature of cor- ruption may be illusory. Corruptionmay not only be bad for the economy, it may be bad for the polity as well. This article first briefly reviews the litera- ture, then tests the competing claims of the political effects of corruption,using survey data from four Latin American countries that rank high on international indices of corruption. Review of the Literature Corruption as Economic Evil Most economists who have studied corruption argue that it reduces invest- ment and slows growth.3 It does so for a variety of reasons. First, bribes are normally not reportedby either party to the transaction,thus denying the trea- One exception is Leff (1964). 410 Mitchell A. Seligson sury needed tax revenues. This tax loss is compounded because the bribe often serves to circumvent the reporting of normal business transactionsthat other- wise would have produced tax consequences (e.g., constructionpermits, ad va- lorem taxes, sales taxes, and import and export taxes). Second, public services are focused toward assisting those who pay bribes, denying those services to those who do not, thereby resulting in uneven and often inferior services to many. Third, bribes enable service providers (e.g., contractorsfor public infra- structureprojects) to ignore established standardsand offer substandardgoods or services from which the economy suffers (e.g., roads that deterioraterapidly and hospitals that provide inferior treatment). Fourth, corruption weakens the rule of law and as a result makes transactions irrational from an economic point of view (e.g., contracts are not awardedto the highest quality, lowest cost bidder but to the firm that pays the highest bribe). In a large-scale study of more than 100 countries over the period 1982-1995, Mauro (1997b) found that when corruption increases by two points on a ten- point scale, GDP decreases by 0.5% and investment decreases by 4%. Further- more, public investment suffers: expenditureson education decline by 0.5% for each two-point increase in corruption.4In a recent study, it was shown that if a high-corruptioncountry like Bangladesh had reduced corruptionto a moderate level, its GNP duringthe period 1990-1997 would have increasedby 18% (Rah- man, Kisunko, and Kapoor 2000, 11). The World Bank (1997, 102-104) also found, using a cross-national design, that among countries in which bribery was both high and unpredictable,the rate of investment was nearly half of what it was in low-corruption countries. Corruptionwas also found to increase in- come inequality, according to Gupta, Davoodi, and Alonso-Terme (1998), and it severely decreases income growth for the poor. Other studies come to virtu- ally identical conclusions (Ades and Di Tella 1996; Fisman and Svensson 2000; Mauro 1995; Mauro 1997a). Yet anothercross-national study, based on 69 coun- tries, found that high levels of corruption encourage businesses to go under- ground, which denies the government tax revenue and produces smaller,
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