Corruption Lesson 9 Corrupttour.cz •Our itinerary –Magistrat: opencard (openkrad) –Firm Cardiopont & Roman Janousek –Dopravni podnik, Martin Dvorak, and Ivo Rittig –House where Topolanek and Marek Dalik lived (prisednik) –Ministry of Defense –Parliament and Senate IMG_9599.jpg (600×338) Today •Does money matter in politics •Ways of limiting influence of money •Corruption and its causes •Solutions to the problem of corruption Keep in mind •Political parties are necessary for democracy •Money is necessary for campaigns and competition between parties •Question is how to make sure money is used for the right purposes •Some corruption may be the price of democracy 1. Does Money Matter? Why do firms give money? •Buy policy influence •Buy access to politicians •Try to influence election •Consumption How much money is there? •Political campaigns only a small portion of GDP •Most contributions come from ordinary people or from state subsidies •A thought experiment: –Contributions are a form of investment –Imagine that for a relatively small contribution to a party, a firm can get very large benefits: eg, a 100% rate of return –Then many more firms should give contributions –Price of policy should rise until rate of return goes down to competitive level Is campaign spending increasing? Tullock paradox •Why is corruption so cheap? Why so little money in politics? –Small contributions buy millions in benefits •Possible solutions –Voters don’t like corruption – politicians can’t appear to be too rich –Competition among politicians to sell their support –Interest groups don’t trust politicians • • Do contributions affect legislative behavior? •Hard to find connection between contributions and legislative votes –Which policies are being sold and bought? –Which parties are changing their positions? Typical study design •Outcome is roll call votes of legislators •Independent variables –Party –Public opinion of constituency –Contributions •Results –Party and public opinion have very strong effects –Contributions usually have weak effect Problems with empirical analyses •Endogeneity: do contributions buy votes or do votes encourage contributions? •Omitted variables: ideologies of parties favor certain interests –Parties receive money from groups with similar beliefs • Contributions as investment or consumption? •Contributions due to ideological motivations •People who contribute to politics also participate in other ways (eg, attend meetings, write letters, etc.) •Firms give more to charity than to politics Better evidence that governments cater to preferences of rich •Good evidence that politicians follow preferences of richer –Gilens and Bartels •Is it influence of money? –Rich vote more –Rich contribute more –Rich are better informed –Politicians identify with rich Bartels – Unequal Democracy 701px-Senate_Income_Votes.SVG.png (701×575) Does money influence election results? •Most studies find limited effects for campaign spending by incumbents, but stronger effects for spending by challengers –Incumbents already have a record and familiarity –Challengers need to spend to get noticed –Spending often cancels out –Difficult to study because money is endogeneous: good candidates get more money, parties allocate money strategically •Implication: By limiting money, we may be hurting challengers and helping incumbents 2. Ways of limiting influence of money 1. Contribution Limits •Contribution limits –Worries about contributions in exchange for policy (quid pro quo) –Economic inequality => political inequality •Issues –Where should finances come from if not contributions? –Limits on corporations? Trade unions? Foreigners? –How high limits for individuals? 2. Expenditure Limits •Expenditure limits –Worries that parties can buy elections –Without limits parties of the rich have an advantage •Issues –Limits freedom of speech –How high to make limits –Does it hurt new and smaller parties 3. Transparency and Enforcement •Transparency and Enforcement –Donations publicly disclosed –Party finances are made public –Penalties for non-compliance •Issues –Administratively difficult, especially for small parties –Can public monitor? Does it care? –Privacy issues – will firms worry about punishment if they support the wrong party 4. Public Funding •Public funding –Attempt to limit influence of private money –Response to fewer party members and volunteers plus increasing cost of campaign –Subsides for (a) operational costs, (b) campaigns, (c) parliamentary groups •Issues –Ideally helps small parties to survive –But may benefit existing, large parties => freeze system (but this may be desirable) –Issues of fairness: who gets how much –Still want to preserve linkages between citizens and parties: contributions, volunteer work Czech campaign finance •Public subsidies based on votes and seats •Certain donations illegal, but no limits on others •No limitations on expenditures, but disclosure of finances and contributions •Is this the problem? Do restrictions clean up politics? •Hard to say – few good studies •Do least corrupt countries (eg, Scandinavia) have strictest laws? –No, but they don’t need them because they have less corruption –We see stricter regulations in places that suffer from corruption •How do restrictions affect public opinion? –Can lead to more cynicism: more restrictions => more scandals –But can increase sense of efficacy • Has public funding helped nurture small parties in CZ? •Cross-national research unclear •Are there cases where new parties survive and gradually build themselves up with public funding? –Maybe Greens? •Successful new parties seem to build on other sources of funds –VV, ANO, Usvit 3. Corruption What is corruption? •Misuse of public office for private gain •Depends on country’s institutions •Consider a country with a good legal framework –Then bribes are paid to do bad things (eg, pollute) •Or a country with a bad framework –Then bribes are paid to do good things (eg, set up a business) How to measure corruption? •Since illegal, actors will try to hide •All we know is exposed corruption –But exposure depends on police, media –Better police and media mean corruption more obvious •Standard method = surveys on perceptions of corruption (businessmen, experts, public) –Problem: they are simply perceptions –Advantage: multiple surveys give similar results (or similar biases?) Transparency International Scores korruptionswahrnehmungsindex-2012-von-transparency-international-corruption-perceptions-index-.jpg (650×360) CPI2010_map.jpg (3000×1493) Causes of corruption •How to measure corruption? –Transparency and WB measures of “perceived corruption” •Cross-national regressions •Key factors reducing corruption –Protestant tradition –history of British rule (common law versus civil law) –high income –long history of democracy (not current level) –trade liberalization •It appears that corruption has deep roots •But potential for reverse causality & omitted variables Corruption and income Corruption and parking tickets •Some countries more corrupt than others •What happens when you take people out of corrupt environment? •Consider diplomats in NY who can ignore parking tickets –How would diplomat from a corrupt country behave? –How would diplomat from an honest country behave? • Who breaks the law? •Diplomats from corrupt countries break the law •But honesty is also sticky – internalized norms Enforcement also matters Two types of politics •You go into politics in order to get rich •You get rich and then you go into politics •Is this second better than the first? •Rich people in politics: Babis, Schwarzenberg, Barta, Topolanek • How would Czech politics look different without money? •Which policies would look different? –Which parties would be more successful? –Would policies be different? More conservative? Liberal? Social democratic? •Less corruption in form of kickbacks, public tenders, etc. –How consequential is it for economy? Some solutions General ideas •Publicity for crimes •Increase penalties •Reduce size of government •More transparency •Anti-corruption bureau •Higher wages for bureaucrats •* But few have been tested Master’s in Corruption Administration •Nevzali Vás na školu? Nebo Vás vzali, ale zjistili jste, že Vás vzít neměli? Nemáte prostředky na nákup běžného akademického titulu? Nechce se Vám ztrácet čas studiem? Právě pro Vás je skvělá nabídka Corrupt Tour University! •Žádné studium! Žádné zbytečné výdaje. Platíte pouze cenu papíru, tisku a administrativní poplatek 699 Kč. A nyní! V rámci předprodeje titulů na akademický rok 2013/14 mají první studenti50% slevu na pouhých 299 Kč! •Studium netrvá ani minutu a vede rovnou k cíli. Hit tohoto akademického roku! Nejžádanější obor, atraktivní titul. Pouze a jedině na Corrupt Tour University získáte krásný titul • MCA www.nasipolitici.cz •Does this information help? •How should you act on it? •Does it encourage people to vote for new parties – ANO, Usvit, VV – because existing politics is corrupt? www.ipaidabribe.com •Paid bribe for not having required papers •Police | Traffic Violations •Reported on April 02, 2014 from Pondicherry, Pondicherry | Report #100347 •I was going on my friend's bike and i don't know where he will keep the papers for that bike. I said him i am a student and i don't know where the papers were and i have paid a bribe of Rs.200 • Zero rupee note http://blogs.worldbank.org/publicsphere/files/publicsphere/rupees_front.jpg