My last post focused on the issue of underpayment of officials and how it can lead to corruption. Linked here is yet another example (hundreds more to come, for sure) of underpayment leading to corruption. While I would never say that corruption is justified--or I'd at least leave that to a separate debate--this linkage is a clear problem. But there is a related concept: that of economic rent.
Economic rent exists when the value of something, a diamond, for example, is much higher than the labor required to acquire it. Similar rent exists in petroleum, as well as for many other natural resources. An oil company has a clear incentive to pay a bribe to a government official for rights to an oil field. What will often be the case is that the revenue from acquiring an oil field will be X, the labor required to acquire the oil will be one fifth of X, .2X, and the resulting profit--RENT--will be .8X. When X is hundreds of millions or even billions of dollars, it costs next to nothing for a company to throw several millions of dollars at a government official if that will secure these rents.
This is relevant and related in that the difference between the value of the commodity and the cost of the commodity is too great. Similarly, the value or power of an official's job compared to his/her actual compensation, if too great, will often lead to corruption, as described in the previous blog and much more to come. In both cases, the closer the value can get to the price, the less corruption there will be. In the myriad cases where this is impossible, adequate regulation combined with vigilant public scrutiny will be necessary.
Yesterday's CorruptionDaily pick of the day highlighted Ethiopia's new tactic for fighting corruption. This system of registering all official income could do wonders for fighting both sides of the corruption coin.
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ReplyDeleteFrom, "Ethiopia's new tactic": "Individuals who tip to the commission about the hidden wealth of government officials, employees and constituencies, the tipsters will be rewarded 25 percent value of the hidden and found property if the tips are found to be true, according to the proclamation."
ReplyDeleteThis incentive to report on the wealth (and possible graft) of others seems both good and bad. The good is obvious, but the bad--well, this sounds like it could begin to mimic strategies of Nazi Germany's police state, where families, particularly children, often members of "Hitler's Youth" spied on the adult members. The notion that people rat on each other seems incendiary at best; at worst, it could lead to an overriding sense of paranoia throughout the country.