Institutions
and the Political Economy of Corruption in Developing Countries
Professor Andrew MacIntyre's thoughtful discussion paper, delivered at a Workshop on Corruption at Stanford University, tackles the dilemma of Indonesia's rapid economic growth amid a system of corruption and collusion. While democratic frameworks make the operations of government more transparent, increase the scope for holding politicians accountable for their actions and allow independent judicial systems to operate, the Indonesia example raises the possibility of property rights being secured - or at least tolerably secure - in environments where democracy is weak or non-existent and where the judiciary is either controlled or corrupted.
Professor MacIntyre theorises that the political and institutional circumstances of Suharto's Indonesia were such that they gave the leader a powerful incentive to ensure that bribes were not priced excessively and that arbitrary behavior was contained within tolerable limits. In short, to ensure that corruption was conducted in an orderly fashion that was within the limits of what the market would bear. This economic incentive structure was dependent upon a political structure and a set of formal and informal institutional mechanisms which reduced agency loss by permitting effective executive oversight and punitive action. This provides a plausible explanation as to how and why Suharto was able to ensure that while corrupt practices flourished, it did so within limits tolerable to investors. The paper then goes on to examine the rather different current political economy of corruption in Indonesia.
Professor MacIntyre is Director of the Asia-Pacific School of Economics and Management at the Australian National University and is a member of the ANU Review Group of the Centre for Democratic Institutions. He replaces Professor Ron Duncan.
Paper
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Andrew MacIntyre
