Why Corruption? Jonathan Hopkin London School of Economics

Modernization theory Corruption an expression of traditional hierarchical ties that undermine workings of formal institutions (Banfield ‘Amoral familism’) Rule of law not secured, economic exchange embedded in informal institutions that work around market regulations Corruption ‘greases the wheels’

Political institutions Corruption the result of inadequate institutions that fail to deliver representation and accountability Competitive electoral systems required to ‘kick rascals out’ (But what if voters want the rascal?)

Economists Corruption and rent-seeking - Distort market allocation, lead to inefficiency But why corruption? Disfunctional institutions as responsible Over-regulation – incentives for bribe-seeking and bribe-giving (Common law vs Roman law)

And the UK? Corruption in the narrow sense not a big deal in UK However, revolving door between business and politics creates issues Overbearing power of financial sector to achieve desired policy corrupt in broad sense. Obsession with minutiae (MPs expenses, top civil service salaries)

What’s our problem? Politics Need to define what the issue is: economic, political, ethical, trust? MPs expenses easily fixed in practical terms, but political legitimacy issue stems from broader question of representativeness of political system (no constitution, distorting electoral laws, weak parties)

What’s our problem? Economics Financial sector problems a matter of regulation and political power. ‘Plutonomy’ – (Citigroup memo). Society run by the super-rich in the interests of the super- rich Impossible to regulate business properly. Fiscal adjustment hindered by ease of tax evasion. Misallocation of resources.

Conclusion: Trust and Participation Successful resolution requires rebalancing by strengthening political legitimacy of the state. But are citizens sufficiently concerned to act? If not, no big deal. British state effective enough. But democratic disaffection will continue, and future challenges may require citizens to have high trust in the state.