Three Fallacies about Corruption, and Why Transparency Laws Fail

EspañolWho is not against corruption? Practically everyone criticizes the misappropriation of public funds by government officials. There are innumerable articles, studies, and daily conversations that condemn such acts, which cause both moral and material harm in all countries. Yet, moral criticism and the urges to stop this evil and to punish those responsible — with utmost necessity — are usually not effective and manifest, mostly, in measures that do not have the capacity to eliminate it.

This is because they rely on faulty reasoning, clear fallacies.

First fallacy: we must create laws and regulations that carefully control the government’s expenditure. There is nothing more seemingly logical than this type of measure, aimed at transparency in the management of public funds. But experience shows that most of these controls become, in practice, bureaucratic requirements easily circumvented by corrupt individuals. Meanwhile, these controls impose a heavy burden of inefficiency on honest officials as the improvement of public affairs becomes difficult. The corrupt have good lawyers at their disposal — they can afford them — and usually act with premeditated malice. There are very few cases that can be prosecuted, and they are very difficult to prove, since they fall on officials who profit handsomely from the country’s finances.

Excessive laws and complex regulations cannot halt or reduce the private appropriation of public funds.

Second fallacy: heavy penalties deter potentially corrupt individuals from acting unlawfully. The official stealing public funds trusts that he will not be caught and will receive complete impunity for his actions. These individuals really don’t care that for the crimes committed, the penalty may be two or 40 years; they know that with the help of judges, witnesses, documents, and legal arguments they will not have to serve the prison sentence. We must keep in mind that the not only does the corrupt individual have money, lots of money, he can circumvent the system where there are also many other corrupt people, potential accomplices of their crimes.

Third fallacy: our countries do not progress because of corruption. Neither history nor analysis of public expenditure confirms this statement at all. Much of the public money is spent recklessly regardless — almost always with the best intentions — and this in turn slows economic development. In addition, with the high taxes charged comes the reduction of capital investments, which otherwise could generate jobs and wealth. Most of the money received by the government is spent on bureaucracy, on conducting meetings and public events that have little importance, on subsidies that create privileges but do not improve the quality of life, on expensive social programs that fight neither poverty nor inequality — although they do feed the political ambitions of senior officials. Even public enterprises with monopolies, such the postal service in the United States, provide poor services and yield constant losses.

Corruption is just an additional outcome of runaway government spending that exists in almost every country in the world. It is not by fighting corruption that we achieve development — since many countries have developed economically despite being minimally transparent. Rather, it is by encouraging investment, providing security to all forms of private property, charging reasonable taxes, and controlling the volume and use of public expenditure.

What to do then? The solution is not simple, but there are two fairly straightforward ways to control and reduce corruption: limit state action to what is essential and mobilize people to impose social control over the corrupt individuals in office. The first, in my view, is almost obvious: reduce opportunities for corrupt individuals to act by simplifying regulations and procedures, and eliminate discretionary permits, preventing millions from passing through the hands of officials.

Paraguay, in the past few days, has given us a great example of how social control can be exercised over corrupt individuals: restaurants, cinemas, and all types of stores have refused to serve senators who protected an accused colleague involved in a clear case of corruption. Thus Paraguayans have shown to officials and senior politicians that after all, they are our employees. We object to them using these resources, that through our work and via taxes we have provided to the government, simply for their own benefit.

Translated by Susel Perez.

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