Observed Differences in Corruption between Asia and Africa: The Industrial Organization of Corruption and Its Cure

Abstract

The paper presents a nonconforming view about corruption and an approach to its ‘cure’. It seeks to explain the anomalous situation that despite pervasive corruption and weak institutions, emerging economies in Asia attracted a flow of foreign investment and achieved a remarkable economic growth and reduction in poverty. Fragile countries in Africa have not done so well.

The paper posits that the main difference in the corruption characteristics between the two regions is that in Asia corruption is part of the fixed cost and in Africa it is in the variable costs and consequently has less distortionary effect on investment and economic growth in Asia. Corruption becomes part of the fixed costs when it has a governance structure based on relationships. Although corruption and violent criminality are often correlated, many involved in corrupt governance structures are not evil.

An early version of this paper was written and presented ten years ago under a slightly different title, and in that sense the paper is anachronistic. The paper has been updated and its concept that there are two kinds of corruption—variable and fixed cost corruption— remains valid. The qualification that needs to be made is that there has been progress in both continents and the broad-brush generalization applies to countries that are stuck in fragility in a different way from those that are making sustained efforts to bring stability and reforms in their country. So, with a decade-long arc and a slight change in the title of the early paper, the regions are good proxies for calling attention to the two kinds of corruption and their associated dysfunctions, crime, violence and political instability.

The leaders are implicated as enablers of corruption. A further premise is that corruption is an emotional disorder and difficult to cure. The paper outlines modern grouppsychoanalytic process to governance and to reorient corruption based on the hypothesis that the human drives, both positive and negative, that bring into being ‘good enough’ government and a cohesive country are the same forces that act as agents of corruption and as a safeguard against it.