Corruption: Cause or Symptom? (2008)

by Josino Moraes
Latin America Economic Researcher

There is a common position in the Brazilian media and as a logical consequence in the
Brazilian population that corruption is the main cause of Brazilian economic and social
tragedy. Obviously, this idea is reproduced by international media.

Why is Latin America with unique exception of Chile -
vide Transparency International index -
one of most corrupted parts of world?  Because, in the short run, corruption is closely related
to the existence of a health state not to economic growth.

Although in the long run, probably, a sustainable economic growth is a necessary and
sufficient condition -
sine qua non - for the existence of a health state. However, in this case
the relation cause and effect between health state and growth is more complicated. They
must walk hand-in-hand, as one supporting the other. Therefore, each leg sustains the body
while the other leg advances. It is somewhat of an upside horizontal brace that supports the
weight of two opposite vertical walls underneath the ground at the same time. If one falls, so
does the other.

Corruption in most cases is not the cause of failed economic growth but rather a symptom of
an illness.

Corruption can be the symptom of a process of destruction as well as of construction of new
states -  
vide the cases of China, India and Russia.  In the case of Latin America it is a
symptom of a process of the destruction of old states. States that could not build up nations.
States that could not strengthen the incipient social capital, a heritage of the old colonies.
States where, most of the time, the rule of law does not prevail anymore.

In a recent article a Brazilian professor of economics in Princeton (Folha de S. Paulo, 3-6-07,
B2) makes a comparison between corruption in the USA in the 19th Century and current
corruption in Brazil. A god example of the confusion exposed above. During that period the US
was on its way constructing a new state or at least in the improvement thereof while Latin
America regressed.    

The most significant evidence on this new phenomenon of destruction of states is the current
Latin American war. The media and people call it "urban violence" - where it is more intense.  
However, if you look carefully you can see the existence of a new type of war: the homicides
have a level similar to a war, no one knows who commits homicides; kidnappings are frequent
and have become trivial in the way that ATMs have become trivial to banking so has the
express kidnappings/hijacks have come to the criminal industry; there are not enough prisons,
criminals partially command prisons, etc. The state does not have complete control over the
whole territory and the monopoly of force. In Rio de Janeiro, the local media talks about a
parallel state.

There is more significant evidence: the massive emigration regardless of level of education to
the US, Japan, and Europe; generalized corruption in  the  police - usually there are different
types of police corps; slums that multiply at rapid rates and where the police sometimes do
not enter; decomposition of the public health and the educational system; degradation of
roads, ports, airports, lack of air traffic control etc.

A recent report (Folha de S. Paulo, 1-07-07, A22) shows that the main reason of the massive
exodus of Brazilians to Portugal is violence, a natural consequence of the Brazilian war.

In the case of Brazil and probably in all of Latin America, corruption scandals have other
important correlated features. They play a role as a diversion of people not considering about
the real causes of the economic and social tragedy.  The real corruption is closely related to
the state-owned companies, other privileged areas, and gorgeous bureaucracy that rise at a
sustainable growth rate to permit the entry of new members to
nomenklatura - this new caste
generated in Latin America.