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Behavioral Scientist

Economic Development Through Bureaucratic Corruption

Nathaniel H. Leff
American Behavioral Scientist 1964 8: 8
DOI: 10.1177/000276426400800303

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 Economic
Development
Through Bureaucratic CorruptionNathaniel by H. Leff
Among scholars the subject of corruption is nearly taboo. Placing it in a model
of developing economy as a developing factor is even worse in some eyes. No doubt,
Nathaniel H. Leff’s analysis will be misunderstood. So be it. It still bids us to under-
stand an important area of social behavior, and tells us why public policies will fail.
The author is at Harvard University
.

THE BUREAUCRATIC CORRUPTION of many un- used by the bureaucracy in attaining given goals,
derdeveloped countries has been widely condemned both whether those of its political directors, or those of the
by domestic and foreign observers. Apart from the grafters. Empirically, inefliciency and corruption may
criticism based on moral grounds, and the technocratic appear together, and may blend into each other. Both
as a policy problem and for analytical purposes, how-
impatience with inef6ciency, corruption is usually as-
sumed to have important prejudicial effects on the eco- ever, it is important to distinguish between two essen-
nomic growth of these societies.1 tially different things.
Corruption is an extra-legal institution used by indi- Who Condemns Corruption?
viduals or groups to gain influence over the actions of
the bureaucracy. As such, the existence of corruption Before proceeding to our analysis of the economic ef-
per se indicates only that these groups participate in the fects of bureaucratic corruption, it may be useful to
decision-making process to a greater extent than would make a brief detour. Any discussion of corruption must
otherwise be the case. This provides information about contend with the fact that the institution is almost uni-
the effective-as opposed to the formal-political system, versally condemned. Insofar as this criticism is based
but in itself, tells us nothing about the content and de- on moralizing-explicit or latent-self-interest, or ide-

velopment effects of the policies so determined. These ology, it can be a formidable obstacle to rational analysis.
depend on the specific orientation and interests of the Consequently, in order to gain a degree of perspective
groups which have gained political access. As we shall on the subject, I would like to consider the sources of the
see, in the context of many underdeveloped countries, this widespread prejudice against corruption. Identifying
point can be crucial. For example, if business groups the specific sources of bias, and breaking down gener-
are otherwise at a disadvantage in articulating their in- alized censure to its component parts should help us
terests to the government, and if these groups are more to evaluate each argument on its own merits. For this
likely to promote growth than is the government, then purpose, let us consider the origins of the critical atti-
their enhanced participation in policy formulation can tude held by such groups as foreign observers, govern-
help development. ment ofhcials, and entrepreneurs, and by intellectuals,
Furthermore, our discussion is limited to corruption of politicians, and businessmen in the underdeveloped coun-
a particular type: namely, the practice of buying favors tries themselves.
from the bureaucrats responsible for formulating and Foreigners living in the underdeveloped countries have
administering the government’s economic policies. Typi- been persistent critics of corruption. First, they have re-
cal examples are bribery to obtain foreign exchange, sented the payments of graft to which they are often
import, export, investment or production licenses, or subjected in the normal course of their business. Sec-
to avoid paying taxes. Such bribes are in the nature of ondly, they have condemned corruption on moral
a tax levied on economic activity. These payments grounds, and criticized it as both a cause and a charac-
have not been legitimized by the correct political process, teristic of the backwardness of these countries.
they are appropriated by the bureaucrat rather than the A more sophisticated, and recent version of this argu-
state, and they involve the subversion of the govern- ment derives from the new interest in promoting eco-
ment’s economic policies-hence the stigma that attaches nomic development. As economists and observers of
to them. The question for us to decide is whether the economic development have grown aware of the enor-
net effects caused by such payments and policy redirec- mous obstacles to spontaneous growth, they have come
tion are likely to favor or hinder economic development. to assign an increasingly important role to the govern-
We should also distinguish between bureaucratic cor- ments of the underdeveloped countries.
ruption and bureaucratic inefficiency. Corruption refers First, there has been an emphasis on the need for
to extra-legal influence on policy formulation or imple- entrepreneurs, coupled with the fear that the under-
mentation. Ine$iciency, on the other hand, has to do developed countries may lack indigenous sources of
with the success or failure, or the economy of means entrepreneurship. Secondly, recent economic theory
s

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stressed the importance of indivisibilities, externalities, Here, moreover, the special ideological perspectives and
and other structural features that may prevent an un- interests of powerful and articulate groups have rein-
derdeveloped economy from breaking out of a low- forced the criticism. Let us consider the specific perspec-
income equilibrium trap. In addition, there was the tives that intellectuals, politicians, and businessmen in
realization that the flow of private capital and technical the underdeveloped countries possess.
skills was insufflcient for promoting large-scale growth.
With the ensuing flow of inter-governmental transfers,
The attitudes of intellectuals and of politicians toward
came the need for the governments of the underde- corruption overlap to a certain degree. As members of
the same rising elite, they condemn corruption because
veloped countries to assume responsibility for the re-
of the idealistic streak which often pervades radicals and
sources they were receiving.
Because of these reasons and political pressures, the reformers. Contemporary intellectuals in underdevel-
governments of the underdeveloped countries have come oped countries often emulate the Jacobins in their
to occupy a very prominent place in most visions of seeking after virtue. Moreover, as Shils has pointed out,2
economic development. In a sense, economists have col- they frequently attribute sacral value to the govern-
lected their problems, placed them in a box labelled mental sphere: hence their hostility to the venality that
&dquo;public policy&dquo;, and turned them over to the govern- would corrupt it. More generally, they may see graft
ments of the underdeveloped countries. as an integral part of the political culture and system of

In order for the governmental policies to be effective, the ancien regirrte which they want to destroy.
however, the bureaucracies must actually implement Furthermore, they also have a direct interest in dis-
them. Hence it becomes crucial that officials not be in- crediting and eliminating corruption because of its func-
fluenced, through graft, to deviate from their appointed tional effects. In most underdeveloped countries, interest
tasks. The logic of this argument goes as follows: de- groups are weak, and political parties rarely permit the
velopment-bureaucracy-e~ciency-probity. This chain participation of elements outside the contending cliques.
of reasoning is central to the whole critique of corrup- Consequently, graft may be the only institution allowing
tion, and we shall examine it carefully in the next section. other interests to achieve articulation and representation
Before going further, however, let us note a few im- in the political process. Therefore, if the ruling elite is
portant points about this argument. to maintain its exclusive control of the bureaucracy, it
must cut off or control this channel of influence.33 Such
First, it confuses bureaucratic inefficiency and bureau-
cratic redirection through dishonesty and graft. Sec- considerations apply especially when the politically dis-
ondly, transferring these problems to the governments advantaged group consists of an ethnic minority or of
and bureaucracies is hardly enough to solve them, for foreign entrepreneurs over whom the elite would like
these institutions may not be at all likely to promote to maintain its dominance.

growth. Rather than leading the development process, Entrepreneurs in underdeveloped countries have also
the governments and bureaucracies may be lagging sec- condemned bureaucratic corruption. This is understand-
tors. Finally, the argument implies that because the able, for they must pay the bribes. Moreover, because
bureaucracy is so strategic an institution, an attack on of certain economic characteristics of graft, the discon-
bureaucratic corruption deserves high policy priority, tent that it arouses probably goes far beyond the cost
offering relatively cheap and easy gains. of the bribe alone.
Foreign aid missions seem to have been particularly It is important to realize that most of the objects of
prone to draw such conclusions, for understandable rea- corruption are available only in fixed and limited supply.
sons. The bureaucracy’s performance will determine the For example, at any point in time, there is only a given
success or failure of many other projects. Moreover, in amount of foreign exchange or a given number of
contrast with some of the other problems facing foreign investment licenses to be allocated. Consequently, when
development specialists, reform of the civil service may the number of favors is small relative to the number of
seem a relatively straightforward matter. Furthermore, aspirants, entrepreneurs must bid against each other in
whereas in other development efforts foreign specialists what amounts to a clandestine and imperfect auction.
may feel hampered by the lack of well tested doctrine With competition forcing prices up, the favors will tend
and procedures, in restructuring the bureaucracy, they to be allocated to those who can pay the highest prices.
can rely on the expertise of public administration and In the long run, the favors will go to the most efficient
management science. Therefore, it is not surprising that producers, for they will be able to make the highest bids
so much foreign development attention and activity have which are compatible with remaining in the industry.
been directed toward the reform of the bureaucracies of Marginal firms, on the other hand, will face severe
underdeveloped countries. pressures. Either they accept sub-normal profits, or they
In the underdeveloped countries themselves, much of must make the effort to increase efficiency, so as to
the condemnation of graft has also come from interest in muster the resources necessary to bid successfully. If
economic development, and from the apparent cogency they drop out of the contest, they are placed in a weak-
of the development/bureaucracy/efficiency/probity logic. ened position vis-a-vis the other firms, which are now

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even more intra-marginal because of the advantages a revolutionary group of intellectuals and politicians, who
given by the bureaucratic favor. are primarily interested in other goals. At the same time,
This sort of situation, where the efficient are able to the propensity for investment and economic innovation
out-do the inefficient, is not generally appreciated by may be higher outside the government than within it.
businessmen. It is likely to be the less popular in under-
Indifference and hostility of government
developed countries where-in deference to the preva-
lence of inefficiency, and to local ideas of equity-the In the first instance, the government and bureaucracy
more usual practice is to tax efficient producers in may simply be indifferent to the
desires of entrepreneurs
order to subsidize the ine~cient. Moreover, as we have wanting to initiate or carry on economic activities. Such
seen, corruption may introduce an element of competi- a situation is quite likely in the absence of effective
tion into what is otherwise a comfortably monopolistic popular pressure for economic development, or in the
industry. absence of effective participation of business interests
Furthermore, in their bidding for bureaucratic favors, in the policy-making process. This is especially the case
businessmen may have to give up a substantial part of when entrepreneurs are marginal groups or aliens. More
the profits from the favor. The economic value of the generally, when the government does not attribute much
favor is equal to the return expected from the favored value to economic pursuits or innovation, it may well be
position it makes possible. This value constitutes the reluctant to move actively in the support of economic
upper limit to the bids made by entrepreneurs. The activity.
actual amount paid is indeterminate, and depends on Evenmore important, the bureaucracy may be hostile
the relative bargaining skills of the bureaucrats and the to entrepreneurs, for it dislikes the emergence of a com-
businessmen. The competitive bidding between busi- peting center of power. This is especially the case in
nessmen, however, may force the price to approach the colonial economies, where a large domestic middle class
upper limit. In such a case, the bureaucrat captures the has not emerged to challenge traditional power-holders.
lion’s share of the profits expected from the favor. Com-
Governments have other priorities
petitive selling by different bureaucrats may strengthen
the bargaining position of the businessmen, but in gen- The foregoing relates to societies where although lip-
eral they are probably forced to pay out a relatively large service may be paid to the importance of economic
portion of their expected gains. Hence, it is not surpris- development, the government and bureaucracy are
ing that they dislike an institution which deprives them oriented primarily to maintaining the status quo. It is
of the fruits of their enterprise.4 also relevant in countries where a successful revolution
The foregoing discussion suggests that many of the against the ancien regime has occurred. There, the gov-
negative attitudes toward corruption are based upon ernment may be proceeding dynamically, but not toward
special viewpoints and interests. VVe should also realize the promotion of economic development. Other goals,
that the background material available on the subject such as an increase in the military power available to
is both scanty and one-sided. Those who engage in the elite, or expansion of its control over society, may
corruption maintain secrecy about their operations, so be justified in terms of economic development, however
that the little data available comes from declared oppo- &dquo;ultimate&dquo;. At the same time, the immediate effect of
nents of the institution. Moreover, those who profit from such policies is to impede growth.
corruption may themselves have no idea of the socially Typically the bureaucracy plays an extensive inter-
beneficial effects of their activities. ventionist role in the economy, and its consent or sup-
The widespread condemnation of corruption has come port is a sine qua non for the conduct of most economic
to constitute a serious obstacle to any reexamination of enterprise. In such a situation, graft can have beneficial
the subject. Indeed, the criticism has become something effects. First, it can induce the government to take a
of a ritual and symbol-laden preamble accompanying more favorable view of activities that would further

policy discussion and statements in the underdeveloped economic growth. The policies or freedom sought by
countries. As such, it is cherished for the modicum of the entrepreneurs would help development, while those
consensus it provides to otherwise antagonistic groups. they subvert are keyed to other goals. Secondly, graft
can provide the direct incentive necessary to mobilize
Positive Effects of Corruption
the bureaucracy for more energetic action on behalf of
The critique of bureaucratic corruption often seems the entrepreneurs. This is all the more important because
to have in mind a picture in which the government and of the necessity for bureaucratic help in so many areas-
civil service of underdeveloped countries are working e.g., licenses, credit, and foreign exchange allocation-
intelligently and actively to promote economic develop- in order to get anything done.
ment, only to be thwarted by the efforts of grafters.
Once the validity of this interpretation is disputed, the Corruption reduces uncertainty and increases investment
effects of corruption must also be reevaluated. This is Corruption can also help economic development by
the case if the government consists of a traditional elite making possible a higher rate of investment than would
which is indifferent if not hostile to development, or of otherwise be the case.

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 The investment decision always takes place in the either from reserves or from current operations, is put
midst of risk and uncertainty. As Aubrey has pointed at a premium. In the
long run, both of these sources are
out,5 however, these difficulties are very much com- heavily dependent on efliciency in production. Hence,
pounded in the economic and political environment of a tendency toward competition and efficiency is intro-

underdeveloped countries. The basic estimates of future duced into the system.
demand and supply conditions are harder because of the Such a pressure is all the more important in under-
lack of data and of the sharp shifts that can occur during developed countries, where competition is usually absent
a period of economic change. The dangers of misjudg- from many sectors of the economy. In the product mar-
ing the market are all the more serious because of the ket, a high degree of monopoly often prevails. Inter-
lower elasticities of substitution at low income levels. national competition is usually kept out by quotas, tariffs,
Aside from the problems of making such economic and overvalued exchange rates. In the factor market,
estimates, the potential investor also faces a major polit- frictions and imperfections are common. Consequently,
ical unknown-the behavior of the government. The we can appreciate the value of introducing an element

possible dangers arising from the government’s extensive of competition, if only through the back-door.
role in the economy are increased because of the failure
of representative government to put an effective check Corruption as a hedge against bad policy
on arbitrary action. The personalist and irrational style
of decision-making, and the frequent changes in govern- Corruption also performs the valuable function of a
ment personnel and policies add to the risks. Conse- &dquo;hedge&dquo; and a safeguard against the full losses of bad
economic policy. Even when the government of an
quently, if entrepreneurs are to make investments, they
must have some assurance that the future will not bring underdeveloped country is proceeding actively and in-
harmful intervention in their affairs. We can see an telligently to promote growth, there is no assurance that
illustration of these difficulties in the fact that in periods its policies are well-conceived to attain its goals. In
of political uncertainty and crisis, investment shrinks, effect, it may be taking a vigorous step in the wrong
and economic stagnation occurs. By enabling entrepre- direction. Corruption can reduce the losses from such
neurs to control and render predictable this important mistakes, for while the government is implementing
influence on their environment, corruption can increase one policy, the entrepreneurs, with their sabotage, are

the rate of investment. implementing another. Like all insurance, this involves
a cost-if the government’s policy is correct. On the
Corruption and innovation other hand, like all insurance, it is sometimes very wel-
The would-be innovator in an underdeveloped society come.

must contend with serious opposition from existing eco- An underdeveloped country often stands in special
nomic interests. Unable to compete economically with need of such a safeguard. First, even when policy
the new processes or products, they will usually turn to goals are clearly specified, competent counsel may well
the government for protection of their investments and be divided as to the best means of achieving them. For
future returns. If the bureaucracy supports innovatioii example, the experts may differ among themselves on
and refuses to intervene, the innovation can establish such basic issues as export promotion vs. import substi-
itself in the economy. In the more usual case, however, tution, or other inter-sectoral priorities. Consequently,
existing economic interests can depend on their long- if the government has erred in its decision, the course
standing associations with bureaucratic and political made possible by corruption may well be the better one,
compadres for protection. supported by a dissenting segment of expert opinion.
In this situation, graft may enable an economic inno- Moreover, the pervasive effects of government policy in
vator to introduce his innovations before he has had an etatistic economy compound the effects of poor deci-

time to establish himself politically6 Economic inno- sions, and increase the advantages of having some kind
vators in underdeveloped countries have often supported of safeguard against the potential consequences of a
serious policy mistake. Corruption provides the insurance
oppositional political cliques or parties. Corruption is
another, less radical way of adjusting to the same pres- that if the government decides to steam full-speed in the
sures and goals. wrong direction, all will not be lost.
Some illustrations may help clarify this point. For
Corruption, competition, and efficiency example, the agricultural producers whose graft sabo-
As we have seen in the previous section, bureaucratic taged Peron’s economic policies were later thanked for
corruption also brings an element of competition, with having maintained Argentina’s capacity to import. An-
its attendant pressure for efficiency, to an underdevel- other example shows in more detail how this process can
oped economy. Since the licenses and favors available operate. An important element in the recent Latin
to the bureaucrats are in limited supply, they are allo- American inflations has been the stagnation of food pro-
cated by competitive bidding among entrepreneurs. duction, and the rise in food prices. In both Chile and
Because payment of the highest bribes is one of the prin- Brazil, the governments reacted by freezing food prices,
cipal criteria for allocation, the ability to muster revenue, and ordering the bureaucracy to enforce these controls.

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In Chile, the bureaucracy acted loyally to maintain price situation of the lower classes, they may be reluctant to
controls, and food supplies were relatively stagnant. bear the costs of development. Hence, the actual level
lnflation rose faster, supported in part by the failure of of taxes collected, and their allocation in the budget
food 1)t,,)duction to increase. In Brazil, however, the may represent the decision of the ruling group as to how
bureaucracys ineffectiveness sabotaged the enforcement hard they want to press forward with economic develop-
of price controls, and prices received by producers were ment. In these circumstances, it is misleading to criti-
allowed to rise. Responding to this price rise, food pro- cize the bureaucracy for the effects of its ineffective tax
duction also increased somewhat, partially limiting the collection on economic growth. Of the revenues they
course of the inflation.’7 might have collected, only a part would have gone for
In this case, we see the success of entrepreneurs and development rather than for the many forms of non-
corrupted officials in producing a more effective policy developmental expenditure. Moreover, when the entre-
than the government. Moreover, subsequent economic preneurs’ propensity to invest is higher than the govern-
analysis justified this &dquo;decision&dquo;, by emphasizing the ment’s, the money saved from the tax collector may be
price elasticity of agricultural supply, and the conse- a gain rather than a loss for development.

quent need to allow the terms of trade to turn in favor Usefulness of government spending
of rural producers.
These points are perhaps strengthened when viewed Furthermore, there is no reason to assume that the
with some historical perspective. As John Nef has re- government has high marginal propensity to spend for
a

marked, the honesty and efficiency of the French bu- development purposes, based on a high income elasticity
reaucracy were in great measure responsible for the of demand for development. Without changes in the
stifling of economic innovation and progress during the factors determining the average allocational propensities,
18th century.s By way of contrast, the laxity of the increases in governmental revenue may well go for more
British administration permitted the subversion of Col- lavish satisfaction of the same appetites. For example,
bertism, and allowed new economic processes and activi- as budgetary receipts rise, the military may be supplied
ties to flourish. with jet aircraft rather than with less expensive weapons.

Alleged Negative Effects of Corruption Cynicism

Most of the arguments concerning the negative effects Another argument has emphasized the social effects
of corruption are based on the assumption that develop- of corruption as an impediment to development. For
ment can best proceed through the policies of an uncor- example, it has been claimed that immorality and self-
rupted government and bureaucracy. As noted in the seeking of bureaucratic corruption may cause widespread
previous section, this assumes that the government really cynicism and social disunity, and thus reduce the willing-
wants economic development, and that its policies would ness to make sacrifices for the society’s economic develop-

favor growth more than the activities of an unregulated ment.

private sector. Actually, the economic policies of the This argument can be criticized on several points.
governments of many underdeveloped countries may be First, insofar as the disillusion is engendered among
predicated on priorities other than global economic de- the lower social orders, the effects on development may
not be as important as assumed. Because of economic
velopment. Even in countries where there has been a
successful revolution against the colonial ancien regime, and social conditions, these people are probably being
policy may aim primarily at advancing the economic squeezed as much as is possible, so that with all good
interests of the ruling clique or of the political group on will, they could not sacrifice any more.
which it bases its dominance. Although the economic Secondly, if the cynicism caused by bureaucratic cor-
policies of some countries may be foolish or catastrophic ruption leads to increased self-seeking in the rest of the
from the viewpoint of development, they may be well society, this may not be a completely bad thing for
conceived for implementing these other goals.9 economic development. Many of the wealth-creating
activities which make up economic growth depend on
Impeding taxation
such atomistic egoism for their stimulus. Consequently,
One version of this argument focuses on taxation. if cynicism acts as a solvent on traditional inhibitions, and
Specifically, it asserts that bureaucratic corruption may increased self-seeking leads to new ambitions, economic
hamper development by preventing the government from development may be furthered.
obtaining the tax revenues necessary for developmental Moreover, this argument also exaggerates the extent
policies. to which economic growth depends on a popular rallying-
This argument probably attributes to the government around rather than on many individual selfish activities.
an unrealistically high propensity to spend for develop- The implicit picture seems to be that of an &dquo;all-together&dquo;
ment purposes. Economic development usually has a social effort, perhaps under etatistic direction. Once
less compelling priority among the elites of these soci- stated explicitly, such a model appears more like a fan-
eties than among the westerners who observe them. Even tasy of intellectuals rather than an accurate guide to how
if the dominant groups are aware and sensitive to the economic development takes place.

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 More generally, we should recognize that there are to overcome the other barriers to economic growth. In
very good reasons for the incivism and unwillingness to many underdeveloped countries, the bureaucracy may
make sacrifices that are often characteristic of under- be a lagging rather than a leading sector. Secondly, it
developed societies. Mutual distrust and hostility usually should be clear that direct policy efforts against such
have much deeper roots in cultural gaps, inequitable in- deeply rooted psychological and social conditions can-
come distribution, and long experience of mistreatment. not hope for much short-term success. As Braibanti con-
Rapid change, dislocating existing institutions and values, cludes,l° powerful investigatory commissions may have
also disrupts social solidarity. In such circumstances, a limited success, but one should expect the problem to
reduced bureaucratic corruption would make only a be improved &dquo;more by time than by effort&dquo;.
marginal contribution to improved public morale. Despite the pessimistic prospects for the usual direct-
action policies against corruption, certain possibilities
Corruption as a Policy Problem do exist for dealing with it indirectly. The problem is
The foregoing analysis and perspective may also be perhaps best conceptualized in terms of the need to
economize in the use of a particularly scarce and im-
helpful in dealing with bureaucratic corruption as a portant resource-honest and capable administrators.
policy problem. Indeed, for several reasons, this shortage may be more
First, we should be clear as to the nature of &dquo;the
serious than others more often cited, e.g., the lack of
problem&dquo; that policy is attempting to solve. As we have capital. Because of political reasons, this input into the
seen, much of the criticism of corruption derives from
the political, economic, and ideological interests of par- development process cannot be imported on a large
scale. Furthermore as we have noted, available domestic
ticular groups. Presumably the elimination of corrup-
tion is a problem only insofar as we share their specific supplies cannot be expected to increase for a long time
in most underdeveloped countries. Finally, this input
concerns.
is all the more crucial because of its importance for the
Aside from these special interests, however, let us
successful deployment of other resources. If we view
consider corruption from the point of view of its effects
on economic development. As we have seen, under cer-
corruption as a problem in the allocation of scarce
administrative resources, two solutions are immediately
tain conditions, the consequences of corruption for de-
velopment are not as serious as is usually assumed. At suggested.
the same time, it may have important positive effects
that are often overlooked. Consequently, to the extent
Two techniques
that reality approaches the conditions of our model, resources should be concentrated
First, the available
corruption of the type discussed in this paper may not in where their productivity in promoting develop-
areas
be a problem at all. This will depend on specific con- ment would be greatest. Such budgeting of administra-
ditions, and will vary between countries and between tors would avoid dispersion of honest and able personnel,
sectors. and make them available only for tasks of the highest
When the conditions of our model donot obtain,
priority.
however, corruption will be an important barrier to economizing in the use of this scarce
A second way of
development. To the extent that corruption exists as a resource would be the use of alternative production
policy problem, it is probably wise to accept it as a
techniques to achieve the same development results. In
particularly intractable part of
underdeveloped
an coun- our context, this would mean employing measures to

try. On superficial level, we should recognize that

a achieve the goals of policy without reliance on direct
corruption creates its own political and economic inter- administration and bureaucratic regulation of the econ-
ests that will resist efforts at its eradication. More im- omy.
portant, corruption is deeply rooted in the psychological In many cases, the desired effects could be achieved
and social structure of the countries where it exists. On either by market forces, or by indirect measures creating
the psycho-cultural plane, corruption will persist until the necessary incentives or disincentives-i.e., with much
universalistic norms predominate over particularistic less direct government intervention, and the consequent
attitudes. Socially, the elimination of corruption prob- need to rely on the bureaucracy. For example, a govern-
ably requires the emergence of new centers of power ment which wants to keep down the domestic price level
outside the bureaucracy, and the development of com- can either institute a cumbersome system of price regu-
petitive politics. Such changes will come, if at all, only lation, or it can permit a measure of competition from
as the result of a long period of economic and social imports. Similarly, a straightforward currency devalua-
development. tion can have many of the beneficial effects achieved by
an administration-intensive regime of differential ex-
Bureaucracy the lagging sector
change rates. Admittedly, such policies may have some
Two conclusions emerge from this discussion. First, undesired consequences and side-effects that ideally
we should realize how illusory is the expectation that would be avoided by more sophisticated government
bureaucratic policy can intervene as a deus ex machina management of the economy. The point is, however,

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that when policy alternatives are evaluated, it would be
better to take explicit account of how bureaucratic cor-
ruption will affect the direct management policies con-
templated. This would lead to a more realistic choice
between the means which can accomplish similar goals.
Perhaps the best procedure would be to select a mixture
of direct and of indirect management policies, taking
account of the bureaucratic resources available.
By way of contrast, the more usual practice is to
choose the policies that would be best if the whole
bureaucracy were dependable, and then to deplore its
corruption, and condemn it for the failure of the policies
chosen. Following the procedure suggested here, how-
ever, governments would accept corruption as an aspect
of their societies, and try to optimize policy-making
within this framework.
Finally, we should note that preoccupation with cor-
ruption can itself become an impediment to development.
This occurs if the focus on corruption diverts attention
from other political and economic deficiencies in the
society, and from the measures that can be taken despite
corruption. To avoid the losses from such misdirection,
re-thinking of the sort suggested here may be helpful.
REFERENCES
I am grateful to Richard Eckaus, John Plank, Lucien Pye, and
Myron Weiner for their comments on an earlier draft of this
paper. They bear no responsibility for the remaining deficiencies.
1 But see V. O.
Key, The Techniques of Political Graft in the
I7nited States, privately printed, 1936. Robert K. Merton, Social
Theory and Social Structure, I~Tew York, 1959, pp. 19-85. Harold
Lasswell, &dquo;Bribery,&dquo; in The L’ncyclopedia of the Social Sciences,
vol. 2, New York, 1930. Cf. especially, F. W. Riggs, &dquo;Bureaucrats
and Political Development: A Paradoxical View,&dquo; paper prepared
for the Social Science Research Council Committee on Comparative
Politics, Conference, January 29-February 2, 1962, to be published
in a forthcoming volume edited by J. LaPalombara.
2 Edward
Shils, &dquo;Political Development in the New States,&dquo;
Comparative Studies in Society and History, 1960, p. 279.
3 Cf.
Riggs, op. cit., pp. 28-30.
4 These
processes are nicely brought out in Alexandre Kafka,
&dquo;The Brazilian Exchange Auction,&dquo; The Review of Economics and
Statistics, October, 1956.
5 If. C.
Aubrey, &dquo;Investment Decisions in Underdeveloped Coun-
tries&dquo; in Capital Formation and Economic Growth, National Bu-
reau of Economic Research. Princeton, 1955, pp. 404-415. Also
cf. the finding of Y. Sayigh (Entrepreneurs of Lebanon, Cam-
bridge, Mass. 1962, p. 117) that political conditions constituted the
greatest unknown facing the entrepreneurs surveyed.
6 Cf.
Lasswell, op. cit., p. 671.
7I am indebted to an eminent expert in Latin American echo-
nomic development for this observation.
8 Industry and Governme7at in France and England: 1540-1640.
Cf. also, J. J. Spengler, &dquo;The State and Economic Growth-
Summary and Interpretations,&dquo; p. 368, in H. Aitken, editor, The
State and Economic Growth, N. Y. 1959.
9 Cf. Frank
Golay, &dquo;Commercial Policy and Economic National-
ism,&dquo; Quarterly Journal of Economics, 1958, and B. Glassburner,
&dquo;Economic Policy-Making in Indonesia, 1950-1957,&dquo; Economic De-
veloinment and Cultural Change, January 1962.
10
Ralph Braibanti, &dquo;Reflections on Bureaucratic Corruption,&dquo;
Public administration, Winter, 1962, p. 370, and p. 372.

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