Is corruption a harmless foul?

In a book review published last weekend in the Wall Street Journal titled “Two Cheers for Corruption,”  the prolific scholar Deidre McCloskey argues that while corruption can be harmful to some societies (such as Afghanistan, the subject of one of the books she reviews), “The Great Enrichment that America rode to economic power was hardly slowed by the spoils system.”  In short, she sees much corruption as sort of a harmless foul, and some as even beneficial.

This is a maddening argument, because the fact that growth in the US was strong  for many years does not mean that corruption was a neutral or even positive force in that growth. Additionally, the possibility that corruption may on some level be good for US economic interests is hardly the end of the ethical (or even economic) inquiry.  For instance, even if one assumes that  McCloskey is right from a purely US-centric view that “It can be good for efficiency if, say, bribes are paid to …smooth the course of sales by U.S. businesses to the Egyptian military,” the people of Egypt – who have long suffered from corruption of their officials – would almost certainly disagree.

Indeed, over the years I have tried to capture in this blog stories showing how conflicts of interest – which underpin all cases of corruption – can be harmful.  While just the tip of the iceberg, it is hard to square these and countless other similar stories with McCloskey’s more benign vision of corruption.

One can also conduct a thought experiment about a world filled with conflicts of interest – and indeed I used to do this when I taught ethics in business school.  As noted in an earlier post , my students thought that:   In “Conflict of Interest World,”  Individuals might be reluctant to take the medicines that their doctors recommend for fear that those recommendations are motivated more by the doctors’ financial relationships with pharma companies than by the patients’ well-being.  Individuals and organizations might not use financial advisors for fear that the advice they receive is driven by hidden, adverse interests – and would instead devote otherwise productive time to trying to become their own financial experts, resulting in a significant misallocation of capital as well as time. Organizations could hesitate to take a wide range of everyday actions for which they need to trust their employees and agents to do what’s right by the organizations – or would proceed only with highly intrusive and costly surveillance-like measures in place. In short, Conflict of Interest World is a place of needlessly diminished lives, resources and opportunities.

 Note that McCloskey would probably respond that her review is focused on government corruption whereas the examples above are the private sector type.  But, as Justice Brandeis said, “Our government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.”

McCloskey indeed has a broad view of the need for ethical instruction, arguing that “All that works in the end is ethical change, urged from the mother’s knee, the pastor’s pulpit, the judge’s bench, the schoolmaster’s lectern.”  All these do work – or at least can.  But the same can be said for a virtuous government as well.

Finally, note that McCloskey speaks derisively of what might be called a systems approach to promoting ethical conduct: “We should stop thinking, as too many economists do, that we can ‘engineer’ society with ‘incentives.’ Freakonomics doesn’t reign. The blessed Adam Smith wrote that ‘the man of system . . . seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board.’ Nowadays, alas, we are all men (and women, dear Adam) of system.”

While there is an obvious logic to Smith’s critique, there is also much that – in my view – can be accomplished through a systems-based approach to ethics,  particularly systems built not only on economic incentives but also learnings from behavioral sciences. For more on the promising field of behavioral ethics,  please visit the Ethical Systems website.