Globalization and Corruption

I've been in Afghanistan and am now in Pakistan, and neither my schedule nor the speed of my internet connections have facilitated blogging. I will offer some updated thoughts on whether I am optimistic or pessimistic about Afghanistan (and Pakistan) -- the answer is still "no" -- as soon as possible.

Meanwhile I received a short article from Yale Global Online that includes a very cogent analysis of the drug problem in Afghanistan by someone who has never concerned himself with Afghanistan, as far as I can see. In an article entitled Globalization and Corrupt States, World Bank economist Branko Milanovic explains that the globalization of trade and transport create the conditions for the corruption of weak states. The prohibition of certain goods and services (e.g. drugs, prostitution) that can be traded or provided globally at relatively low cost creates economic returns for businessmen who can create or exploit conditions of illegality. The market assures that the production of prohibited goods and services become concentrated in places enjoying what I have called a "comparative advantage in the production of illegality and insecurity."

In such countries illegal industries grow and dominate the economy. The political result is predictable:

Once organized crime and its supporters become the largest employers in the country, they play the same role that a more conventional business plays in other countries. They try to influence the political process. Moreover, they need to control the political arena - election of presidents and parliaments - even more tightly than "normal" business people because their very existence depends on having a government willing to tolerate violation of international rules as the country's main activity.

Corruption in such countries is not due to "bad governance" that can be fixed by improving the political structures:

Governance structures respond to underlying incentives, and to expect an honest person to rise to power in a corrupt state is akin to expecting a person with no financial backing from big business to be elected president of the US. In both cases, the outcome of a political process reflects the country's underlying economic conditions.

I was once on a panel on Afghanistan in Washington, where a questioner from the International Crisis Group asked a well-informed question about the presence of known drug traffickers in the Afghan parliament. He wanted to know why such people had not been excluded (using the passive voice of course, enabling him to avoid thinking about who could do the excluding). I replied that it was not possible to hold a free election anywhere while excluding the representatives of the country's largest industry. My co-panelist, the native of a poppy producing village in Badakhshan, smiled sadly.

Milanovic's proposal:

Legalize the currently illegal activities like prostitution and drug use and modify the often draconian US and European immigration laws that stimulate human trafficking.

The key is that meaningful reforms do not begin in the corrupt states themselves, but in the rich world that is the main consumer of illegal goods and services.

Read the article.