In the book Plunkitt of Tammany Hall William Riordan published many of George Washington Plunkitt’s thoughts about government and about big city machines. In the link below, you can find the passage that explains the difference between honest and dishonest graft.
Honest graft is using your connections and knowledge as a government official to enrich yourself. It is essentially what we would now call “insider trading.”
Honest graft is when a goverment official goes out (for example) and buys up land because he knows a city project will need that land and he will be able to make a lot of money by buying the land now while no one else knows that it is about to be bought by the city. He can buy it cheap and then sell it at a higher price to the city.
Dishonest graft consists of doing things like blackmailing people who are doing illegal or semi-illegal things. It can also consist of actually taking money directly from the city treasury.
It is more of what you would expect mobsters to do–things like forcing prostitutes to pay money to police in order to be allowed to work in a given area rather than being arrested.
Anti-Dismal blogged today on how vertical integration can reduce the double mark-up problem of monopolies. The one thing worse than a monopoly is dealing with a chain of monopolies. Buyers must pay a monopoly price to each step in the chain.
If these monopolies were to merge into one single monopoly, the monopolist would charge a lower single monopoly price. The vertical integration captures the deadweight social loss of the chain of monopoly prices. Monopoly profits are higher, yet the monopoly price paid by buyers is lower.
This blog post reminded me of a particularly astute short article in the Economist 15 or so years ago analysing Benazir Bhutto’s husband as a solution to the chain of monopolies problem.
When Benazir Bhutto became Prime Minister of Pakistan for the first, she appointed her husband Minister of Investments. He became known as Mr 10%.
The welfare gain for the downtrodden Pakistani’s was that if you paid Benazir Bhutto’s husband is 10%, you got what you pay for. No further bribes of more junior and petty officials were required if you paid Benazir Bhutto’s husband his 10%. Many investments and business that otherwise would have been blocked but for countless bribes to a chain of corrupt politicians and bureaucrats at every turn went ahead.
When Benazir Bhutto became Prime Minister of Pakistan for the second time, not only was her husband again appointed Minister of Investments, he had better economic advisers. He became Mr 40%. Benazir Bhutto’s husband wanted to capture the economic gains of single-stop bribery and corruption for his family.
My experience with Japanese overseas development assistance confirms the same. They budget 10% for bribes. Their main interest is effective bribery. If they pay a bribe, the Japanese ODA agency expects to get what they pay and not have to pay a chain of more junior officials as well for the same thing.
A candidate for Congress or for mayor in the Philippines has to spend around P73, 060, 000 (US$1,537,781).
The Congressmen in the Philippines must meet a huge payroll:
- As many as 6,000 ward leaders are maintained. They are the backbone of election campaign in the barangays (villages) where they live. They receive at least P2, 000 per month for three months prior to the election.
- In between elections, ward leaders of incumbents are hired as casuals or holds office in the city’s bureaucracy. Casuals have jobs for a minimum of three months a year. Then there are 15-30 ghost employees hired by the city or municipality.
- On election day, a candidate needs watchers for each of 3,000 precincts. At a minimum of P500 ($10.52) per watcher, the total cost is P3 million (63, 144) plus meals.
- Transportation costs amounts to at least P3 million ($63, 144).
- Costs of the campaign materials and many carnival style election rallies are conservatively pegged at P5 million ($105, 241).
My source then asks:
On this minimum conservative figure, why is a candidate willing to spend this amount in an election when the accumulated salaries of a mayor for a three-year term amounts to P 2 million ($42, 096) and P3 million ($63, 144) for a representative of the Lower House?
A successful Philippine presidential candidate expects to spend 3 billion pesos; a candidate for the Senate must spend at least ½ billion pesos. Senate candidates are elected on a single national ballot, so they must have a national payroll and a larger payroll in the provinces where they are strong.
Philippine politics is basically divided up into Communist and non-Communist political parties with a shifting kaleidoscope of alliances both between and within parties. Most alliances breakup and realign when a presidential election is looming, depending on who looks like being the winning side.
These costs of running for Congress do not include maintaining private armies, which some Philippine politicians do, especially in the south and in the poorer provinces. These private armies, at least 85 private armies of politicians have been identified, are for personal protection as well is intimidation of rival candidates. Many of these private armies are made up of moonlighting police officers.
I was in the Philippines for the election when Estrada was elected president. There were 40 murders in that election by the time I left. That is the average number for a Philippine national election. Most of the murders are associated with candidates for local or provincial elections.
Politics is very retail the Philippines, which is common through Asia. I once attended a public meeting with the visiting Vice-President of the Philippines in New Zealand. Every question but one was about how she could help members of the audience in some way at the personal level. The only political question was on abortion.
The two politicians who accompanied her sang or did a comedy routine rather than answer questions or make some sort of pitch to the audience on policy. One of these politicians who accompanied Vice-President Arroyo was an actress who was later elected to the Senate.
Under the Sale of Offices Act 1809, the sale of House of Commons seats was outlawed so membership of parliament must be freehold property. Prior to that 1808 Act, there is a lively trade in seats in the House of Commons: you can buy them outright, or just rent a seat for a session of Parliament.
- Being paid a salary as a member of parliament is very 20th century with the House of Representatives beating the House of Commons by 5 years.
- Back in 1695, the House of Commons resolved that offering a bribe to a Member of Parliament shall be a high crime and misdemeanour liable to impeachment, and an MP accepting such a bribe shall be a matter of privilege.
- In 1858, the House resolved to prohibit advocacy for fee or reward.
- In 1947, a further resolution banning MPs from entering agreements which restricted their freedom to act and speak, or require them to act as a representative of outside bodies.
Prior to the 19th century virtually all European civil appointments were made through outright sale or patronage, included judicial courts, public finance, sheriffs, and notaries public so the offices were freeholds – effectively private property.
Once an office had been granted it could be mortgaged, sold privately or through public auction, and bequeathed to heirs. The key source of income from most offices was the right to charge fees for service.
The buying and selling applied to army officer commissions, but never to the British navy for reasons explained by Doug Allen in his clever writings on the economics of patronage and veniality. The sale of military commissions ended in 1871.
The queen is corporation sole in perpetual succession – she or he may possess property as monarch which is distinct from the property he or she possesses personally, and may do acts as monarch distinguished from their personal acts.
Elizabeth II has several corporations sole – Her Majesty the Queen in Right of the United Kingdom, Her Majesty the Queen in Right of Canada, Her Majesty the Queen in Right of Australia are all distinct corporations sole. She is also a distinct corporation sole for states and provinces.
Ministers of the crown can be corporations sole. This is administratively convenient as regards the ownership of property because it facilitates continuity when the office-holder changes.
There ends today’s trivia.