Looters, rent-scrapers, and dividend-collectors: Corruption and growth in Zaire, South Korea, and the Philippines

Journal of Developing Areas

Volumn 31, Issue 4, 1997, Pages 457-478

  Wedeman, Andrew ^a  

^a UNIVERSITY OF NEBRASKA LINCOLN   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

COMPARATIVE STUDY; ECONOMIC GROWTH; INFORMAL ECONOMY; POLITICAL CORRUPTION;

PHILIPPINES; SOUTH KOREA; ZAIRE;

EID: 0031402301     PISSN: 0022037X     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (85)

1. Paolo Mauro, "Corruption and Growth," Quarterly Journal of Economes 10 (August 1995): 681-712.
2. Nathaniel H. Leff, "Economic Development through Bureaucratic Corruption," American Behavioral Scientist 8 (November 1964): 8-14.
3. J. S. Nye, "Corruption and Political Development: A Cost Benifit Analysis," American Political Science,Review 61 (June 1967): 417-27.
4. Omotunde E. G. Johnson, "An Economic Analysis of Corrupt Government, with Special Application for Less Developed Countries," Kylos 28, no. 1 (1975): 47-61.
5. Michael Johnston, "The Political Consequences of Corruption: A Reassessment," Comparative Politics 18 (July 1986): 459-77.
6. Ranked on a scale of zero to ten, with zero equal to no corruption and ten equal to endemic corruption, China ranked 7.57, Cameroon 7.54, and Venezuela 7.50. Here I have inverted Mauro and Transparency International's corruption scores. In these analyses, a high score represented a high level of honesty and a low score a high level of corruption. Because I am interested in talking about the relationship between growth and corruption in countries ranked as highly corrupt, it is rather more intuitive if a high score represents a high level of corruption and a low score a low level of corruption.
7. Singapore received a rating of 1.20 while Vietnam received a rating of 7.78 and Thailand a rating of 6.67.
8. The "excessive" number of slow-growth honest cases, for example, can be explained in large part by the fact that this group contains the advanced industrial states of Western Europe and North America, which tend to have much lower rates of growth than economies in the developing world.
9. Stanislav Andreski, "Kleptocracy as a System of Government," in Political Corruption: Readings in Comparative Analysis, by Arnold J. Heidenheimer (New York: Holt, Rinehart, and Winston, 1970), pp. 346-57; and Robin Theobald, Corruption, Development, and Underdevelopment (Durham, NC: Duke University Press, 1990), p. 78.
10. Stanislav Andreski, "Kleptocracy as a System of Government," in Political Corruption: Readings in Comparative Analysis, by Arnold J. Heidenheimer (New York: Holt, Rinehart, and Winston, 1970), pp. 346-57; and Robin Theobald, Corruption, Development, and Underdevelopment (Durham, NC: Duke University Press, 1990), p. 78.
11. Defined herein as administratively induced profits greater than those obtainable in a competitive market.
12. Nye, "Corruption and Political Development."
13. Oskar Kurer, "The Political Foundations of Economic Development Policies," Journal of Development Studies 32 (June 1996): 645-68.
14. Laurence Whitehead, "On Presidential Graft: The Latin American Evidence," in Corruption: Causes, Consequences, and Control, ed. Michael Clarke (London: Francis Pinter, 1983), pp. 146-62.
15. Serguey Braguinsky, "Corruption and Schumpeterian Growth in Different Economic Environments," Contemporary Economic Policy 14 (July 1996): 14-25.
16. Susan George, A Fate Worse than Debt (New York: Grove Weidenfeld, 1990), p. 107.
17. Janet MacCaffey, Entrepreneurs and Parasites: The Struggle for Indigenous Capitalism in Zaire (New York: Cambridge University Press, 1987), p. 114.
18. According to former Prime Minister Nguza, the president withdrew US $71.02 million from the Bank of Zaire in 1977, $65.10 million in 1978, and $14.28 million in the first quarter of 1979, for a total of $150.40 million in a two-year period. In early 1981, Mobutu ordered the Bank of Zaire to transfer $30 million to his personal bank account in Belgium. U.S. Congress, Senate, Committee on Foreign Relations, Zaire: A Staff Report (Washington, DC: Government Printing Office, 1982), pp. 6, 12, and 33.
19. Established in 1974, the Mobutu-controlled Cultures et Elevages du Zaire (CELZA) controlled 13 percent of Zaire's production of palm oil, 15 percent of its tea production, 23 percent of its cocoa production, 26 percent of its rubber production. See Crawford Young and Thomas Turner, The Rise and Decline of the Zairian State (Madison, WI: University of Wisconsin Press, 1985), p. 180.
20. MacCaffey, Entrepreneurs and Parasites, pp. 112-14; U.S. Congress, Zaire, pp. 6, 12, and 33; and Young and Turner, Rise and Decline of the Zairian State, p. 181
21. MacCaffey, Entrepreneurs and Parasites, pp. 112-14; U.S. Congress, Zaire, pp. 6, 12, and 33; and Young and Turner, Rise and Decline of the Zairian State, p. 181
22. MacCaffey, Entrepreneurs and Parasites, pp. 112-14; U.S. Congress, Zaire, pp. 6, 12, and 33; and Young and Turner, Rise and Decline of the Zairian State, p. 181
23. U.S. Congress, House of Representatives, Committee on Foreign Affairs, Subcommittee on Africa, Political and Economic Situation in Zaire - Fall 1981 (Washington, DC: Government Printing Office, 1992); and David J. Gould, Bureaucratic Corruption and Underdevelopment in the Third World (New York, NY: Pergamon, 1980), pp. 51-60. Mobutu had indirect interests in the Zairian subsidiaries of major multinational corporations including ITT-Bell, Fiat, Gulf, Pan Am, Renault, Peugeot, Volkswagen, and Unilever. See Young and Turner, Rise and Decline of the Zairian State, p. 179.
24. U.S. Congress, House of Representatives, Committee on Foreign Affairs, Subcommittee on Africa, Political and Economic Situation in Zaire - Fall 1981 (Washington, DC: Government Printing Office, 1992); and David J. Gould, Bureaucratic Corruption and Underdevelopment in the Third World (New York, NY: Pergamon, 1980), pp. 51-60. Mobutu had indirect interests in the Zairian subsidiaries of major multinational corporations including ITT-Bell, Fiat, Gulf, Pan Am, Renault, Peugeot, Volkswagen, and Unilever. See Young and Turner, Rise and Decline of the Zairian State, p. 179.
25. U.S. Congress, House of Representatives, Committee on Foreign Affairs, Subcommittee on Africa, Political and Economic Situation in Zaire - Fall 1981 (Washington, DC: Government Printing Office, 1992); and David J. Gould, Bureaucratic Corruption and Underdevelopment in the Third World (New York, NY: Pergamon, 1980), pp. 51-60. Mobutu had indirect interests in the Zairian subsidiaries of major multinational corporations including ITT-Bell, Fiat, Gulf, Pan Am, Renault, Peugeot, Volkswagen, and Unilever. See Young and Turner, Rise and Decline of the Zairian State, p. 179.
26. U.S. Congress, Political and Economic Situation in Zaire, p. 39.
27. Gould, Bureaucratic Corruption and Underdevelopment, pp. 72 and 81.
28. Crawford Young, "Zaire: The Politics of Penury," SAIS Review 3, no. 1 (1983): 127.
29. U.S. Department of State, "Zaire Human Rights Practices, 1995," Department of State Dispatch, vol. 07, March 1996.
30. Young and Turner, Rise and Decline of the Zairian State, p. 401.
31. Christian Science Monitor, 10 March 1983; Inter Press Service, 4 October 1989; and MacCaffey, Entrepreneurs and Parasites, p. 53.
32. Christian Science Monitor, 10 March 1983; Inter Press Service, 4 October 1989; and MacCaffey, Entrepreneurs and Parasites, p. 53.
33. Young and Turner, Rise and Decline of the Zairian State, p. 179
34. Gould, Bureaucratic Corruption and Underdevelopment, p. 40; and U.S. Congress, Political and Economic Situation in Zaire, pp. 1-2.
35. Gould, Bureaucratic Corruption and Underdevelopment, p. 40; and U.S. Congress, Political and Economic Situation in Zaire, pp. 1-2.
36. Gould, Bureaucratic Corruption and Underdevelopment, pp. 111-13.
37. Young, "Zaire," p. 128.
38. Political Risk Services, available at http://www.polrisk.com.
39. Robert Summers and Alan Heston, "Penn World Table, Mark 4," provided on disk in Review of Income and Wealth 34 (March 1988).
40. World Bank, World Tables data base, 1994.
41. Jung-en Woo, Race to the Swift: State and Finance in Korean Industrialization (New York: Columbia University Press, 1991), p. 66.
42. Park also earned money by providing South Korean forces for the "allied" war effort in South Vietnam and exporting construction workers to the Persian Gulf.
43. Woo, Race to the Swift, pp. 108-9; and Mark L. Clifford, Troubled Tiger: Businessmen, Bureaucrats, and Generals in South Korea (Armonk, NY: Sharpe, 1994), p. 93.
44. Woo, Race to the Swift, pp. 108-9; and Mark L. Clifford, Troubled Tiger: Businessmen, Bureaucrats, and Generals in South Korea (Armonk, NY: Sharpe, 1994), p. 93.
45. Reuters, 31 December 1995, 12 January 1996, 14 April 1996, and 15 April 1996.
46. Ilhae was closed down in 1988 after the arrest and conviction of Chun's elder brother on charges of embezzlement, the conviction of his younger brother on charges he stole US $10 million from the state-sponsored Saemaul Movement, and the forced resignation of Chun's wife from her position as head of the Association to Sponsor the New Generation (Saesedae). At that time, Chun admitted to pocketing $3 million while in office and keeping $20 million in Democratic Justice Party (DJP) funds after he left office. Chun initially escaped prosecution by entering a Buddhist monastery but was subsequently brought to trial after Roh left office in 1992. See Los Angeles Times, 6 September 1995, 13 November 1988, 6 September 1988; Reuters, 8 August 1988, and 14 October 1988.
47. Reuters, 6 November 1995. South Korean legal and political practice makes a distinction between monies handed over without an expectation of an immediate favor, but rather as a means of establishing rapport between two parties; and bribes or kickbacks, where there is an expectation that the receiver will provide some tangible favor to the giver. Goodwill money, known as chonji or "rice cakes," is not considered improper, but rather simply a traditional way of doing business and thus a form of "honest graft." Bribes and kickbacks, on the other hand, are considered "dishonest graft."
48. Martin Hart-Landsberg, The Rush to Development: Economic Change and Political Struggle in South Korea (New York: Monthly Review, 1993), pp. 235-37.
49. Based on data gathered from the Lexis/Nexis database.
50. Chicago Tribune, 15 April 1990; and Clifford, Troubled Tiger, p. 84.
51. Chicago Tribune, 15 April 1990; and Clifford, Troubled Tiger, p. 84.
52. Averaged out over the length of their administrations, Chun skimmed off around US $180 million a year, while Roh skimmed off about $130 million.
53. According to one of Clifford's informants, "Park had [the chaebol] trembling with fear" and was quite willing to crush those that refused to cooperate "like insects." See Clifford, Troubled Tiger, p. 107.
54. Chun claimed that out of the US $890 million he took in, he spent $20 million a year subsidizing the DJP (since, according to Chun, legal fund raising covered only a third of the party's costs, even in nonelection years), used $88 million to buy support for the party, turned $200 million over to Roh Tae-woo when Chun left office in 1988, and then kept $127 million. Prosecutors, however, believe that he took over $250 million. Roh admitted that he kept $242 million of the $654 million he collected. See Reuters, 14 April 1996 and 15 April 1996.
55. A government crack down on borrowed and false name accounts in 1993 revealed a total of 2.75 trillion won (US $3.40 billion), in false name accounts and an additional 24-30 trillion won ($29.63-37.04 million) in borrowed name accounts. Not all of the money, of course, belongs to corrupt officials. Ordinary Koreans frequently used false name accounts to evade taxes. See Reuters, 13 October 1993.
56. Either Roh was an extremely shrewd investor who managed to increase his original US $242 million over 50 percent in a matter of a few short years, or he took more money than he admitted.
57. Estimates of the size of the informal sector vary, with some putting it as high as over 40 percent of nominal gross domestic product (GDP), to a middling range of 20 percent, and a low of around 10 percent (Reuters, 26 March 1990, 12 August 1995, 8 January 1991, and 2 August 1989). Although estimates vary, a comparison of the growth rates of the informal and formal economies shows a pattern of parallel rather than divergent growth.
58. Bayley, for example, suggested that one of the beneficial functions of corruption was that it would tend to shift capital out of sectors where access to easy credit on soft, state-subsidized terms would artificially lower the price of capital and into sectors where administratively created capital shortages had raised the price of capital. See David H. Bayley, "The Effects of Corruption in a Developing Nation," in Heidenheimer, Political Corruption, p. 529.
59. ironically, President Kim Young-sam's 1993 decision to ban false and borrowed name accounts and to crack down on the curb market almost triggered a financial panic. See Far Eastern Economic Review, 12 September 93.
60. Belinda A. Aquino, Politics of Plunder: The Philippines under Marcos (Quezon City: Great Books Trading and the University of the Philippines College of Public Administration, 1987), pp. 5 and 66.
61. Gabriella R. Montinola, "The Foundations of Political Corruption: Insights from the Philippine Case," Asian Journal of Political Science 2 (June 1993): 86-113.
62. Sterling Seagrave, The Marcos Dynasty (New York: Harper and Row, 1988).
63. Bernardo Villeges, "The Economic Crisis," in Crisis in the Philippines: The Marcos Era and Beyond, ed. John Bresnan (Princeton, NJ: Princeton University Press, 1986), pp. 145-75.
64. Aquino, Politics of Plunder, appendices; and Seagrave, Marcos Dynasty, p. 289.
65. Aquino, Politics of Plunder, appendices; and Seagrave, Marcos Dynasty, p. 289.
66. Gary Hawes, The Philippine State and the Marcos Regime: The Politics of Export (Ithaca, NY: Cornell University Press, 1987), chap. 2.
67. Hawes, Philippine State, chap. 3.
68. Aquino, Politics of Plunder, p. 45.
69. Although the most commonly cited figures range between US $5 billion and $10 billion, after a decade of searching, the Presidential Commission on Good Government (PCGG) concluded that Marcos probably stole about $3 billion. See Asiaweek, 13 October 1995 and 10 February 1995.
70. Los Angeles Times, 1 January 1991.
71. As of 1991, the government had recovered only US $461 million (South China Morning Post, 25 May 1991). An additional $550 million was later recovered from Swiss bank accounts, although litigation kept it tied up in escrow for years.
72. Reuters, 23 November 1991; Los Angeles Times, 1 January 1991; Los Angeles Times, 22 June 1986; and Agence France Presse, 19 May 1991.
73. Reuters, 23 November 1991; Los Angeles Times, 1 January 1991; Los Angeles Times, 22 June 1986; and Agence France Presse, 19 May 1991.
74. Aquino, Politics of Plunder, pp. 32-34.
75. Deutsche Presse Agentur, 7 September 1995; South China Morning Post, 25 May 1991; and Los Angeles Times, 24 November 1990.
76. Deutsche Presse Agentur, 7 September 1995; South China Morning Post, 25 May 1991; and Los Angeles Times, 24 November 1990.
77. Aquino, Politics of Plunder, p. 73.
78. James K. Boyce, The Philippines: The Political Economy of Growth and Impoverishment in the Marcos Era (Honolulu, HI: University of Hawaii Press, 1993), pp. 271 and 295.
79. Waiden Bello, David Kinley, and Elaine Elinson, Development Debacle: The World Bank in the Philippines (New York: Institute for Food and Development Policy, 1982).
80. Villeges, "Economic Crisis," p. 162.
81. David Wurfel, Filipino Politics: Development and Decay (Ithaca, NY: Cornell University Press, 1988).
82. See Oskar Kurer, "Clientelism, Corruption, and the Allocation of Resources," Public Choice 77, no. 2 (1993): 259-273; Kevin Murphy, Andrei Shleifer, and Robert W. Vishny, "Why is Rent-Seeking So Costly to Growth?" American Economic Review 83 (May 1993): 409-14; Andrei Shleifer and Robert W. Vishny, "Pervasive Shortages under Socialism," Rand Journal of Economics 23 (Summer 1992): 237-46; and Andrei Shleifer and Robert W. Vishny, "Corruption," Quarterly Journal of Economics 58 (August 1993): 599-617.
83. See Oskar Kurer, "Clientelism, Corruption, and the Allocation of Resources," Public Choice 77, no. 2 (1993): 259-273; Kevin Murphy, Andrei Shleifer, and Robert W. Vishny, "Why is Rent-Seeking So Costly to Growth?" American Economic Review 83 (May 1993): 409-14; Andrei Shleifer and Robert W. Vishny, "Pervasive Shortages under Socialism," Rand Journal of Economics 23 (Summer 1992): 237-46; and Andrei Shleifer and Robert W. Vishny, "Corruption," Quarterly Journal of Economics 58 (August 1993): 599-617.
84. See Oskar Kurer, "Clientelism, Corruption, and the Allocation of Resources," Public Choice 77, no. 2 (1993): 259-273; Kevin Murphy, Andrei Shleifer, and Robert W. Vishny, "Why is Rent-Seeking So Costly to Growth?" American Economic Review 83 (May 1993): 409-14; Andrei Shleifer and Robert W. Vishny, "Pervasive Shortages under Socialism," Rand Journal of Economics 23 (Summer 1992): 237-46; and Andrei Shleifer and Robert W. Vishny, "Corruption," Quarterly Journal of Economics 58 (August 1993): 599-617.
85. See Oskar Kurer, "Clientelism, Corruption, and the Allocation of Resources," Public Choice 77, no. 2 (1993): 259-273; Kevin Murphy, Andrei Shleifer, and Robert W. Vishny, "Why is Rent-Seeking So Costly to Growth?" American Economic Review 83 (May 1993): 409-14; Andrei Shleifer and Robert W. Vishny, "Pervasive Shortages under Socialism," Rand Journal of Economics 23 (Summer 1992): 237-46; and Andrei Shleifer and Robert W. Vishny, "Corruption," Quarterly Journal of Economics 58 (August 1993): 599-617.