The political economy of corruption

7 May 2019

INTRODUCTION

In an article in Daily Maverick[1], Pierre de Vos draws heavily on an argument made by Karl von Holdt[2] which goes as follows:

1. We should see corruption as a ‘mechanism of class formation’ and not confine ourselves to regarding it as a moral or criminal issue.

2. This class formation has given rise to a pervasive informal political-economic system which is much more extensive than the Zuma-Gupta project.

3. This informal political-economic system rests on violence.

4. Both corruption and anti-corruption initiatives are a form of politics.

5. Ramaphosa’s coalition within the ANC will inevitably involve corrupt figures and the informal political-economic system will remain pervasive. Otherwise, his precarious position will become politically impossible.

6. A liberal democratic constitutional order is unable to contain the contradictions produced by settler colonialism.

Is this argument complete? Is it compelling?

COMMON CAUSE

The argument here will agree with the following premises:

- Start from a social scientifically hard-headed approach, as suggested by (1) above. 

- As (2) above suggests, corruption is pervasive and much more extensive than Zuma-Gupta.

- Corruption and the attempt to stop it both have political dimensions, as indicated by (4) above. Since hypocrisy is the tribute that vice pays to virtue, there can never be an explicit argument in favour of corruption[3], while such argument is essential to anti-corruption initiatives.

However, by themselves, they do not sustain the argument as a whole. Other elements in the argument are much more questionable.

DIFFICULTIES

1. Why do beneficiaries of corruption constitute a ‘class’? Beneficiaries have money, of course, and often a great deal of it. Some goes to conspicuous consumption and, probably, quite a lot more goes to tax havens[4]. It is much less clear how much of it goes into capitalizing domestic production, a condition for class formation at the national level, at least in the classical Marxist sense.

Some of this class talk comes from Christopher Malikane, an adviser to Malusi Gigaba when he was Minister of Finance. Malikane argued boldly that a tender-based capitalist class is locked in a life-and-death struggle with white monopoly capital (and its credit-based BEE allies) to overcome the colonial class structure. However, for this project to proceed, the existing legislative and institutional framework, including the National Treasury and the Reserve Bank, constitute fundamental obstacles. Malikane called for a broad front of workers and youths and progressive whites to support tender-based capitalists to smash these institutions[5].

2. While there is certainly sometimes violence in the competition for access to corruption opportunities, corruption rests mainly on the erosion of financial checks and balances within the public service. Getting this right matters. Were it the case that corruption rested on violence, anti-corruption initiatives would provoke more violence. On the other hand, a patient programme of administrative reform can restore and improve financial accountability without a violent reaction.

3. The tougher issue is action against the corrupt. Impunity increases corruption, so the proper functioning of the criminal justice system is crucial, from police work to prosecution efficiency to the judicial system, particularly magistrates’ courts. Better control can produce violence against its visible agents, as the experience of the Auditor-General’s office indicates. But the critical question here will be whether sufficient and effective administrative control can be introduced by prevailing over corrupt networks. If it can, the constitutional division between the executive and the legal system helps evade political consequences of particular prosecutions. If it can’t, the prospects of anti-corruption initiatives are bleak.

4. Our liberal constitutional democratic order may fail at some time in the future, but the von Holdt argument provides no grounds for believing that it must do so in light of our colonial history. Moreover, its institutions – an independent judiciary, a free press, space for an energetic civil society, and even on occasion, parliamentary oversight of the executive – have helped to expose corruption, and exposure helps the anti-corruption cause. The fight would be completely impossible were the constitution to fail, as Jacob Zuma understood when he expressed a desire for a six months dictatorship.

OMISSIONS

There are also key omissions in the de Vos/von Holdt account, including:

1. Nationalist sentiment plays an important role in maintaining corruption. Were it not present, a government which has presided over economic stagnation since 2014, which is so encrusted with sleaze, would face bleaker prospects in the 2019 election. As it is, cognitive dissonance has produced more angst among voters in this election than in the five that preceded it. How it plays out will soon be apparent. 

The alternative road, not taken since 1994, is to reduce the salience of race in our politics and increase the focus on the poor, whoever they are. 

2. The risks of a political fight back against anti-corruption measures must be weighed against the risks associated with low trust in the government and economic stagnation. Fortunately for anti-corruption supporters, the pressures on a new administration will not solely be from one side. The longer economic stagnation lasts, the greater the risk that something in the political economy breaks: unmanageable state owned enterprise finances, a Moody’s downgrade, widespread and uncontrollable fury in townships at the lack of service delivery, impossible debts between levels of government and state owned enterprises, or something else.

3. If amnesty for corrupt actions is to be considered, it must require full disclosure to a Commission (in line with the Truth and Reconciliation Commission standard) plus full return of the proceeds of crime to its rightful owners. Calls for such an amnesty have already been made, as a means of defusing pro-corruption political pressure. Under strict conditions, it could be a useful anticorruption initiative. On the other hand, simple failure to prosecute where there is a case to answer colludes with corruption.

CONCLUSION

At the end of the day, even the most hard-headed social scientist must acknowledge that human action is not comprehensible without meaning, and meaning includes normative orientation. Try to exclude it, and it comes straight back at you. Anti-corruption initiatives must rely on the illegality and immorality of corruption, and the preservation of the constitutional order is a prerequisite for their success.

Charles Simkins is head of research at the Helen Suzman Foundation. 

[1] Pierre de Vos, Why Ramaphosa is probably not in a position to end corruption and patronage, Daily Maverick, 29 April 2019

[2] Karl von Holdt, The political economy of corruption: elite formation, factions and violence, Society, Work and Politics Institute, University of the Witwatersrand, February 2019

[3] Though some get very close. See the Malikane argument below

[4] The ultimate destination of the Gupta fortune is a case in point

[5]Christopher Malikane in Haroon Bhorat et al, Betrayal of the Promise: How South Africa is being stolen, State Capacity Research Project, University of Stellenbosch, May 2017