Economic gangsters: corruption, violence, and the poverty of nations PDF
Preview Economic gangsters: corruption, violence, and the poverty of nations
ECONOMIC GANGSTERS Corruption, Violence, and the Poverty of Nations (cid:189) Raymond Fisman and Edward Miguel PRINCETON UNIVERSITY PRESS PRINCETON AND OXFORD Copyright © 2008 by Princeton University Press Requests for permission to reproduce material from this work should be sent to Permissions, Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, 6 Oxford Street, Woodstock, Oxfordshire OX20 1TW All Rights Reserved Library of Congress Cataloging-in-Publication Data Fisman, Raymond. Economic gangsters : corruption, violence, and the poverty of nations / Raymond Fisman and Edward Miguel. p. cm. Includes index. ISBN 978-0-691-13454-3 (hardcover : alk. paper) 1. Corruption—Economic aspects. 2. Political corruption—Economic aspects. 3. Smuggling. I. Miguel, Edward. II. Title. HV6768.F57 2008 364.1'323—dc22 2008025208 British Library Cata loging- in- Publication Data is available This book has been composed in Goudy Printed on acid- free paper. ∞ press.princeton.edu Printed in the United States of America 1 3 5 7 9 10 8 6 4 2 For Ellie For Ali Contents (cid:189) Chapter One Fighting For Economic Development 1 Chapter Two Suharto, Inc. 22 Chapter Three The Smuggling Gap 53 Chapter Four Nature or Nurture? Understanding the Culture of Corruption 76 Chapter Five No Water, No Peace 111 Chapter Six Death by a Thousand Small Cuts 136 Chapter Seven The Road Back From War 159 Chapter Eight Learning to Fight Economic Gangsters 186 Epilogue Doing Better This Time 207 Ac know ledg ments 211 Notes 215 Index 235 Chapter One (cid:189) Fighting for Economic Development I n the summer of 2004, world- renowned Kenyan novelist Ngugi Wa Thiong’o returned to his homeland after t wenty- two years in exile. He fl ew to Nairobi to launch his new novel, Wizard of the Crow, his fi rst in over a de cade. Ngugi’s earlier works—a dozen or so novels and collections of sto- ries, which he began publishing just after Kenyan in de pen- dence in 1963—had been wildly successful, not only in Kenya but throughout the world. Through his carefully wrought characters and achingly familiar plots of loss and suffering, Ngugi captured the bewildering contradictions left behind in the wake of Eu ro pe an colonialism. Ngugi had lived those contradictions and drew inspira- tion from his experiences, which were shared by so many of his fellow Kenyans. Ngugi had grown up during the 1950s, when Kenya had been rocked by the Mau Mau rebellion against its British colonizers. He had witnessed the murder CHAPTER ONE of his brother, who had died along with thousands of other Kenyans in opposing the British. And he had celebrated with his countrymen as they watched the British imperial machinery retreat in 1963 at the birth of the Kenyan nation. He had also suffered at the hands of the second free Kenyan government—for despite the country’s turn to self-rule and hopes for a bright future, Ngugi had been forced to fl ee Kenya in the 1980s following years of persecution and impris- onment for his sharp criticism of the post- in de pen dence regime. Novels like A Grain of Wheat, published in 1967, just four years after Jomo Kenyatta became in de pen dent Kenya’s fi rst president, provided a window into the hopes and frus- trations that came with the dismantling of the Western empires—dreams of economic prosperity mea sured against tales of corruption seeded throughout the new government. A Grain of Wheat is a fable about the early, tumultuous years of a free Kenya, and captures the unwavering hope for a bright future coupled with the fear of what the British legacy of corruption and violence might bring. “Would in de pen- dence bring the land into African hands? And would that make a difference to the small man in the village?” asks Ngugi through the novel’s main character, Gikonyo.1 In the 1950s and 1960s, that same question echoed in the minds of the citizens of newly ind e pend ent countries from Kenya and Sierra Leone to Indonesia and Pakistan. What would the future hold? Would freedom bring jobs, peace, and wealth? The sentiment that drove these concerns would help make Ngugi’s novels international sensations; they’ve been translated into more than thirty languages and are considered classics of African literature. For Ngugi him- self, the post- in de pen dence years spent in exile had brought 2 FIGHTING FOR ECONOMIC DEVELOPMENT professional acclaim and prosperity. He had taught at New York University as the Erich Maria Remarque Professor of Lan- guages and is now a professor at the University of California at Irvine, where he directs the Center for Writing and Transla- tion. And he returned to Kenya in 2004 not with bitterness about the past but with optimism for the future. “I come back with an open mind, an open heart and open arms. I have come to touch base. I have come to learn,” he told the crowds of well- wishers upon landing in Nairobi.2 But even in the face of the enthusiasm, hope, and joy that greeted his return—a visit that came not long after Ken- ya’s longtime dictator Daniel arap Moi, his longtime perse- cutor, had stepped down to make way for a demo cratically elected government—Ngugi was brutally assaulted in his rented Nairobi apartment, beaten, his face burned with ciga- rettes; his wife, Njeeri, was raped. Many interpreted the at- tack as payback from the earlier regime for Ngugi’s outspoken criticism of Kenyan politicians and politics, and served as yet another reminder of the despair and unfulfi lled aspirations of Kenya’s people. The parallels were made even more poi- gnant by the widespread political violence in Kenya in early 2008.3 This isn’t the way it was supposed to be. (cid:189)(cid:189)(cid:189) Over the past four de cades, we’ve witnessed some of the greatest economic miracles in human history. In 1963, an average person in South Korea or Kenya earned only a few hundred dollars a year. Most eked out a living as peasant farmers. Back then, it wasn’t so clear where you’d lay your bets if you had to guess which country would be rich at the 3 CHAPTER ONE end of the millennium. Both countries were recovering from the devastating armed confl icts that had accompanied de- colonization. South Korea had already boosted its literacy rates by the early 1960s, but Kenya had much greater natural resource wealth to exploit, including some of the world’s richest soil for growing coffee, cotton, and tea. After de cades of fi rst manufacturing textiles, then refi n- ing steel, and fi nally producing high- end consumer goods and advanced electronics, South Korea pulled off an eco- nomic leapfrog that today puts it among the world’s wealthy nations. South Korean citizens now enjoy a standard of liv- ing rivaling the Japa nese, their former colonizers, and that of many Eu ro pe an nations. But the average Kenyan is no better off today than he was in 1963. What went wrong? In looking back over four de cades of history, what can we learn of why South Korea—and Malay- sia and Thailand and now China—began to close the in- come gap with Eu rope and North America, while Bangladesh, Pakistan, Central America, and most of sub- Saharan Africa remain mired in extreme poverty? This is the puzzle that gets the two of us out of bed and into the offi ce each morning, and solving it is the ultimate purpose of the research that we’ll share with you. This book isn’t about fi nding the singular explanation for why poor countries are poor. You should probably be suspicious of anyone selling you a grand unifi ed theory of poverty (or anything else). Human societies are far too complicated for that. But neither do we subscribe to the view that no one can make progress on such a vexing problem. Many hard lessons have been learned since 1963. The experiences of newly in- de pen dent Kenyans—the fruits of their hard labor lost to 4 FIGHTING FOR ECONOMIC DEVELOPMENT corruption or destroyed by violence—foreshadow the twin evils of corruption and violence that have been so central to Kenya’s modern economic experience as to be inseparable from it. As we’ll see, Kenya’s story is far from unique: from the post- colonial plundering in Indonesia to the bloody civil wars of Central America and Africa, the destructive power of corruption and violence is clear for all to see. The Lives and Times of Economic Gangsters Al Capone is remembered as a gangster and a brutal, cold- blooded killer. It is perhaps less widely known that Capone was also an accountant for a Baltimore construction fi rm before joining and eventually leading Chicago’s North Side Gang.4 We don’t normally associate the relatively humble and perhaps humdrum vocation of bookkeeping with mob icons like Capone. There are no scenes of Al Pacino strug- gling to balance the books or poring over fi nancial state- ments in the fi lms Scarface or The Godfather. But Capone’s training as an accountant was instrumental in helping him or ga nize a vast criminal business empire. The emphasis was on business—it’s just that Capone’s business happened to be in prostitution, gambling, racketeering, and selling booze during Prohibition, illicit trades where disputes were settled with machine guns rather than lawyers. According to biographer Robert Schoenberg, Capone was “a businessman of crime [with] lucid, rational, and discover- able reasons for his actions.”5 He is the quintessential eco- nomic gangster: a violent and lawless criminal who wrought havoc on 1920s Chicago, but did so in a rational, calculating way.6 A cold- blooded killer, yes, but violence was simply a tool Capone used to keep the money rolling in. 5
The list of books you might like
