Knowing and Making

Robert Peston's article today is about the potential for BAE to be prosecuted over alleged bribery. The article itself is interesting but the reader comments are what staggers me. Page after page of comments passionately defend the corruption. "It's just the way things are done"..."do you really think the French and Germans don't do this?"..."it's not as if they were bribing British officials, but foreign ones, which is how you do business in these places". You need to get through 23 comments defending BAE before finding a single one condemning illegal and immoral actions that hurt millions of desperately poor third world citizens (well done to DrDelbert, PorterRockwell and a few others for having a bit of integrity). I am left wondering if this is really how the majority of Peston's readers feel...or is it, in fact, an organised campaign?

This article at VoxEU implies that companies in Italy which are 'connected' with politicians make 5% more profit. Could be true. But an equally plausible story is that companies become less profitable around election time because they are spending 5% of their profits on subsidising politicians. On this interpretation, contributing to political campaigns is seen as a cost of doing business, and depresses profits immediately before an election. Note that in the graphs shown in the article, the firms' profits take a dip in the year before the politician's term ends. Far be it from me to impugn the Italians' proud record of rent-seeking and corruption - my Italian friends would claim they have a unique comparative advantage in this field, and lead the world in their craftsmanship (though there are some volume producers in Africa and Asia who compete for sheer scale of bribery). But I want to allow them the elegance of a convincing escape clause - which is, after all, ...

I'm reading Dani Rodrik's " One Economics, Many Recipes " which sheds interesting light on the understanding of developing-country growth and its causes. Chapter one focuses on the idea that there are basic principles behind economic development (indeed, economic activity in general): property rights, sound money, fiscal solvency, and market-oriented incentives. The exact policies which result in these outcomes are not necessarily those from the standard (Washington Consensus) list: privatisation, tariff reduction, etc. Instead, the universal principles need to be achieved with policies that are tailored to the country in question. There's one point he makes in passing which struck me as fundamental. From p38 (of the 2007 edition): "...policy changes at the outset have been typically modest...[South Korea's] military government led by Park Chung Hee that took power in 1961 did not have strong views on economic reform, except that it regarded economic deve...