Institute for Research in Economic and Fiscal issues

IREF Europe - Institute for Research in Economic and Fiscal issues

Fiscal competition
and economic freedom


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Small Governemnt vs Corruption

Corruption! A word that is destroying the base of the Government action. Above the “Cahuzac Case”, it is the whole public power that is stained with doubt and distrust. The clear and present danger is the rise of uncontrolled populisms seeking the collapse of a corrupt Government. But this would lead nowhere. The real solution lies in setting up a Small Government and the implementation of the principle of subsidiarity to ensure freedom. Jacques Garello, president of Aleps and board member of the IREF, wrote an op-ed underlining this issue.

Obviously, the “Cahuzac Case” will not restore the image of French politicians. The vast majority of the French people already broke off with their parliamentarians and rulers from the left as well as from the right.

Yet, will the country give in to populism and promote those who are surfing on the wave of indignation, lassitude and even revolt? Populism is actually a wrong answer to a real plague that must be fought, but how?

Corruption is the true plague. It is as old as the world and has an old ally: secret. Keeping a secret today is harder than ever. Castes, sects, brotherhoods and other hidden groups still have this privilege even if it cannot be preserved entirely. Thus, corruption is as wide as the world and contaminates all countries. The NGO Transparency International is publishing each year a corruption index for 174 countries. The best indicator belongs to Scandinavian countries or Australia. Being among the twentieth, France is ranked not far from the United States and the United Kingdom, and way before European countries as Russia and Italy (not to mention Ukraine, Serbia and Belarus).

What is the real source of corruption? The Council of Europe defines it as “the use and abuse of public power for private purposes”. This definition unduly excludes a type of corruption that can be considered as “private” since bribes and gifts can be given in business at the expense of companies and customers’ interests. Yet, the most frequent cases of corruption are related to the public power, at all level and for all purposes. And it is obvious that the more political institutions and administrations are intervening in society, the more corruption occurs.

The explanation is easy to find: in a controlled economy, individuals and companies cannot live without given a heavy duty to rulers and bureaucracy. Price suppressions and quotas give birth to black markets. Procedures and initiatives are stuck by an excessive regulation (400 000 rules in France). A long wait can be shortened by knocking on the right door or doing the right thing. In order to have a building permit, a social housing or a public contract, bribes and favors are a precious help. When taxpayers and policyholders are robbed from the money they honestly earned, they end up seeking to recover it fraudulently since most of them do not have a social or tax niche. Thus, corruption is an outcome of power. As the British philosopher and historian Lord Acton said, “Power corrupts, absolute power corrupts absolutely”.

No doubt that corruption is a social and economic plague. It is an economic plague: Transparency International estimates that corruption costs amount to a value of 3% in international trades. But it does not include shortages and wastes caused by misinformation and inappropriate use of goods. Money does not go where it should and according to consumers and producers’ free choice. The economic failures of dictatorships and planning have no other explanations. But above all, on a social point of view, the source of wealth is stained by corruption and doubt is raised. Wealth becomes suspicious since no one knows if it comes from companies, work, savings, and merit or if it is the result of embezzlements, dishonesty, privileges, etc. No one is to be trusted. Envy and denunciation appear. Society is no longer a “society of trust” bringing individual progress and social harmony: it becomes a social of distrust, a society of clients, a society of power. Then populism thrives: since power is corrupting, it must be toppled down. But is it the solution, the right reaction for plundered, despised and outraged people?

Once the power is toppled down, another one will succeed that could be revolutionary, republican or democratic, yet it will be no less than a power that could be as led astray as the previous one. History shows this fatal linking. French revolutionary Robespierre was guillotined while Sieyès, Fouché or Talleyrand lived well throughout the Revolution and the Empire. South American dictatorships collapsed and are falling because of corrupt practices. The Arab Springs led to painful days.

A Coup d’Etat or a change in power, even a democratic one, are no solutions. The actual solution is to limit power. The best anti-corruption weapon is to take back rights the Government unduly seized, reduce political power according to the principle of subsidiarity: protecting freedom and security of people and property. That is the only way possible. Unfortunately, right now, politicians do not want to release a part of power, and one out of two French people are on the raiders’ side. It is time to restore responsibility and morality, two virtues that are pertaining to freedom. No change of power would be significant without them.

Pr.Em.Jacques Garello

President of ALEPS, (Association for Economic Freedom and Social Progress) and board member of the IREF (Institute for Research in Economic and Fiscal Issues).

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