Aren't We All a Bit Corrupt?

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Kevin Drum argues that Ireland is really pretty corrupt:


Granted, Greek corruption is depressingly crude, conspicuous, and grasping, sort of like being mugged in a dark alley or shaken down by a wise guy. By contrast, Irish corruption, much like its U.S. counterpart, is rather more genteel, discreet, and white collar than the Greek variety. For this reason, it's usually treated as mere "cronyism" -- regrettable, perhaps, but not truly corrupt "in the sense of Greece."

On the other hand, the U.S./Irish version is actually far more efficient at separating the yokels from their money. In any meaningful sense, then, shouldn't it be considered more corrupt? The fact that the theft is mostly legal and barely even noticeable may make it more respectable, but it hardly makes it more honorable.

This is basically a variant of complaints that white-collar crime is treated less harshly than blue collar crime.  And there's some justice in the complaints--white collar crimes usually involve larger sums, and the people who commit them can rarely claim that they are victims of society.

But I think this comparison fails for several reasons.  We treat lying to people differently from threatening to kill them (or to jail them), and we should.  The corrosion of the former is bad, but the latter is far more devastating on almost every level: compare Bernie Madoff's victims to the elderly jews huddling inside their Bronx apartments because they were physically too afraid to leave.  Were the politicians in Ireland who turned a blind eye to the problems in the banking sector really just as bad as the Greek politicians who simply lied about how much money their government was raising and spending?  Or, for that matter, bureaucrats shaking down businessmen for bribes?

Moreover, it's not like there's some binary tradeoff:  Greece has cronyism as well as a massive gray economy, rampant nepotism, and officials who solicit bribes.  While such figures are always hard to determine, some very smart people put the percentage of Greek economic activity that is underground at 40-50%--more than 4-5x what it is in the US.

These sorts of figures have all sorts of implications:  for taxation and civic engagement, but also for developing the sorts of legal institutions that support well-functioning markets.  Yes, you can argue that clearly these went awry in American and European banking sectors, but in Greece they're awry everywhere.  And of course, having so much underground activity creates great scope for cronyism and official corruption, as connections and bribery replace compliance with the law.  There's a reason that corruption and national income appear to be correlated--not perfectly, but reasonably well.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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