Model Exports

On my way to the university one day I chanced upon Assar Lindbeck out for a walk along Brunnsviken with a group of visiting dignitaries. As I went by I overheard him say that the role of the Swedish labour unions as paymasters of the Social Democrats would be called corruption in any other country. The point is well taken and raises some relevant questions.

Is there much difference, for instance, between Suharto in Indonesia, Marcos in the Phillipines or the Shah of Iran holding their nation's wealth in personal accounts in Zurich and a pension fund manager in the City of London placing Mr. & Mrs Jones life savings in an offshore fund on the Cayman Islands?

And how much difference is there between the Miners Union Pension Fund holding works of art in the basement and Chiang Kaishek Kuomintang Party...reputedly the richest political party in the world...or the Swedish Democratic Party holding members' assets in the party's name?

We throw around words like 'corruption' a little too easily. As economists we should perhaps seek to define such terms operationally. What we like to call corruption may in practice be a sensible way of holding accumulated capital safely until it is needed for investment.

To take another example, Mobuto would have been crazy to have kept money in Zaire. Obviously it was more sensible to put it in the safe-keeping of the Swiss bankers. Furthermore no banker or businessman would expect to judge a bankrupt concern by the same criteria as a going-concern. Yet that is what we do with 'fallen dictators'.

What really matters is not where the money is held when it is not being used but what the 'competent receiver' does with other people's money when he goes out and spends it.

Do they invest their money wisely in building up their country or do they use it in frivolous pursuit of their own private pleasures?

Do they fritter away their country's money on the grandiose white elephants so beloved by the World Bank?

Do they spend their people's savings on bringing weapons of destruction into their country...weapons that would not otherwise have found their way out of the war factories of the west?

Are these not more important moral questions than the name on the bank account?

A separate question is how these investment funds should be invested to maximise their purchasing power when sensible projects do become available and economic goals can be found that will lead to real economic development.

Chile under Pinochet, for instance, after Allende had cleared the decks with his land reforms...as opposed to the economic growth without development that is typical of Brazil and elsewhere in Latin America.