The following is the text of a letter I sent to the editors at The Wall Street Journal. (The version they printed, in today’s Journal (4/11/13), was edited just a bit.)
Daniel Henninger, in “Capital’s Corruptions” (Wall Street Journal 4/4/13), states that corruption keeps the poor down, suppresses growth, and kills capitalism, and that its eradication would be an appropriate focus for the new pope. In making the case, Mr. Henninger treats corruption as though it were a cause, not an effect; a disease, not merely a symptom; something that could be eradicated if we attacked it.
Hayek was not the first (the early Israelites beat him to it) to observe that the very existence of government invites corruption, as the governed, having granted powers to their governors, are inevitably tempted to offer bribes and kickbacks to induce the governors to grant – or to reward them for granting – favors in the exercise of that power. Power corrupts, absolute power, . . . and so on. It is impossible to outlaw or eliminate corruption; it exists in every nation on earth. But some nations are substantially more corrupt than others, and that is no accident or coincidence, because it is clear that the greater the degree of governmental intrusion into the normal operation of free markets, the greater the degree of corruption the country must eventually endure. As Hayek has demonstrated, once a government gets into the business of picking winners and losers (i.e., planning the economy), it is inevitable that businesses will compete less and less on the basis of the price and quality of their products and services, and more and more on the basis of currying the favor of those in government with the power to determine who wins and who loses. Just consider what has happened in the US in the areas of healthcare and financial services. Sometimes the bribes and kickbacks are obvious and illegal; sometimes they are more subtle, and we call them “crony capitalism.”
Totalitarian, command/control, planned-economy states like Russia and China have extremely high levels of corruption: under regimes like theirs, if you want something done, you bribe somebody – otherwise, it never gets done, regardless of how capable and honest a competitor you might be. No pope can do much about corruption – certainly, no pope with a predilection for economic class-warfare, regardless of the piety of his motives. You want to curtail corruption? Get the government out of the business of planning the economy.
Mr. Henninger, by focusing upon the effect rather than the cause, is playing right into the hands of the Obama crowd, who no doubt would attack corruption in the only way they know how: mock reform, in the form of even more governmental-regulation.