Why do African politicians “overcharge” corruption fees?

The average cost of winning a US Congressional seat (HoR) is about $1.6 million.

We know from insider accounts that the equivalent cost of a Ghanaian parliamentary seat is about $500,000.

US per capita income in PPP terms is nearly $60,000. Ghana’s per capita income in PPP terms is just a little above $4000. In nominal terms the difference is even more staggering.

The population in an average US congressional district is more than 700,000. The population in an average constituency in Ghana is just a little above 100,000. This is relevant if the standard marketing notion that audience size is a factor in outreach cost i correct (a theory, by the way, on which the $520 billion global digital ad industry depends).

There are other comparison factors that produce similar outcomes.

In relative terms therefore it is at least ten times more *expensive* to get into the Ghanaian Parliament than into the US Congress.

Some have hypothesised that the high costs of doing politics in developing countries like Ghana make higher levels of corruption inevitable.

What they have failed to do however is to provide a uniform theoretic to probe this situation rigorously without losing the human essence of the analysis. That is to say, without unnecessary quantitative distractions.

I propose, in a very very brief treatment, a “cost of capital” framework for understanding why this is so.

And no, I don’t mean that we must magnify the headline costs provided in respect of Ghanaian parliamentary campaigns above by taking into account interest rates and the opportunity costs of going into politics in Ghana in the context of such large expenditures. That would be a perfectly valid addition, but we would be overflogging the matter.

Rather, what I have in mind is a “capital interconvertibility framework”.

I would like us to consider a simplified world in which three main forms of capital define one’s capacity to play the game of politics: Social Capital, Economic Capital and Political Capital.

Social capital refers to all the assets available to an individual or entity that can be used directly to offset the transaction costs of building new social connections (i.e. human to human, institution to institution or human to institution).

It is obvious that reputation is a prime example of the kind of assets mentioned here. Reputation reduces the search time involved in due diligence for a counter-party during a transaction.

Economic capital refers to material assets that can be deployed to material ends with minimal loss of value.

Political capital refers to all the assets that can be used directly to offset the *agency costs* associated with group actions. This obviously includes authority, power, position, legitimacy etc. Power, for example, dramatically reduces the coordination costs of getting a group of unruly, self-interested, people to fall in line.

I theorise that in developing countries the conversion ratio/”exchange rate” between one form of capital and the other tends to be excessively large.

In particular, converting social capital to economic capital and thence to political capital is highly difficult/expensive. Converting political capital to economic capital or economic capital to social capital, on the other hand, is much easier.

The implication then is that many simply skip the accumulation of social capital, borrow economic capital in large amounts, trade it for political capital and then aggressively look for channels to convert the latter back into economic capital to pay off the borrowed economic capital.

In the so-called developed societies the process of converting political capital to economic capital or economic capital to social capital tend to be more difficult, thus incentivising the accumulation of social capital directly.

Furthermore, the lower conversion ratios in developed societies often allow a quicker conversion cycle between social and political forms of capital.

You may counter the argument put forward here by pointing to the near-universality of political corruption and dismiss the entire analysis as built on the fallacy of exceptional levels of corruption in developing societies compared to so-called developed societies.

But you would only be partially right. Whilst political corruption is indeed universal, the “proportionality” of corruption is not of universal character.

Corruption is a standard “agency cost” associated with economic transactions. Often people with decision making power in economic transactions try to compensate for what they perceive to be an undervaluation of their political capital.

Despite the logical universality of this phenomenon, theory is still required to explain why developing country politicians tend to charge such high corruption fees relative to the value of their economic decisions.

Only the capital interconvertibility framework explains why, for instance, African politicians in charge of tiny economic fiefdoms still price their kickbacks at a level considerably above that of their compatriots in, say, the West.

All one has to do is look at the sums mentioned in European and American political corruption scandals versus the case in African scandals.

Here is a random sample:

Ghana

______

Woyome Scandal – ~$30 million

SADA ACICL Scandal – $25 million

AMERI Scandal – $150 million

GYEEDA Scandal – $900 million (investigative committee’s estimate)

Kenya

______

Goldenberg Scandal – $1.5 billion

Nigeria

_______

Abacha Scandal – $500 million (recovered; actual amount is in the billions of dollars)

US

______

Whitewater Scandal – $300,000

William Jefferson Scandal – $400,000

Jesse Jackson Jr Scandal – $750,000

Europe

_________

Chirac Scandal – $3 million

Kohl Scandal – $1.6 million (2.3M DM)

There is no doubt, upon any careful analysis of the evidence, that African politicians, for instance, overcharge corruption fees relative to the economic value of their political decisions.

Only the capital interconvertibility framework provides an adequate account of why this is so by linking the phenomenon to the high convertibility ratio from economic to political forms of capital, and the conversely low convertibility ratio from the political to the economic form.

 

By Bright Simons