Corrupt Circles

Corrupt Circles combines different tools of economic, political, and historical analysis to identify the costs and consequences of corruption in a developing society. The book particularly adopts and applies recent methodological breakthroughs by economists who conceive corruption as an obstacle for overall development. Only marginally does this analysis treat corruption solely through the angle of public perceptions, a fleeting standard for measuring it.

The book’s main object is the hard evidence of corruption’s costs transpired in governmental and institutional malfunction, failure, and wasted opportunities.

Institutions as well as policies suffer costly biases if they are directed by corrupt officers or policy makers swayed through bribes rather than goals of efficiency.  Certainly there continues to be a lively academic debate over these issues. Armed with a considerable arsenal of quantitative data, I venture to estimate the direct and indirect costs of graft in different cycles and government administrations in Peru.

On average corruption costs accounted for as high as 30 or 40 percent of Peru’s total public budget expenditures and 3 to 4 percent of gross domestic product. I confine most of these calculations to the sole appendix of the book, to avoid interrupting the main narrative built upon unraveling corruption scandals and the controversies they entailed.

The political underpinnings of corruption are evident through the almost perennial absence of checks to the executive branch of government. Despite constitutional blueprints, often violated, political practice in Peru has subjected the legislative and judicial branches to the influence or control of presidential power. Abuse of political power in a context of viceregal or caudillo patronage went hand in hand with the draining of scarce public resources for private or party benefit. Modern political parties involved in electoral democracy also profited from crooked means to obtain and maintain power. Political leaders and officers engaged in covert pacts and interested understandings with other political forces so as to buttress customary impunity.

Corruption can also encompass both continuity and variation in history. This is a key notion to understand the phenomenon of corruption. Each new cycle of corruption brings new means and schemes imbedded in technological and organizational changes. An illustration can be the public contracting of railway construction in the 1850s and 1860s. As this history of graft illustrates, corrupt and corrupting agents always found new and sophisticated ways to illegally funnel public resources into private hands. To visualize the changing nature of a paradoxically persistent encumbrance, the book adopts a long-term perspective.

The main historical sources I analyze are colonial treatises, official accounts and inquiries, diplomatic reports (from British, French, Peruvian, Spanish, and United States archives), legislative investigations, judicial trials, declassified documents, business records, memoirs, self-incriminating audio and video transcripts, journalistic accounts and investigations, among several other.