The reveals a surprising volume of messages between lawyers, consultants, political operators and institutional interlocutors. A system that appears to work through payments and the continuous mobilization of resources. What catches my attention is how much it costs to sustain this architecture of influence.
Public contracts conducted with greater administrative discretion present higher prices, attract fewer competitors and select less productive suppliers. Ferenc Szucs documented this pattern in Hungary following a reform that authorized more discretionary procedures for contracts below a certain value, allowing authorities to avoid open auctions and directly invite a small number of companies. The expansion of this discretion reduced the average productivity of contractors by around 6% in relation to the level considered efficient. The winning companies are measurably worse at what they do, but politically connected.
Brazilian companies exposed to random audits by the Comptroller General of the Union lost access to public contracts, but began to grow more quickly in terms of employment in the following years. Emanuele Colonnelli and colleagues show that the probability of these firms obtaining federal contracts drops substantially after the audit and the value of these contracts decreases. Even so, many expand their staff and invest more.
The authors’ interpretation is that some of these companies were trapped in a business model based on political connections. When this channel was interrupted, companies needed to reorganize and compete in the private market. Resources that could go towards expansion, training or technology ended up being directed towards building political relationships.
Supporting the winning party in municipal elections increases the probability of getting a public job by 10.5 percentage points, almost half more than that of supporters of the defeated party. Colonnelli, Prem and Teso documented this result by combining administrative data on public employment in Brazil with information on campaign donors, exploiting elections decided by extremely narrow margins. Those hired through political connections are, on average, less qualified in terms of formal education and salary history in the private sector.
When these mechanisms operate together, a system emerges that consumes resources in its own maintenance. Intermediaries need to be paid, safety nets maintained and public reputations managed. We can even call this process rent seeking: resources spent not to produce wealth, but to compete for privileged access to it.
The more complex the influence network, the more expensive it becomes. A paradox then arises: in some contexts, operating in this arrangement can become more expensive and less efficient than competing in an open market. Brazilian companies exposed by CGU audits grew precisely after losing access to public contracts, when they were forced to adopt a less costly model.
There are situations in which the corrupt system itself becomes so inefficient that it destroys the gains it promised to generate. Companies, politicians and intermediaries invest enormous resources in an arrangement that may be leaving everyone worse off than they would be in a more competitive and less corrupt economy.
LINK PRESENT: Did you like this text? Subscribers can access seven free accesses from any link per day. Just click the blue F below.
