Security & Prosperity in East Asia & the World

　　Corruption is a research topic whose time has come, gone, and come again. The comprehensive programs of economic liberalization and privatization that have taken place in developing and post-communist nations since the 1980s were supposed to dismantle the rents of import-substitution and dirigisme. Yet it did not happen the way we were told. Economies were massively privatized, market mechanisms were adopted throughout, trade and financial regimes were deregulated, and yet, all these economic policy changes do not appear to have dissolved distributional coalitions. In fact, they appear to have merely restructured them.

　　Those who sold state-owned assets often ended up buying them. Those who had political power frequently used it to acquire economic power. And those with political clout rarely hesitated to use it to increase their wealth. From Russia to Argentina, and from Mexico to the Middle East, economic reform has taken place behind closed doors and through opaque mechanisms. The study of corruption, popular under the modernization paradigm of the 1960s, has made a big come back.

　　This paper pursues five goals. First, I review the main approaches to the study of economic reform and privatization, especially the transition from studying reform as a process imposed from above by autonomous policymaking elites, to examining that process as one driven by below by organized distributional coalitions who colluded with those policymakers. Second, I connect the literature on the political economy of reform to the literature on corruption. This is a necessary step for, once the study of reform disclosed the opacity of that process, the extant literature on corruption had a contribution to make. Third, in trying to identify the main factors that explain why governments conduct divestiture programs through opaque methods, I advance an analytical framework to account for the propensity of governments to collude with groups of beneficiaries of privatization and/or bailout programs. This framework is illustrated with empirical materials drawn from Latin American, post-communist, and Asian nations. Finally, I propose four areas of policy recommendation, where more research is needed and more resources are imperative in order to curb corruption and increase transparency and democratic accountability.