Can Institutional Reforms Reduce Corruption? Economic Theory and Patron-Client Politics in Developing Countries

Can Institutional Reforms Reduce Corruption?
Economic Theory and Patron–Client Politics

in Developing Countries
Luca J. Uberti
ABSTRACT
The ‘anti-corruption consensus’ of the dominant development paradigm sees

corruption as a governance failure and maintains that graft can be reduced or
eradicated through appropriate institutional reforms, such as strengthening
the judiciary, designing corruption-proof regulatory regimes, and establish-
ing anti-corruption agencies. This article aims to cast doubt on the theoretical
rationale of this family of anti-corruption interventions. The neo-classical
paradigm that informs the consensus is based on a set of unsatisfactory
idealizations, which undermine the explanatory power of mainstream eco-
nomic models of corruption. Drawing on insights from economic sociology
and anthropology, the article develops an account of the relationship between
corruption, cultural norms and patron–client politics in developing countries.
This account shows that corruption is embedded in socio-cultural structures
that are endemic to the process of transition to industrial capitalism — a
transition that all developing countries are arguably undergoing, however
haltingly. This insight clarifies the theoretical limitations of mainstream cor-
ruption economics and provides a framework for constructing more empiri-
cally adequate explanations of corruption levels in specific countries. It also
suggests that substantially reducing, let alone eradicating, corruption in the
developing world may not be possible without fundamentally rethinking the
existing set of anti-corruption strategies and techniques.
INTRODUCTION
This [anti-corruption] law secures to the Tories the glory that under their administration
the greatest purity of election has been theoretically proclaimed, and the greatest amount of
electoral corruption has been practically carried out.
(Karl Marx, 1852/1953)
I would like to thank Philip Nel, James Headley, Blendi Kajsiu and David Jackson for their
helpful comments on earlier versions of this paper. The painstaking reviews of three anonymous
referees from Development and Change were crucial for preparing the final version of this article.
Development and Change 47(2): 317–345. DOI: 10.1111/dech.12222

C 2015 International Institute of Social Studies.
318 Luca J. Uberti
Since Wolfensohn’s presidency at the World Bank, the post-Washington

Consensus era has seen the consolidation of what one commentator has
called an ‘anti-corruption consensus’ in global development policy (Buko-
vansky, 2006). This consensus consists of two propositions, one pertaining to
the effects, the other to the causes of corruption. First, corruption has joined
the bandwagon of governance ills that are increasingly regarded as bad for
economic growth: in a famous speech, Wolfensohn himself denounced cor-
ruption as an ‘economic cancer’ (Marquette, 2003: 11). Second, corruption
has come to be seen specifically as a governance failure; as such, it is re-
garded as feasibly eradicable through appropriate institutional reforms. As
stated in a 2000 report: ‘the Bank views corruption as a symptom of underly-
ing institutional dysfunction, and thus employs an . . . approach that attempts
to help [borrowing countries] strengthen governance and public sector man-
agement, to improve economic policies and legal/judicial systems, and to
develop and implement specific anti-corruption measures’ (World Bank,
2000: 4, emphasis added).
Amongst the many institutional reforms commonly touted as a cure to
the malaise of corruption, we could cite measures to improve the capacity
and independence of the judiciary, strengthen independent media and civil
society watchdogs, and establish government-independent anti-corruption
agencies and bureaus (Marquette, 2003: 115). A related set of measures
seeks to reduce corrupt incentives through civil service reform, decentraliza-
tion and the restructuring of regulatory regimes (such as public procurement
and industrial licensing) in ways that minimize the risk of corruption. Often-
times, these reforms involve the deployment of complex separation-of-power
arrangements (World Bank, 1997: 40–43; World Bank, 2000: 33).
Focusing on the deep causes of corruption, this article aims to cast doubt
on the theoretical underpinnings of this family of anti-corruption institutional
reforms. Analytically, their effectiveness is predicated upon three related as-
sumptions carried over from neo-classical and new institutional economics:
corrupt transactions are entered into by utility-maximizing rational agents;
corruption functions to a large extent as a competitive market; and, lastly, the
behavioural incentives of corrupt agents are shaped primarily by the rules
encoded in formal institutions. As this article will show, these assumptions
amount to highly unsatisfactory idealizations: they grossly oversimplify or
misrepresent the configuration and dynamic of real-world corruption. This
means that modelling corruption through the tools of microeconomics be-
comes problematic, as does the expectation that controlling corruption may
be a function of modulating incentives by (re-)designing legal rules and
bureaucratic procedures. In the non-ideal world, the theory and policy pre-
scriptions of the anti-corruption consensus are likely to generate inadequate
forms of knowledge and ineffective techniques of intervention.
To explain the inadequacies of corruption economics, the article goes
on to develop a more sociologically grounded account of the relation be-
tween corrupt transactions and patron–client politics. Moving from Polanyi’s
Can Institutional Reforms Reduce Corruption? 319
dictum that in developing societies, ‘the economic order is merely a function

of the social order’ (1944/2001: 93), this article theorizes much more care-
fully the structure of the society upon which anti-corruption interventions
and institutions are deployed. In doing so, it aims to restore the mainstream
models of corruption to their appropriate context of applicability. Turning to
culture and social structure reveals the fallacies associated with the notion
that corruption originates in institutional failures. As the main ‘currency’
of patron–client exchange, bribing is both deeply embedded in the type
of socio-economic relations that prevail in most developing countries, and
endemic to their stage of development. The theoretical foundations of the
anti-corruption consensus are thus shaken to the core. If corruption originates
in deep-seated social structures, fighting corruption may prove a futile exer-
cise if the only tool in the ragbag of development policy remains institutional
tinkering.
The next section discusses mainstream microeconomic models of cor-
ruption, focusing specifically on Shleifer and Vishny’s influential account
(1993). Because they are premised on a highly idealized set of assumptions,
mainstream models can hardly provide an adequate account of compara-
tive corruption, nor can they form the analytical basis for anti-corruption
interventions. The article therefore goes on to present a more sociologically
grounded story of the deep causes of corruption. This account explains why
corruption is so widespread in pre-industrial and industrializing societies,
why the mainstream body of economic theory on corruption encapsulates
inadequate idealizations, and why it is likely to spawn ineffective policy
prescriptions.
SELF-INTERESTED BUREAUCRATS, BRIBE MARKETS

AND INSTITUTIONS: THE ECONOMICS OF CORRUPTION
The Intellectual Foundations of the ‘Anti-corruption Consensus’
The intellectual lineage of the anti-corruption consensus has its roots in what
John Toye (1987) dubbed the ‘counter-revolution in development theory’.
In the mid-1970s, some scholars suggested that the social costs of state in-
tervention in the economy were much larger than had been suggested by
standard welfare economics. Politically organized transfers did not merely
cause a deadweight loss, but generated a ‘rent-seeking society’ in which
individuals engaged in large wasteful expenditures — in the forms of bribes
and lobbying costs — to secure access to state-organized transfers (Krueger,
1974; Posner, 1975). In the worst cases, governments deployed intervention-
ist and protectionist measures purposefully to favour politically powerful
urban groups rather than on account of their economic merits, leading to the
entrenchment of a neo-patrimonial style of governance (Bates, 1981). In this
vein, a long tradition in corruption studies claims that ‘corrupt incentives
320 Luca J. Uberti
are the nearly inevitable consequence of all government attempts to control

market forces’ (Rose-Ackerman, 1978: 9).
This liberal conception of corruption, premised on a view of the market
as a natural, uncorrupted order, can be traced back to Adam Smith. Accord-
ing to Smith, corruption, economic and moral, originated in interventionist
economic regulations (e.g. the English poor laws, mercantilist privileges,
etc.), and was the remnant of a pre-modern age characterized by political
factionalism and paternalistic or redistributive forms of economic organi-
zation (Hill, 2012). By the early 1980s, the elimination of corruption and
rent-seeking had become the most important justification for promoting lib-
eralization and state-retrenchment (Chang, 2003: 46–7). Past the point where
whittling down the state was not possible (without actually undermining the
state), a new generation of development thinking went on to prescribe in-
stitutional and administrative reforms to sanitize the functions that the state
must inevitably retain (see Hopkin, 2002: 582–6), ushering in the so-called
‘post-Washington Consensus’ (PWC) in development thinking.
The prescriptions of the PWC are based on three ground-level analyti-
cal assumptions. First, there is a commitment to the methodological indi-
vidualism of neo-classical economics and public choice theory, in which
economic agents and bureaucrats are modelled as self-interested, rational,
utility-maximizing individuals. Second, PWC reforms are predicated on the
new-institutionalist view that the strongest incentives for corrupt behaviour
result fundamentally from the nature of institutions — by which the advo-
cates of the PWC mean formally codified rules and procedures, like those
embodied in laws and constitutional provisions regulating the interaction
between different branches of the state, or between the state and business.
In the economic foundations of the PWC, these two assumptions operate
in tandem. Rethinking institutional rules and administrative procedures is
crucial — so the argument goes — because office-holders in bureaucratic
institutions decide whether or not to engage in illicit transactions upon con-
ducting a cost-benefit calculus. This calculus supposedly weighs the material
rewards of corruption against the (perceived) costs that existing institutional
rules impose, whether in the form of transaction costs (how difficult it is
to conclude and conceal a corrupt exchange) or ex-post costs (the likeli-
hood and severity of sanctions). These two ontological assumptions about
corruption — methodological individualism and the primacy of formal insti-
tutions — lead to an implication at the level of epistemology: if formal rules
determine the costs and benefits of actors’ behaviour, it may be appropriate
to investigate corruption with the tools of microeconomic theory.1 As noted
by Rose-Ackerman (1999: 39): ‘because scarcity lies at the heart of corrupt
deals, basic insights derived from microeconomics can help structure efforts
1. Note that the assumptions that corrupt agents are utility-maximizing rational individuals,
and that they respond to formal rules logically entails the proposition that corruption can be
studied micro-economically, although the reverse may not necessarily be true.
to reduce corruption’. Ontology determines how corruption is actually stud-

ied in the mainstream body of theory informing the PWC. In particular, the
toolbox of microeconomics is supposed to be suitable to shed light on the
relation between institutional incentives and the relative incidence of corrupt
transactions in specific bureaucratic set-ups. The outcome level of corrup-
tion is taken as an equilibrium state resulting from the optimization strategies
of bribe-takers and bribe-givers. Equilibria may be derived theoretically by
thinking of corrupt exchange as a ‘market’ where state resources (e.g. rights
or rents) are exchanged for bribes. In these ‘bribe markets’, institutional rules
and procedures act as incentives by constraining and enabling the actors’
utility-maximization calculus, and thereby affect the final equilibrium state.
A Microeconomic Model of Corruption with a Benevolent Principal
This twin reliance on institutional economics and neo-classical micro theory

is highly problematic. Investigating institutional rules and their supposed
effects on corrupt behaviour largely misses the point of what actually causes
corruption in the non-ideal world of socially and culturally embedded agents.
The resulting account of corruption, due to its high level of ideal abstraction,
conspicuously lacks explanatory power. To establish this point, I shall set
up a basic microeconomic model of corruption. Assume the existence of
an economically valuable (state-created) right such as an import licence or
business permit. There is a demand curve for this right; yet the government
decides it is economically efficient to reduce the total available supply of the
right to an administratively set quantity QAdmin (Figure 1).2 If the bureaucrats
responsible for allocating the right are given sufficient discretion, it is likely
that they might further reduce the quantity supplied to QBribe in order to
artificially create a scarcity value and collect a bribe PBribe – PAdmin per unit
sold.
Institutional economists would now remind us that organizing a corrupt
transaction — which involves finding a sufficient number of bribe-givers
to clear the ‘market’ while maintaining secrecy — is not costless. If there
is a stationary marginal cost curve MC, then the net return to the briber is
PBribe – (PAdmin + MC) per right sold, and the net total bribe collected in
this bribe market is the area PBribe BMC. Recognizing that bribing has a cost
is critical, for the contention is precisely that institutions create incentives
by modulating the costs and benefits of corruption. The reforms typically
promoted by the anti-corruption consensus purport to raise the marginal
2. Let us assume first that the state reduces the available quantity based on a legitimate
(industrial policy) rationale, e.g. in order to promote import substitution. In this and the
following examples, the state does not reduce the quantity deliberately to create opportunities
for corruption or to favour political sponsors (as suggested by Bates, 1981, and Krueger,
1974). We will lift this assumption in the course of the ensuing discussion.
322 Luca J. Uberti
Figure 1. Corruption and Institutional Reforms with a Benevolent Principal
cost of concluding a corrupt transaction, be it by raising ex-post judicial

sanctions, tying politicians’ behaviour to the risk of electoral defeat, or
increasing transaction costs through monitoring and separation of powers.3
If the marginal cost curve is raised by an amount (Figure 1), the total net
return PBribe BMC to the sale of the right is completely eroded by costs and
the total bribe transacted falls to zero.
This is all very well in theory, but practice invalidates some of the key
assumptions of this model. For one thing, the bureaucrat may further reduce
the quantity supplied to QBribe – 1. Marginal costs may then be increased
through further institutional reforms (e.g. tougher penalties). If the process
is iterated, the bureaucrat would progressively increase the bribe price, the
quantity supplied would reach zero and the marginal cost curve after suc-
cessive reforms would hit the intercept of the demand curve, suggesting that
the repertoire of institutional reforms that may have a perceptible effect on
the ‘bribe market’ has effectively been exhausted. Yet, in this densely insti-
tutionalized licensing system, the allocation process is in practice so corrupt
that bureaucrats issue no rights at all. Going by the lights of microeconomic
theory, thoroughgoing PWC reforms would simply paralyse the state.
Of course, things are likely to be more complicated than this. For instance,
the proponent of the PWC may rebut that it is possible to introduce different
kinds of reforms, e.g. an auditing mechanism to prevent the bureaucrat
from creating a shortage past a certain quantity where it becomes evident
that corrupt motives are at work. However, a crucial question remains,
namely who can be expected to implement the reforms that are supposed to
3. See Uberti (2014: 697–709) for a summary of separation of power arguments.

increase the costs of corruption? In a corrupt system, not only is the middling
bureaucrat likely to be corrupt; the higher-level politician who conferred
decision-making discretion upon the bureaucrat is also likely to be part of
a corrupt arrangement. This point is fairly uncontroversial by now, and has
been conceded by many neo-classical economists who support the anti-
corruption consensus (see Aidt, 2003: 642–6). In fact, the view that there is
no benevolent principal designing the institutions within which the agents of
the state operate has a long pedigree in the public choice tradition (Hopkin,
2002). Yet the reforms promoted by international development agencies
stubbornly assume the existence of a benevolent principal and in fact make
sustained calls for political will, domestic ownership and leadership in the
fight against corruption4 (Marquette, 2003: 114–16).
Institutional Arrangements and the ‘Grabbing Hand’ of the State
The more refined neo-classical accounts of corruption do away with the

benevolent-principal assumption and picture the state as a ‘grabbing hand’
establishing permits and regulations precisely ‘to give officials the power to
deny them and to collect bribes in return for providing the permits’ (Shleifer
and Vishny, 1993: 601, echoing Bates, 1981).5 From a sociological point of
view, these models are more fine-grained than the ones assuming a benevo-
lent principal since they concede, and rightly so, that higher-level politicians
and lower-level bureaucrats may be involved in exchange relations over and
above those defined by formally codified rules. For instance, a politician
may grant a bureaucrat bribe-extracting powers in exchange for obedience
or compliance. That said, even though it makes room for informal social
relations, Shleifer and Vishny’s influential model and the many variations
and refinements it spawned still assume that formal institutions define the
principal structure of incentives that actors confront when engaged in corrupt
transactions.
Shleifer and Vishny (1993) distinguish three broad institutional set-ups.
In the first set-up, a centralized bribe monopolist controls the allocation of a
state-created right such as an import licence (Figure 2). When creating arti-
ficial scarcity, the monopolist will choose the quantity QBribe that maximizes
4. A typical component of UNDP’s anti-corruption strategy involves co-opting local politi-

cians and nurturing them as ‘anti-corruption heroes’. To be sure, it could be argued that
international agencies perform precisely the function of benevolent principal when engaged
in anti-corruption assistance programmes. However, as soon as a programme comes to an
end and the ‘domestic principal’ is restored, we can expect lower-level bureaucrats to bribe
higher-level politicians (that is, the principal) into reverting to an institutional structure in
which they may increase, if not maximize, the total bribe collected.
5. Although they clearly offer an account of the causes of corruption, Shleifer and Vishny
claim, somewhat misleadingly, that they are interested in the consequences of corruption
(1993: 600).
324 Luca J. Uberti
Figure 2. Centralized and Decentralized Corruption with Non-benevolent

Principal
total returns. Note that this logically implies that, according to Shleifer and
Vishny, PBribe ABM is the maximum total bribe that may be collected in this
bribe market — and, indeed, in any bribe market governed by neo-classical
microeconomics. This is because, at QBribe ± 1, the area marked ‘Max Total
Bribe’ shrinks due to either lower output or a lower demand price.
According to Shleifer and Vishny, the case of a centralized bribe monop-
olist is associated with intermediate levels of corruption. In the second case,
the right is conferred by obtaining several complementary permits from de-
centralized state bureaus (Figure 2). As soon as a bribe-giver buys the first
permit, the value of the next permit increases, together with the ‘exploitable
rent for the second administrative agency’ (Parisi et al., 2006: 59). Thus, the
marginal bribe requested is likely to increase progressively to PCompl ; the
quantity of rights issued would decrease to QCompl ; and the system would
be perceived as very corrupt.6 In the third case, conversely, the right can
be conferred by various competing agencies selling substitute permits. As
the marginal bribe is bid down by inter-agency competition, demand rises
and the quantity of rights provided increases to QSubst . Since at the market-
clearing equilibrium QSubst , the net return from taking a bribe is zero, bu-
reaucrats would have no incentives to negotiate (costly) corrupt exchanges;
6. Yet the actual total bribe collected across agencies would be fairly small (shaded area
bounded by PCompl and QCompl in Figure 2). The distinction between the first and second
set-ups is formally similar to Mancur Olson’s metaphorical distinction between stationary
(bribe-maximizing) bandits and roving (predatory) bandits (Olson, 2000).
rather, they would simply provide quantity QAdmin and corruption would all
but disappear. This is the rationale behind the frequently heard prescription
to increase competition in public service provision (Rose-Ackerman, 1999:
49–52; World Bank, 2000: 30).
Against the Microeconomics of Corruption
Due to its narrow focus on institutional incentives and scarcity values,

Shleifer and Vishny’s argument turns out to have very limited explanatory
capacity. As the next section will argue, bureaucrats in developing coun-
tries are often members of informal networks of political support whose
organizational dynamics might override the incentives provided by formal
institutions. Take the second scenario above. If the agencies issuing comple-
mentary permits are staffed with bureaucrats from the same factional net-
work, the group’s patrons might use their informal authority to coordinate
the agencies’ bribe levels and maximize the faction’s total revenues (Khan,
2001: 119). Thus, despite the lack of a formally centralized bribe monop-
olist, the quantity provided would revert to QBribe and corruption would be
mitigated. During Taiwan’s high-growth period, for instance, the economic
bureaucracy was subdivided into several complementary agencies governed
by a complex division of labour (Uberti, 2014: 707). Yet the political settle-
ment that prevailed behind the edifice of formal institutions ensured that the
total bribe collected by high-ranking political patrons could be maximized
by containing corruption lower down the bureaucratic pecking order. In this
informal bargain, political patrons offered the capitalist classes pro-growth
policies and efficient, bribe-free public administrations in return for skim-
ming a sizeable ‘dividend’ off their profits (Wedeman, 1997). The cost and
benefit estimates that corrupt agents supposedly compute to formulate their
optimization strategies are not solely, or even predominantly, determined by
the structure of formal rules. Rather, a complex field of informal rules and
factional allegiances may complicate the agents’ calculus.
Institutions do not explain corruption levels any better in the other two
cases discussed by Shleifer and Vishny. The bribe-monopolist case assumes
that a socially disembedded, utility-maximizing political patron can real-
istically afford to preoccupy her/himself solely with the size of the total
bribe (Bardhan, 1997: 1322). But the demand of keeping the social fabric
of the political faction together means that sometimes rights and permits
must be sold to faction members at a ‘below-market’ bribe price — that
is, a price below that at which patrons would supply the right if they were
guided solely by a bribe-maximization logic. The existence of patron–client
factions not only complicates the model of cost-benefit calculus; sometimes,
it eviscerates it altogether.
More worrying still from the point of view of development practice is
the realization that administrative competition (the third case discussed by
326 Luca J. Uberti
Figure 3. Decentralized Allocation of Substitute Rights
Shleifer and Vishny) does not necessarily reduce corruption. Suppose the
bribe monopolist is suddenly confronted with an anti-corruption reform in-
troducing administrative competition (Figure 3). Microeconomics predicts
that the marginal bribe price PBribe – PAdmin is bid down as the quantity sup-
plied increases, until a competitive equilibrium is reached. The explanatory
power of this theoretical mechanism rests on the existence in the non-ideal
world of a bribe market where corrupt exchanges can be concluded as
market-like transactions. But contrary to the epistemological assumptions
of the anti-corruption consensus, corruption does not take place in a public,
impersonal market; rather, it is typically embedded in informal, idiosyncratic
and often secretive social structures. Furthermore, the market-clearing pro-
cess described by Shleifer and Vishny presupposes perfect competition,
including genuine ‘market demand’ for the right being auctioned. But the
actual bidders might be very few in number (the ‘market’ structure is likely
to be a near-monopsony), considering that only the capitalists associated
with the dominant coalition are likely to have sufficient information and
connections to have a shot at bidding.7
In the absence of a genuine ‘demand’ force, the quantity supplied might
not progressively increase, and no reduction in the marginal bribe price
would materialize. In fact, a single capitalist from the dominant faction (or
an oligarchic conglomerate of capitalists) might well attempt to buy up the
whole available quantity QAdmin – QBribe . Since each unit cannot normally be
7. Additionally, in developing countries the modern capitalist sector is very small in the first
place.
priced differently in a single transaction, the capitalist would have to pay a

unit price PBribe – PAdmin (or only slightly less). Thus, the total bribe actually
collected when administrative competition is introduced is PBribe AB’M’,
which is likely to be over twice as much the total maximum bribe PBribe
ABM predicted by Shleifer and Vishny. Worse still, if two equally powerful
but opposed capitalists compete for the available quantity, the marginal
bribe is likely to be bid up further (Khan, 2000: 114–17). The existence of
patron–client factions and the distribution of (non-market) power within the
faction can cause sharp increases (or reductions) in corruption against the
backdrop of similar institutional rules. These empirical variations are at best
‘underdetermined’ and at worst ignored by micro theory.
In sum, the mainstream economics of corruption — which provides the
analytical underpinnings of the anti-corruption consensus — loses much of
its explanatory value once more complex features of the real social world are
fed back into the model. However elegant and methodologically convenient,
the notion that corrupt agents are bribe-maximizing individuals operating
in the impersonal space of neo-classical markets (i.e. methodological in-
dividualism) is an unlikely candidate to form the basis for an empirically
adequate account of corruption and its causes. By the same token, the notion
that corrupt agents make rational decisions and conclude transactions solely
or largely in response to the formal rules of the game is deeply flawed.
This notion under-theorizes or simply assumes away much of the ‘messy’
social context that characterizes developing societies, and places agents and
formal institutions in an outlandish ‘social vacuum’. Thus, given their rigid
focus on ‘impersonal’ exchange relations and formal rules, micro theory and
institutional economics are likely to make an inadequate analytical platform
to explain the relative incidence of corruption. They also make an unre-
liable tool to design effective anti-corruption interventions.8 To improve
our knowledge of corruption and our ability to control it, a new theoretical
framework is needed to reframe corrupt transactions as eminently ‘personal’
exchanges, and to theorize the equally ‘personalistic’ networks in which
corrupt exchanges take place.9
8. Further research should develop ways to test the inadequacies of anti-corruption institutional
reforms using econometric techniques. One way of doing so would involve testing the cor-
relation between average aid flows in the anti-corruption sector and reductions in corruption
levels. Since anti-corruption programmes are mostly focused on technical assistance (iden-
tifying corruption risks, rewriting regulatory regimes, establishing anti-corruption agencies
and developing civil society-based monitoring systems), aid volumes should make a good
proxy for the extent to which specific developing countries have implemented the institu-
tional reforms advocated by the ‘anti-corruption consensus’.
9. Although the economics literature on social networks may effectively rectify some of the
flaws of the standard models discussed here, its application to the study of corruption is very
much in its infancy and this emerging line of thinking has not yet begun to influence actual
development thinking and practice.
328 Luca J. Uberti
PATRON–CLIENT NETWORKS AND CORRUPTION: PERSPECTIVES FROM

ECONOMIC SOCIOLOGY AND ANTHROPOLOGY
Drawing on insights from economic sociology and anthropology, this sec-

tion seeks to lay the groundwork for a deeper and more empirically adequate
theory of comparative corruption, by way of two propositions. First, I argue
that in developing countries corruption always takes place within the enve-
lope of patron–client networks, or similar neo-patrimonial structures, and
never in isolation. Secondly, neo-patrimonial forms of social organization
are endemic to the particular stage of development that characterizes most
developing societies. Besides forming the basis for a sociologically grounded
account of the causes of corruption, these two arguments cast doubt on the
three core assumptions of corruption economics. If bribe takers and givers
are not rational agents who demand and supply scarce rents solely based
on the formal rules of the game, then the poor predictive capacity of neo-
classical models comes as no surprise. Furthermore, the models’ capacity to
provide analytical guidance in formulating anti-corruption interventions is
thrown into doubt.
The Embeddedness of Corruption
Patron–client relations are relations of exchange between individuals of un-

equal status: in the simplest model, ‘patrons’ enjoy privileged access to state-
created resources (e.g. property rights and economic rents), while ‘clients’
gain access indirectly through their personal relationships to ‘patrons’. As
suggested in the early sociological literature on informal networks, client-
age emerges from traditional relations of authority in agrarian societies. In
these settings, authority is based on traditional patterns of loyalty, fealty
and deference and is cemented through non-reciprocal forms of exchange
involving the ‘distribution of material resources and perks . . . , distributed
and consumed as though they were the private property of the ruler’ (Kelsall,
2011: 77). By providing resources and protection, traditional rulers create
and maintain vast networks of political support (Hilgers, 2011: 560–70;
Scott, 1972: 104–6).
Subsequently, with the collapse of feudal and tribal social arrangements
induced by colonialism and economic modernization and the consequent
erosion of traditional symbolic bonds, patron–client relations become in-
creasingly reciprocal and interest-based. Crucially, former gift or coopera-
tive relationships become progressively monetized (Clammer, 2012: 121),
and bribing becomes an important ‘currency’ of patron–client exchange.10
10. Although, of course, other monetary and non-monetary goods and services can be expected
to be transacted alongside money, for example protection, insurance, or economic rights
(see Figure 4).
As noted by Scott (1972: 111), ‘the Filippino haciendero could, until re-
cently, rely on his tenant laborers and peasants indebted to him to vote as
he directed. Increasingly, though . . . the peasant now often requires cash
and other special inducements’. At the same time, political modernization
means that the traditional authority system becomes overlaid with ‘formal,
impersonal elements of governance, like a legal system that demarcates the
public and private domain’ (Kelsall, 2011: 77; see also Ekeh, 1975). Yet,
despite their monetization and hybridization, the hierarchies and exchange
relations inherited from agrarian feudalism remain fundamentally unaltered,
operating behind formal rules as the true organizing principles of social
interaction.
All I have suggested so far is that, with the decline of traditional centres
and modes of authority, bribing emerges as a mechanism of exchange within
pre-existing relations of patronage. The crucial point, however, is that the
exchange of bribes is always embedded in patron–client relations. Bribes, in
other words, are never paid in something resembling an open and impersonal
market — as neo-classical models of corruption imply — nor are their value
and volume determined by the rules of theoretical microeconomics.
To see this, it is necessary to attend to the fundamental logic of patron-
age. In post-feudal settings where clientelism is the principal mode of social
organization, access to political rights and economic resources is not open
to all citizens on an equal and impersonal basis; rather, it is restricted and
regimented by factional and other particularistic ties: ‘the social identity of
non-elites is closely tied to the identity of the patronage network in which
they are located: a non-elite is the king’s man or the duke’s man’ (North
et al., 2009: 35). Since network membership becomes the chief mechanism
of social identification and regulation, the organization of patronage gener-
ates social cleavages operating through a logic of inclusion and exclusion.
Furthermore, the emergence of particularistic networks is historically an-
tecedent to the establishment of formally codified institutions, especially in
post-colonial or post-conflict contexts where the state and its bureaucracies
are to a large extent the product of external actors’ interventions. In that case,
the social obligations that particularistic networks impose on their members
are likely to ‘supersede the legal and political mandates that in principle
should guide their behaviour’ (Granovetter, 2007: 162), spawning a ‘moral
economy’ with rules of its own (Olivier de Sardan, 1999).
If the normative space is saturated by network loyalties and obligations,
it follows that the allocation of rights and resources is never conducted
impersonally (through the market, the state bureaucracy), as is the case in
advanced capitalist democracies. Even to the extent that rights and resources
are allocated corruptively (as they are), access to these ‘bribe markets’ is not
free and open. As noted above, there is likely to be no impersonal, market-
like mechanism of rent allocation in which bribers may freely, albeit secretly,
compete regardless of factional affiliation. Access to corrupt bidding is itself
restricted by network membership. As shown by a revealing ethnography
330 Luca J. Uberti
of corruption involving customs authorities and timber trade companies in

Vietnam, ‘corruption is best understood as a process that emerges within
and between familial relationships of exchange, trust and obligation . . . .
Far from being primarily a financial transaction, corruption involve[s] kin-
like relationships, friendships, and the maintenance of trust through social
rituals and tributes’. In other words, ‘payments and favours are sustained
through a logic of sociality’11 (To et al., 2014: 171, 168). To sum up using
the words of Polanyi, in pre-industrial societies bribe economies are wholly
‘submerged in . . . social relationships’ (Polanyi, 1944/2001: 65, emphasis
added).
Networks versus Markets: Corruption in Hybrid Environments
The notion that corruption is embedded in network relations should not be

taken to mean that corrupt transactions are not at all sensitive to supply
and demand for the rights and rents obtained by means of bribery. True,
participants in corrupt exchange frame their interactions through culturally
specific scripts and norms. For instance, the members of the trans-border
corrupt network studied by To et al. (2014) refer to each other with names
that echo aspects of the traditional Vietnamese family. Yet, it is material
interest rather than traditional deference that oils the wheels of patron–client
exchange. Thus, scarcity values are likely to be relevant factors, even in soci-
eties where the dominant mode of economic exchange is not market-like and
impersonal, as in advanced capitalist societies.12 Rights and rents that bro-
kers and non-elites may profit from are likely to attract higher bribes, while
goods and services that cannot be used economically (due to technology
constraints, for instance) are not likely to be transacted at all.
However, the logic of supply and demand is fundamentally bounded by
the logic of factional membership. To put it more precisely, the economic
rationality of actors is ‘bonded’ to the social networks that enable and sustain
their continuing access to resources (Di John, 2009: 145). Economic agents
primarily ‘act so as to safeguard [their] social standing, [their] social claims,
[their] social assets’ (Polanyi, 1944/2001: 65, emphasis added). Their in-
dividual material interests cannot always be realized directly, by deploying
a rational cost-benefit calculus: in other words, agents may not always be
in a position to maximize utility by buying cheap and selling dear, as the
neo-classical literature assumes. The social rules of the game imply that, to
11. In a similar study of comparative neo-patrimonialism in Morocco, Tunisia and Iraq, Mounira
Charrad (2011: 52) shows that in all her case studies ‘family arrangements and symbols are
extended into the public sphere’.
12. That said, some sociologists argue that the concomitant presence of different modes of
economic exchange — personalistic and impersonal — is a feature of all societies, advanced-
capitalist or traditional (e.g. Barber, 1995: 400).
maximize utility in the long run (and to maintain social reputation13 ), actors
must often relinquish the imperatives of economic rationality in the short
run, as they enter into individual exchange relations. James Scott makes a
similar point by introducing a helpful distinction:
‘parochial’ (nonmarket) corruption is a situation where only ties of kinship, affection, caste,
and so forth determine access to the favors of power-holders, whereas ‘market’ corruption
signifies an impersonal process in which influence is accorded those who can ‘pay’ the most,
regardless of who they are. The real world [of developing countries], of course, rarely ever
contains such pure cases. (Scott, 1972: 88, emphasis added)
If utility calculations (to the extent that they are made) are ‘bonded’ to
structural and cultural elements of society (rather than simply ‘bounded’
by the rules of the game encoded in formal institutions), the dynamic of
graft is unlikely to be captured by an unqualified microeconomic model: we
cannot assume that greater demand will always result in rising unit bribe
prices, or that patrons might maximize the total bribe collected simply by
computing and applying an ‘optimal’ bribe price. The actors’ optimiza-
tion strategies cannot solely be dictated by the type of rational calculation
posited by microeconomics, for the power relations that come with fac-
tional membership set limits upon the rules of supply and demand. Taking
the example of India’s canal irrigation system (circa the late 1970s), a bu-
reaucrat might have to settle for a lower bribe if the bidder for a canal
maintenance contract is politically affiliated with the bureaucrat’s politi-
cal patron (whom he had to bribe and make promises of allegiance to in
order to get the job). The bureaucrat would also have to agree to a ‘below-
market’ bribe if the bidder had previously leveraged her/his influence to
assist the bureaucrat in negotiating a bribe with local farmers (Wade, 1984:
296, 304). While corrupt agents may indeed seek utility maximization in
the long term (i.e. over repeated interactions), individual transactions can-
not be understood by framing bribing as a market-like exchange relation
between utility-maximizing agents, as microeconomic models of corruption
do.14
Even so, elements of market-like corruption often co-exist with network-
based arrangements. Crucially, the market-like character of corruption may
come in degrees. Different systems of corruption may be more or less
amenable to the predictions of neo-classical economics depending on the
13. Of course, it is debatable whether ‘clients are merely utility-maximising actors responding
to incentives provided by patrons, feigning loyalty while awaiting an opportunity to defect
once their market position permits it; or [whether they] are actually loyal’ (Granovetter,
2007: 161, emphasis added). I submit that while genuine loyalty might have been obtained
in traditional (or ‘feudal’) societies, self-interest bounded by network-induced incentives
is the right account of actors’ motivation in most present-day developing countries, where
traditional symbolic bonds have waned.
14. As noted by Clammer (2012: 126), ‘methodological individualism proves to be a weak
framework for the explanation or understanding of corruption . . . because it suppresses the
systems dimension of social interaction’.
332 Luca J. Uberti
type of patron–client structures in which they are embedded. Consider Lom-

nitz’s insight that, generally speaking, ‘accepting a bribe is an acknowledge-
ment of social inferiority, just like accepting a tip’ (Lomnitz, 1988: 44). Thus,
in societies (such as Latin American societies) where officeholders — i.e.
those with the power to create and distribute valuable rights and rents — are
of lower social status than businesspeople (i.e. the rent-recipients), corrup-
tion tends to have a monetary and market-like character (Granovetter, 2007:
156–60). This is because bribers frame corrupt transactions as one-off ex-
changes. They do not seek to establish long-term bonds with bribe-takers, the
latter being individuals of lower status. In these contexts, the assumptions
of neo-classical models may come closer to approximating the real-world
dynamic of corruption. That said, conceding the partial applicability of cor-
ruption economics demands an important qualification. As Gupta reminds
us (1995: 379), ‘however open the process of giving bribes [might be] and
however public the transaction, there [is] nevertheless an [irreducibly] per-
formative aspect’ that the parties to any corrupt transaction have to master.
This performative dimension is likely to have an effect on the incidence and
magnitude of exchange — an effect that is entirely lost in the microeco-
nomics of corruption.
Furthermore, in neo-patrimonial societies where traditional networks are
overlaid with formal systems of impersonal rule, the parties to corrupt trans-
actions confront the challenge of maintaining secrecy. This imposes fur-
ther requirements of mutual trust, which would not bind in the absence of
donor-imposed formal rules defining, stigmatizing and sanctioning ‘corrupt’
behaviour. In this context, even the most overt forms of ‘market’ corruption
are bound to occur within the envelope of factional relations if the parties
are to trust each other, follow the progress of the transaction and deter or
punish opportunistic behaviour (Li and Wu, 2010: 138). The institutional
reforms promoted by the anti-corruption consensus may actually exacerbate
the need for secrecy and thus entrench the embeddedness of corruption.
Therefore, even in societies where corruption has a market-like character,
the applicability of neo-classical assumptions may not be as thoroughgoing
as mainstream development practice assumes. Their applicability is further
eroded as we move to the other end of the spectrum, towards cultures in which
officeholders are of higher social status than businesspeople — for instance
1960s’ South Korea, where the capitalist class emerged under the patronage
of bureaucratic elites. Here corruption retains an irreducibly idiosyncratic
character. A crude cash payment to an official would be considered an insult.
Thus, corruption becomes entangled in highly ‘elaborate systems of gift
giving, banquets, entertainment, and factors keyed to the highly particular
needs of officials’ (Granovetter, 2007: 159). The corrupt exchange becomes
densely ritualized and embedded in cultural scripts that often frame the
exchange as an act of deference, friendship or familial obligation. Here, the
normative basis of corruption goes far beyond the cultural performativity
required to conclude market-like corrupt transactions.15 In these contexts, the

incidence and magnitude of corrupt exchange can hardly be studied through
a model that reduces corrupt actors to undifferentiated utility maximizers.
Likewise, formal anti-corruption institutions and bureaucratic arrangements
are unlikely to ever produce binding incentives.
Culture, Norms and Corruption
The link between corruption and status differentials suggests that patron–
client exchange is undergirded by norms and values. Yet in neo-classical
models of corruption, cultural meaning, besides social structure, is sim-
ply abstracted away. These models (along with the types of development
practice associated with the anti-corruption consensus) usually assume a
definition of corruption as the ‘abuse of public office for private gain’. In so
doing, they universalize what is actually a culturally situated norm: that is,
the Western dualism between a Weberian conception of the public sphere
(the ‘state’) — rational, bureaucratized and impersonal — and a private
sphere (‘civil society’) where individuals and organizations pursue their
self-determined interests (Bukovansky, 2006; Harrison, 2006). To be sure, it
may be argued that the very concept of corruption always relies on a separa-
tion between the ‘public’ and the ‘private’; in exchanges coded as ‘corrupt’,
this distinction is subverted (Cheng and Zaum, 2012: 4–5). While this may
be true, the substantive content of the public–private distinction — which
informs what we may call a conception of corruption — is not fixed but
varies across cultures.16 Thus, the conception of the public–private divide
that operates in the culture of Vietnam’s state–business networks is likely to
be substantively (and substantially) different from the Weberian conception
that informs the anti-corruption consensus.
Anthropologists have documented that ‘there are rules (albeit informal
and pragmatic) and cultural codes that govern the way corruption [or rather
those exchanges that Westerners code as “corrupt”] . . . should, or does,
take place’, so much so that, ‘like patronage and clientelism, corruption
may not be legal, but it nonetheless has its own morality, at least in the
eyes of the local public’ (Shore and Haller, 2005: 8, 12). Indeed, the rules
and norms of patronage networks may be much more thickly ‘public’, in
15. In To et al.’s rich ethnography of a smuggling network in Vietnam, the bribe-giving busi-
nessman refers to the bureaucrat who agrees to broker a bribe payment on his behalf as his
‘elder brother’. In the traditional Vietnamese family, the ‘elder brother’ is expected to pro-
tect his siblings from harm, including from business risks (To et al., 2014: 164). In a similar
study of cross-border tax evasion in China, the bribing businessman gives a bureaucrat a
tiger pelt as a bribe but casts it as a gift ‘to ward off evil’. Similarly, cash gifts were referred
to, amongst others, as ‘lunar New Year gifts’ (Wank, 2002: 12).
16. The distinction between ‘concept’ and ‘conceptions’ (of justice) is from John Rawls
(1971/1999: 5).
334 Luca J. Uberti
the sense that they command a broad understanding and consensus, than
any set of legalistic norms imported by donor agencies.17 Of course, this is
not to say that ‘corruption’ — in the culturally situated sense — does not
take place in developing countries. On the contrary, a violation of network
loyalties and obligations may sometimes be construed as a violation of public
morality which individuals commit for private gain: in other words, it may be
construed as ‘corruption’.18 The problem is that these ‘corrupt’ practices may
sometimes be the very same practices that donor agencies seek to entrench
with a view to furthering (their own conception of) public integrity. By the
same token, discharging the moral obligations of network membership —
that is, maintaining one’s own public ‘integrity’ — may involve entering
into the very transactions that the agencies of the anti-corruption consensus
castigate as normative aberrations (e.g. bribing).
Understanding the prevailing cultural representations of ‘corruption’ in
specific contexts is very important for a theory of comparative corruption.
Neo-classical models assume that corrupt agents are always aware of com-
mitting an illicit act and they factor this belief into their utility calculations,
not only to evade detection, but also to avoid social stigma and political de-
feat. Once we negotiate a more culturally sensitive definition of ‘corruption’,
it becomes clear that the agents that donor organizations regard as corrupt
may not necessarily also regard themselves as such. If corrupt actors act
without violating the prevailing conception of public integrity, their utility
calculations — to the extent that they are made at all — are likely to be
different from the ones typically posited by neo-classical models. At a mini-
mum, corrupt actors should not be assumed to cost in the expected disutility
of social condemnation and electoral defeat. In that case, their propensity to
enter into corrupt transactions is unlikely to be very sensitive to institutional
incentives designed to increase the expected reputational costs of corrup-
tion. The effectiveness of institutional reforms seeking to strengthen the link
between political integrity and electoral success is thus likely to be severely
limited.
Towards an Economic Sociology of Corruption
By virtue of its social structure, economy and culture, each developing

country will have its own norms and routines of patronage organization. Yet
17. As noted by Polanyi (1957: 70–1, emphasis added), in pre-market societies, ‘no [indepen-
dent] concept of an economy need arise. The elements of the economy are here embedded
in noneconomic institutions, the economic process itself being instituted through kinship,
marriage, age-groups, secret societies, totemic associations, and public solemnities’. The
same could be said of ‘corrupt’ economies. See also Ekeh (1975).
18. Indeed, individuals may mobilize their own private ethical principles and condemn as unjust
(i.e. as ‘corrupt’) a transaction which may be coded as ‘non-corrupt’ (and, in fact, may be
mandated) under the prevailing conception of the public–private divide in that culture or
social group.
Figure 4. Exchange Relations Embedded within Patron–Client Networks

Location of Patrona Client(s)a Name of Transaction
Transaction
State-citizen relations – Bribes – Votes – Vote-buying [1]

(municipal or regional – Goods
level)
– Low-level job – Family vote – Small-scale job
– Bribe-extracting – Kin membership patronage
powers/‘rights’ – Bribes – Petty nepotism
– Prebendalism [2]
– Local public goods – Votes – Pork-barrelling [3]

(rents)
State-business – Higher-level jobs – Factional support – Job patronage

relations (usually – Valuable rents – Employees’ votes – Clientelism
central level) – Valuable rights (narrowly defined) [4]
– Industrial licences – Campaign finance – Rent-seeking

(rights) – Large bribes (narrowly defined)
– Industrial subsidies – Hiring of faction – Neo-patrimonialism
(rents) members (narrowly defined) [5]
– Privatization sales – Factional support
– Tax or bribe
exemptions
International relations – Aid – Policy alignment – Dependencyb [6]

– Foreign investment – Market opening
– Geopolitical support – Industrial licences
(rights)
– Public contracts
Notes:
a: supplies
b: according to dependency theory
all patron–client systems are likely to incorporate a combination of at least

some of the exchange relations and hierarchies mapped in Figure 4. As can
be noted in the diagram, bribes are only one of many possible ‘currencies’ of
exchange. Bribes can be variably paid by both patrons and clients, and they
may be transacted at any level of social organization, from the micro-level of
local bureaucracies, through central-level ‘state–business’ interfaces, to the
international level. The organization of patronage thus comes to resemble a
pyramid (Kitschelt and Wilkinson, 2007: 8). Insofar as patrons by definition
enjoy privileged access to state resources, while clients do not, patron–
client networks can be thought of as informal modes of organizing state–
society relations, or the relation between elites and non-elites (or between
the dominant class and the middle class).
At the ground floor of the system, middling brokers consolidate factional
support by mobilizing and bribing voters — who are often already nested
336 Luca J. Uberti
in the faction’s non-elite base — or by enlisting new members through

provisions or promises of local collective goods (Lazar, 2005).19 This is
indicated by [1] and [3] in Figure 4. In non-democracies, non-elites may
be offered material rewards in exchange for overt support or quiescence.
Larger bribes or proofs of factional loyalty allow (middle-class) clients and
brokers to be assigned to various offices in faction-controlled organizations
(e.g. private firms or the civil service); in turn, office-holders can make use
of their prerogatives to extract further bribes from non-elites and recoup
the cost of acquiring office — a phenomenon that van de Walle (2007) has
termed ‘prebendalism’ [2]. Higher-rung patrons dispense patronage not only
to reward their supporters, but also to secure control and compliance in the
lower rungs of the faction’s hierarchy, where clients and brokers facilitate
an upward flow of resources by buying protection and insurance from their
superiors (Gupta, 1995: 384).
At the central level, the faction’s clientele of large and mid-size capitalists
disburses large bribes and provides electoral support to the faction’s political
patrons; in return, the latter use their privileged access to the state appara-
tus and its formal prerogatives to manipulate the allocation of economic
rights and rents and protect the interests of the capitalists affiliated with the
dominant coalition (Khan, 2000) [4, 5].20 High-ranking patrons may also
leverage their connections with faction members in key public offices to
neutralize or emasculate donor-established anti-corruption institutions (e.g.
anti-corruption audits) and buy wholesale protection for all illicit operations
conducted by their clients lower down the pyramid (Vadlamannati, 2015).
Network structure shapes and constrains graft at all levels. Petty acts of
corruption such as vote-buying and grand/systemic corruption are part of the
same logic of patronage. Of course, this account provides a stylized ideal
type of an all-encompassing patronage network. In reality, different regions
of the political economy may be regulated through different combinations of
cliental vs. rule-based modes of governance. In fact, while corrupt transac-
tions are likely to always be embedded in (and regulated by) a patron–client
network of this type, the particular configuration of the network will give
rise to different fields of bribe-flows in different contexts.
This insight sheds light on another flaw of corruption economics. While the
absolute value of the total bribe transacted may stay the same, the intensity,
frequency and direction of the many exchanges that comprise the total bribe
19. Some scholars of clientelism argue, mistakenly, that unlike clientelistic relations properly
construed, vote-buying is always a one-shot exchange, rather than an enduring relation
(Hilgers, 2011: 577). However, if vote-buying took place outside the bounds of factional
ties, it is not clear how enforcement of the mutual bargain between the voting client and
bribing patron could take place (on this, see also Granovetter, 2007: 161).
20. Sometimes, the faction’s leadership becomes itself a client to a foreign power, which
supplies rents or provides protection to the ‘client state’ in exchange for the granting of
special economic rights to its own capitalist sector [6]. The international dimension of
clientelism is beyond the scope of this article.
transacted may vary depending on network structure. Yet in neo-classical

models, bribes are seen, as it were, solely as scalar quantities, and never as
vector quantities. The ‘direction’ of the bribe (‘who bribes who to get what’)
is entirely lost, to the detriment of explanatory power.
Corruption and the Social System
Whatever the specific configuration of bribe flows, it is clear that in neo-

patrimonial societies corruption is embedded in social-hierarchical structures
that rely for their functioning and stability on the continuing possibility of
transacting bribes. This brings me to the second thesis. Neo-patrimonial
forms of social organization of the monetary kind outlined above are
endemic to the pre-industrial stage of development characteristic of de-
veloping countries: they are the hallmark of the ‘liminal space’ between
traditional feudal orders and advanced capitalism. This section moves be-
yond the analytical focus on ‘networks’ and ‘cultural norms’ adopted so
far. To sketch the lineaments of a deeper economic sociology of corruption,
we need to place developing-country corruption in the context of the larger
‘social system’ in which it occurs (Barber, 1995: 406–7).
To say that neo-patrimonial forms of social organization are endemic is not
to say that they reflect the ‘primitiveness’, ‘irrationality’ or ‘backwardness’
of pre-industrial societies (Banfield, 1958). In fact, neo-patrimonial gover-
nance is best understood as a rational response to the social and material
environment of developing countries. To see this, it is useful to bring in an
important (if somewhat old-fashioned) insight from modernization theory.
Developing countries are in what we may call a state of (arrested or accel-
erated) ‘transition’: traditional social relations have withered, giving way
to monetized exchange and social fragmentation, but advanced bureaucratic
capitalism has not yet properly emerged, except perhaps for a few isolated
enclaves of modern industrial production, usually foreign-controlled (Lewis,
1954; Rostow, 1960).21 In a similar vein, albeit evoking ideas from depen-
dency theory, other social theorists have emphasized that the globalization
of capitalist relations and consumerist moralities has produced a global
periphery characterized by economic inequality, individualism and ‘mal-
development’ (Clammer, 2012). Neo-patrimonialism is part of the logic of
this (variably accelerated) ‘transition’ from traditional society to capitalist
(under-)development in the global periphery (ibid.: 128): it is endemic in
a historical, and not in a culturalist or essentialized sense — as in ‘Africa
works’ accounts of corruption (Chabal and Daloz, 1999).
Furthermore, it is not merely political and economic liberalization that trig-
gers the emergence of corruption regimes, as some accounts might suggest
21. In line with modernization theory, I equate capitalism with industrial modes of production
that are capable of generating a surplus for reinvestment.
338 Luca J. Uberti
(Divjak and Pugh, 2008; Meagher, 2007). Although liberalization might well
fragment the structure of patronage and increase the incidence of bribery,
the deep historical root of neo-patrimonialism as a mode of social organi-
zation is not merely the reform of regulatory rules (e.g. liberalization), but
a long-term process of social-structural change, namely the transition from
traditional to industrial-capitalist relations of production.
There are two broad sets of processes that make neo-patrimonialism (and
hence corruption) endemic in capitalist transitions. The first occurs in the
context of economic regulation. Colonial rule in most of the developing
world triggered deep economic and social dislocations, including the col-
lapse of artisanal manufacturing, the dissolution of the semi-feudal ‘village
system’ of social organization, and the onset of large rural-to-urban migra-
tion (Marx, 1853/2008). These transformations fragmented the prevailing
power structures and brought economic uncertainty and social disorganiza-
tion (Scott, 1972). In this context, neo-patrimonial factionalism — and its
attendant corruption — functions as a rational solution to the Hobbesian
problem of violence and disorder. Patron–client organizations contain vio-
lence and create a semblance of economic order. Albeit often sub-optimally,
they regulate the allocation of key scarce resources (notably, those state-
created rents that are necessary for accumulation and learning); they also
provide an informal mechanism for enforcing agreements (Khan, 2005: 712;
North et al., 2009).
Informal economic regulation is associated with the early stages of tran-
sition from traditional feudal orders to advanced industrial capitalism. In
these contexts, the productive economy is, by definition, unable to produce
a significant surplus. As a result, regulating economic exchange bureaucrat-
ically, through the complex and expensive institutional arrangements that
must be established to generate trust and punish malfeasance in impersonal
settings — that is, amongst disembedded, atomized transactors — is mate-
rially impossible (Khan, 2005). On the other hand, informal networks (and
the trust they engender) emerge costlessly in the non-economic sphere: thus,
relying on them does not take up a significant share of the economic surplus.
Of course, as industrial production grows, the growing economic surplus
can be used to finance the establishment of a bureaucratic apparatus to regu-
late economic exchange; consequently, more impersonal markets (including
‘bribe markets’) can start to function as resource allocators. With the onset
of fully-fledged industrial capitalism, the economic rationale of clientelism
(and its attendant corrupt flows) is likely to lose purchase.22
22. As noted by Marx in the context of nineteenth-century elections in England, ‘the constituen-
cies . . . of densely populated manufacturing counties were, by their peculiar circumstances,
very unfavourable ground for [corrupt] manoeuvres’. In these counties, the emerging in-
dustrial and commercial middle classes ‘considered it cheaper to compete . . . by general
moral, [rather] than by personal pecuniary means’, for ‘they were conscious of representing
a universally predominant interest of modern society’ (Marx, 1852/1953).
The second process takes place in the context of social regulation. Albeit
informally, neo-patrimonialism helps both elites and non-elites confront
the post-colonial state and compensate for its organizational shortcomings.
The post-colonial state — which is usually either the creation of foreign-
educated elites or the result of donor-led state-building efforts — has usu-
ally very limited capacity to extract revenue and coordinate redistributive
demands through legalized or routinized avenues.23 Patronage networks pro-
vide the organizational framework and social legitimacy to accommodate
redistributive demands and engender social stability, acting as the functional
equivalent of formal bureaucracies in more advanced polities (Khan, 2005:
718–20; Lyne, 2007; North et al., 2009). As noted by David Lovell, ‘endemic
corruption is perhaps best explained as a response that [elites] adopt when
confronted with the conflicting demands of traditional obligations and loyal-
ties on the one hand, and legal-rational forms of rule on the other’ (quoted in
Shore and Haller, 2005: 20). At the same time, neo-patrimonialism is also an
important coping mechanism for non-elites, who rely on corrupt networks
when they ‘encounter’ the state and its local-level bureaucracy24 (Gupta,
1995).
If patronage is necessary (as the least-cost solution) to both regulate eco-
nomic exchange and stabilize social interaction, the networks that enable
and constrain corrupt transactions are unlikely to be displaced by the type
of institutional reforms promoted by the PWC. Socially situated agents will
not make blunt utility calculations based on the costs and rewards embodied
in formal rules; rather, they will primarily respond to the benefits and obli-
gations that stem from network membership.25 Corruption is embedded in
socio-cultural structures which are endemic to the process of capitalist tran-
sition that most developing countries are undergoing (however haltingly).
This two-pronged thesis also explains the poor predictive capacity of
neo-classical accounts. In particular, it clarifies my earlier assertion that
Shleifer and Vishny’s model (along with the several variants it spawned)
under-determines the corruption effects of different institutional set-ups: the
overly idealized and highly restrictive ontological assumptions of the model
simply overlook the most important causal mechanisms at work. That said,
the social embeddedness thesis helps restore the microeconomic approach
to its appropriate context of applicability, whether it be advanced countries
in which patronage is no longer endemic, or developing countries in which
23. The predominantly informal economy of a typical developing country is quintessentially

difficult to tax.
24. I should also add that, just as social networks and their rituals enable and facilitate corrupt
exchange, the latter constitute a constant ‘investment’ in network relations that nurture and
reproduce the existing neo-patrimonial structures (To et al., 2014).
25. This point suggests that although individual behaviour cannot be understood purely in
rational-choice terms, there is a rational-choice justification for the system of clientelism as
a whole.
340 Luca J. Uberti
patron–client networks sustain patterns of market-like corruption (e.g. Latin

America).
SOCIOLOGY AT WORK: EXPLAINING CORRUPTION AND DESIGNING

ANTI-CORRUPTION
A fully-fledged demonstration of how the social-embeddedness approach

may be analytically fecund is beyond the scope of this article. Still, in this
brief section, I use an example from development history as an exploratory
illustration of how the approach to the study of corruption sketched above
may be employed, both to construct rich empirical explanations of corruption
levels in specific country contexts, and to help design context-sensitive anti-
corruption interventions.
Consider Thailand and South Korea in the early 1980s. In a corruption
perception index ranging from 0 to 10, where 0 indicates minimum corrup-
tion and 10 maximum corruption, Thailand scored 8.5 while South Korea
scored 4.3.26 What explains the much higher levels of corruption recorded in
Thailand than in Korea? Shleifer and Vishny’s model yields the wrong re-
sults. In Korea, the economic bureaucracy was relatively centralized; in fact
it is reasonable to believe that, to the extent that one existed, the inter-
agency division of labour generated complementary jurisdictions (Uberti,
2014: 707). In Thailand, by contrast, ‘industrial policy-making was spread
across a wide array of sectoral agencies’ that displayed ‘inadequate co-
ordination . . . and overlapping jurisdictions’ (Rock, 2000: 185): firms that
were refused access to important rights or rents by one agency could turn
to other agencies and obtain equivalent or ‘substitute’ permits or benefits.
Going by Shleifer and Vishny, corruption levels should have been higher
in Korea than in Thailand, where bribes should have been bid down by
inter-agency competition. Yet, the very opposite was the case. This suggests
that, in 1980s’ Thailand, further enhancing administrative competition — a
hallmark prescription of the ‘anti-corruption consensus’ — would arguably
have occasioned even more corruption.
So how do we explain this puzzle? The answer lies in the turn to social-
structural and cultural factors. In the first place, since corruption perceptions
are constructed from expert interviews, they may encapsulate a cultural
bias. In Thailand, as in Latin America, capitalists were usually of a higher
(or at least equal) social status than state bureaucrats, owing to the form-
ers’ long history of accumulation. By contrast, Korea’s post-war capitalist
class emerged largely as a result of state patronage (just like in post-Deng
China): thus, conceivably, the status differential ran in the opposite direction
than in Thailand. If Granovetter’s (2007) analysis of corruption and status
26. These figures, which are averages over 1980–83, are rescaled using data from Khan (2000:
Table 2.1).
differentials is correct, corruption would have been crudely monetary in

Thailand but much more subtle and ‘performative’ in Korea, where bribes
were exchanged mostly in the form of gifts and political contributions.27 The
same goes for post-Deng China, where corruption is inextricably rooted in
the cultural practice of guanxi.28 Since campaign donations are a less clear-
cut form of corruption — even under the Weberian conception of corruption
that Western-trained ‘experts’ are often socialized into — it is likely that cor-
ruption perceptions in Korea may have been grossly underestimated. On the
other hand, corruption in the Thai democracy of the 1980s was unmistakably
rampant even by non-Weberian standards.
Allowing for a cultural bias might explain some of the recorded differ-
ences in corruption levels between Thailand and Korea. Yet, social-structural
considerations are also relevant. In particular, it is conceivable that bribes
might have been both more prevalent and materially larger in Thailand than
in Korea. The relatively non-competitive nature of Korean clientelism might
explain why top patrons succeeded in reining in petty corruption in the mid-
dle and low rungs of the economic bureaucracy (Wedeman, 1997), leading
to a densely centripetal structure of bribe-flows across the patron–client
pyramid. On the other hand, high levels of competition between capitalist-
dominated factions in the Thai polity meant that businessmen would pay
factionally affiliated bureaucrats ever higher bribes in order to secure lu-
crative rights and rents and outcompete each other (consistently with my
earlier objection to Shleifer and Vishny’s endorsement of inter-agency com-
petition). This deeper sociological and cultural analysis suggests, in a pre-
liminary fashion, that a viable anti-corruption strategy in 1980s’ Thailand
would have enhanced the power of top patrons to depoliticize the bureau-
cracy and discipline the allocation of rights and rents, rather than promote
a further separation of powers in an already highly fragmented economic
bureaucracy.
CONCLUSION
The anti-corruption consensus ingrained in current development policy and

practice maintains that corruption levels are a function of institutional ar-
rangements. As such, corruption may be reduced or even eliminated by sim-
ply implementing a pre-packaged blueprint of institutional forms that are
supposed to be corruption-proof. This article has shown that this conviction
is informed by an overly economistic and narrowly institutionalist body of
theory that fails to capture and theorize the underlying social determinants
of corruption. To the extent that anti-corruption institutional reforms are
27. On the political economy of rent-seeking in South Korea and Thailand, see Khan (2000:
95–8, 101–4).
28. The culture of hierarchical networks and relations in China.
342 Luca J. Uberti
grounded in this body of theory, they are unlikely to constitute universally

valid anti-corruption techniques, as the advocates of the PWC imply.
Further cross-country research is needed to corroborate the doubts raised
in this article about the effectiveness of anti-corruption institutional reforms.
Yet, what is sure is that the analytical assumptions of the consensus are em-
pirically weak. The aim of this contribution was to sketch the lineaments
of an alternative account that takes the socio-cultural embeddedness of cor-
ruption much more seriously. The main insight of this account, redolent of
a Polanyian approach to economic sociology, is that corruption is always
‘embedded’ in patron–client forms of social organization that are endemic
to the particular stage of development of late developers. To the extent that
it rests on a more empirically adequate representation of the complex social
reality of developing countries, this account might offer a platform to engage
in ‘puzzle solving’ and to construct more empirically detailed accounts of
comparative corruption and anti-corruption. Studying the organization of
patron–client networks in specific contexts may offer valuable insights into
the structure of rent- and bribe-flows that prevail therein. This, in turn, could
be used to explain cross-country variations in corruption perception indexes.
It could also be employed to design anti-corruption strategies and techniques
that target the underlying social mechanisms driving corruption in specific
countries, rather than merely scratching the socially disembedded surface of
donor-imposed formal institutions.
Cross-country differences in corruption levels become visible — and
context-sensitive interventions possible — only once we attend to the social-
structural and culturally situated organization of patron–client networks. For
the purpose of understanding corruption and designing effective techniques
of intervention, neo-classical ‘mono-economics’ is likely to prove moot.
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Luca J. Uberti is a PhD student in the Department of Politics, University

of Otago (New Zealand). His interests include corruption and development,
industrial policy and the role of the state in early capitalism. His doctoral
dissertation is a sub-national study of corruption, governance reforms and
comparative industrial development in Albania and Kosovo. His articles
have appeared, amongst others, in New Political Economy, Progress in De-
velopment Studies, and Capital & Class.
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Can Institutional Reforms Reduce Corruption?

Economic Theory and Patron–Client Politics

The ‘anti-corruption consensus’ of the dominant development paradigm sees

(Karl Marx, 1852/1953)

Development and Change 47(2): 317–345. DOI: 10.1111/dech.12222

Since Wolfensohn’s presidency at the World Bank, the post-Washington

dictum that in developing societies, ‘the economic order is merely a function

SELF-INTERESTED BUREAUCRATS, BRIBE MARKETS

The Intellectual Foundations of the ‘Anti-corruption Consensus’

are the nearly inevitable consequence of all government attempts to control

to reduce corruption’. Ontology determines how corruption is actually stud-

A Microeconomic Model of Corruption with a Benevolent Principal

This twin reliance on institutional economics and neo-classical micro theory

Figure 1. Corruption and Institutional Reforms with a Benevolent Principal

cost of concluding a corrupt transaction, be it by raising ex-post judicial

3. See Uberti (2014: 697–709) for a summary of separation of power arguments.

Institutional Arrangements and the ‘Grabbing Hand’ of the State

The more refined neo-classical accounts of corruption do away with the

4. A typical component of UNDP’s anti-corruption strategy involves co-opting local politi-

Figure 2. Centralized and Decentralized Corruption with Non-benevolent

Against the Microeconomics of Corruption

Due to its narrow focus on institutional incentives and scarcity values,

Figure 3. Decentralized Allocation of Substitute Rights

priced differently in a single transaction, the capitalist would have to pay a

PATRON–CLIENT NETWORKS AND CORRUPTION: PERSPECTIVES FROM

Drawing on insights from economic sociology and anthropology, this sec-

The Embeddedness of Corruption

Patron–client relations are relations of exchange between individuals of un-

of corruption involving customs authorities and timber trade companies in

Networks versus Markets: Corruption in Hybrid Environments

The notion that corruption is embedded in network relations should not be

type of patron–client structures in which they are embedded. Consider Lom-

required to conclude market-like corrupt transactions.15 In these contexts, the

Culture, Norms and Corruption

Towards an Economic Sociology of Corruption

By virtue of its social structure, economy and culture, each developing

Figure 4. Exchange Relations Embedded within Patron–Client Networks

State-citizen relations – Bribes – Votes – Vote-buying [1]

– Local public goods – Votes – Pork-barrelling [3]

State-business – Higher-level jobs – Factional support – Job patronage

– Industrial licences – Campaign finance – Rent-seeking

International relations – Aid – Policy alignment – Dependencyb [6]

all patron–client systems are likely to incorporate a combination of at least

in the faction’s non-elite base — or by enlisting new members through

transacted may vary depending on network structure. Yet in neo-classical

Corruption and the Social System

Whatever the specific configuration of bribe flows, it is clear that in neo-

23. The predominantly informal economy of a typical developing country is quintessentially

patron–client networks sustain patterns of market-like corruption (e.g. Latin

SOCIOLOGY AT WORK: EXPLAINING CORRUPTION AND DESIGNING

A fully-fledged demonstration of how the social-embeddedness approach

differentials is correct, corruption would have been crudely monetary in

The anti-corruption consensus ingrained in current development policy and

grounded in this body of theory, they are unlikely to constitute universally

Charrad, M.M. (2011) ‘Central and Local Patrimonialism: State-Building in Kin-Based

Vadlamannati, K.C. (2015) ‘Fighting Corruption or Elections? The Politics of Anti-Corruption

Luca J. Uberti is a PhD student in the Department of Politics, University

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