Economics of Corruption by Democracy

13 Pages Posted: 6 Sep 2009

See all articles by Rasit Pertev

Rasit Pertev

affiliation not provided to SSRN

Date Written: August 30, 2009


We investigate democracies where citizens vote on basis of personal gains, guaranteed individually through direct contracts with political parties. Once a political party wins the elections, it is expected to honour its contracts with individuals. We show that such a system is both feasible and applicable, in large and small states alike, where democracy merely serves as a competitive mechanism determining which group of persons will benefit – though unjustly - from state resources and privileges. This is a free democratic contest, where individuals, citizens and the elite alike, can easily move and even change sides. We also show that such systems are very stable and do not readily generate endogenous forces in favour of good governance. We also deduce that such systems, due to their dependence on a non-fiscal surplus, have a compelling tendency to block the path to development, be exploitative of environment, extractive and natural resources, and to squander funds, including those for development cooperation. In the absence of clarity on concepts on the part of the international community, such systems are impervious to good governance initiatives. Governments are usually able to use such moves in their favour, by shifting attention to marginal or superficial issues unthreatening to system’s continuity e.g. reduction of lower-level baksheesh and legal reforms not intended to be enforced. The findings also point out the overwhelming need to scrutinize democracies, as democracies are a necessary but not a sufficient condition for good governance. As this model clearly shows, democracy without good governance is corruption by majority. It is also argued that all democracies are, deep down, klepto-democracies as described above, with an endogenous characteristic which can resurface any time societal and institutional guards are down – in multiple and complex forms of corruption.

Keywords: Governance, anti-corruption, baksheesh

Suggested Citation

Pertev, Rasit, Economics of Corruption by Democracy (August 30, 2009). Available at SSRN: or

Rasit Pertev (Contact Author)

affiliation not provided to SSRN

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