Does This Sound Like El Paso?

From a 2009 El Paso Inc. interview with Woody Hunt:

Q. How does corruption impact economic development?

If the procurement process is not driven by qualitative analysis of who is offering the most for the least, and it is based on relationships instead, then two things happen.

One, you reduce the level of competition. Those who are unwilling to compete on a relationship basis decide they are going to go somewhere else because, no matter how good they are, they are not going to be successful.

So the government entity is going to pay more for the product, which means the tax rates are going to be higher.

Two, where do you get high-skill, high-paying jobs? You find them in the headquarters of businesses that have become regionally, nationally and globally competitive.

And, if you want those kind of firms headquartered here, you have to have an environment that helps build them.

Becoming regionally, nationally and internationally competitive starts with being competitive in your own local market, which means you are producing the most for the best price.

If you have an environment where the procurement process is based on relationships, then the firms organize that way and, while they may have the ability to gain business within the local market, their ability to find business outside the local market is going to be impaired.

You also have a misallocation of resources. Corruption will cause government to spend in ways it would otherwise not.

In other words, they will find areas where the potential for corruption is higher, so they will buy goods and services that might have low value to the taxpayers but mean a transfer of compensation for them.

Mr. Hunt is a smart man.

“And if you gaze long into an abyss, the abyss also gazes into you.” — Friedrich Nietzsche

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