Retrovision: The Effects of Corruption

This post originally appeared on 28 March 2019.

Back in 2009, Woody Hunt talked about the effects of corruption in this interview with the El Paso Inc.

Scholarly work has shown that the higher the level of corruption the lower the growth rate, the lower the investment, the lower the gross city product. There is a very strong correlation there.

When I look at corruption, it is not the dollars that get exchanged that cause the economic damage those dollars are relatively small.

The true cost of corruption is the cost of a noncompetitive process, whether it is paying for goods you don’t need, paying more for goods that you do need, or failing to help create an environment that produces companies that can compete here and ultimately outside El Paso.

. . .

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 studied corruption. Mr. Hunt is an expert on corruption. But Mr. Hunt missed a key result of corruption.

If the corruption is blatant, systemic, and rampant, the woke citizens will move away.

No one wants to be angry all the time. No one wants to be bullied.

El Paso is a long way from anywhere. El Paso is pressed up hard against a country that wavers between the first and third world. The citizens of El Paso need a city government that nurtures them. El Pasoans don’t need a city government that bleeds away their resources for glitzy projects that most El Pasoans won’t ever use. Glitzy projects that are designed to lure businesses and people from out of town.

Our best and brightest, our entrepreneurs and risk-takers and opinion leaders, are moving someplace where the city government is less ostentatiously arrogant. Where the city leaders don’t fritter away scarce tax dollars on vanity projects because they think they know what’s good for us.

God gave us legs so we can walk away. And our best and brightest are exercising that option.

2 comments

  1. “The true cost of corruption is the cost of a noncompetitive process…”

    Let’s see, was there a competitive bidding process from AAA teams or was it a take-it-now-or-lose-it full court press? On the stadium construction? In Hunt’s world, competition is for thee, not for me.

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