What if Government Paid Better?

October 14, 2020 • #

In his book Political Order and Political Decay, Francis Fukuyama has a section on corruption in political systems and how it impacts economic development:

There are many reasons why corruption impedes economic development. In the first place, it distorts economic incentives by channeling resources not into their most productive uses but rather into the pockets of officials with the political power to extract bribes. Second, corruption acts as a highly regressive tax: while petty corruption on the part of minor, poorly paid officials exists in many countries, the vast bulk of misappropriated funds goes to elites who can use their positions of power to extract wealth from the population.

Today the most famously corrupt regimes lead the least liberal, least free societies. In these unstable environments, government jobs are among the most attractive to ambitious people. In part it’s because those jobs are more reliable than weak, inconsistent private sector jobs (and sometimes easier to get and retain), but the ease with which rents can be extracted in corrupted systems attracts people ambitious to build personal wealth.

You see the inverse of this phenomenon in states with strong free market systems. A certain class of ambitious person is still attracted to government, but more often for reasons of celebrity or power than financial reasons. The potential for personally-enriching rent extraction is much lower. Brain drain happens in the public sector because many of the most ambitious for wealth and status see faster, more lucrative paths in the private market. So paradoxically, the lack of this personally-enriching career path could be impeding potential economic development, just as in poisoned systems, but for different reasons.

It’s unfortunate that we squander our hard-won strong, corruption-resistant1 government system’s performance because we can’t find the funding to better pay our public servants. Our federal (and state) agencies don’t realize how efficient this allocation of capital would be, compared to the many channels through which we hemorrhage money year after year. What would happen if we paid civil servants better? How many of the ambitious, entrepreneurial class would stick around and increase the state’s capacity if they didn’t become disillusioned with personal stagnation?

  1. Of course we’re far from immune here. But when juxtaposed with the political systems of Liberia or the DRC, we’re doing pretty well.