“Grabbing Hand” or “Helping Hand”?: Corruption and the Economic Role of the State

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Abstract

This article seeks to disentangle which features of government intervention are linked to corruption and which are not, by distinguishing between the government roles of regulator, entrepreneur, and consumer. It finds that the degree of regulation of private business activity is the strongest predictor of corruption, and that high levels of public spending are related to low levels of corruption. There is no evidence of direct government involvement in production having any bearing on corruption. It is concluded that advanced welfare capitalist systems, which leave business relatively free from interference while intervening strongly in the distribution of wealth and the provision of key services, combine the most “virtuous” features of “big” and “small” government. This suggests that anti-corruption campaigners should be relaxed about state intervention in the economy in general, but should specifically target corruption-inducing regulatory systems.

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