"Bureaucracy vs. Corruption – Two Sides of the Same Coin"

From Neue Zürcher Zeitung's TheMarket.ch, January 16:

The terms «bureaucracy» and «corruption» often evoke distinct images. However, upon closer examination, these two phenomena share crucial similarities: they are united by their ability to misallocate resources, distort economic incentives, and erode public trust.

Deutsche Version

Bureaucracy conjures thoughts of slow, rigid administrative processes, while corruption suggests illicit exchanges of power for personal gain. At first glance, they seem worlds apart – bureaucracy represents lawful administrative order, while corruption symbolizes criminal misconduct.

However, upon closer examination, these two phenomena share a crucial similarity: both lead to a profound misallocation of capital, impeding economic efficiency and undermining societal trust.

«Any allocation of capital other than productive is a form of corruption, benefitting individuals at the expense of society as a whole, thereby creating stresses that will eventually be its undoing.»
_{Andrew Lees, British economist (*1967)¹}

Bureaucracy and corruption both distort economic decision-making, diverting resources away from their most productive uses.

«The quest for equality is often the road to tyranny.»
_{Friedrich A. Hayek, Austrian-British economist (1899–1992)²}

In «The Road to Serfdom», Friedrich Hayek warns against expanding bureaucratic control, noting that centralized planning inevitably leads to inefficiency.

Bureaucracies operate under rigid rules designed to ensure fairness and accountability. However, these rules often create bottlenecks, delay decisions, and stifle innovation. Resources are allocated based not on market efficiency but on compliance with procedural mandates. It took 29 years to build the Berlin airport from planning to completion. This compares to four years and six months in case of the new Beijing airport.

«He who is unfit to serve his fellow citizens wants to rule them.»
_{Ludwig von Mises, Austrian-American economist (1881–1973)³}

Consider the permitting process for new businesses in highly regulated economies. Lengthy approval timelines and excessive paperwork discourage entrepreneurship, misallocating human capital and stifling economic growth. It is said that buying a skyscraper in New York is easier than buying a one-room apartment in Italy.

Ludwig von Mises, in «Bureaucracy», argues that when government agencies prioritize rule-following over outcomes, they incentivize waste rather than productivity.

«Democracy substitutes election by the incompetent many for appointment by the corrupt few.»
_{George Bernard Shaw, Irish dramatist, critic, political activist (1856-1950)⁴}

Unlike bureaucracy, corruption bypasses official rules altogether. In corrupt systems, resources are allocated based on favouritism, bribes, and nepotism. Thomas Sowell, in works like «Knowledge and Decisions», discusses how corruption short-circuits the market’s natural processes by replacing merit-based outcomes with patronage.

Nassim Taleb, in «Skin in the Game», emphasizes the importance of accountability in decision-making, particularly in engineering and infrastructure. He argues that when decision-makers lack personal risk– i.e., «skin in the game» –, the likelihood of catastrophic failures increases. For instance, in a corrupt construction project, contracts may be awarded not to the most efficient or capable firms but to those offering the highest kickbacks. This leads to inferior infrastructure, higher costs, and reduced economic output.

«It is said that power corrupts, but actually it’s more true that power attracts the corruptible. The sane are usually attracted by other things than power.»
_{David Brin, American scientist and author (*1950)⁵}

From an ethical perspective, fighting bureaucracy and corruption is not merely an economic imperative but a moral one. Bureaucratic overreach undermines personal autonomy by subjecting individuals to impersonal, inflexible rules.

Corruption, by contrast, erodes social trust by substituting public interest with private gain. Whether the unjust gain is monetary or political doesn’t matter that much.

Both systems violate the principle of justice. Bureaucratic rule-following without consideration for fairness leads to Kafkaesque absurdities where people suffer due to procedural technicalities. Corruption, on the other hand, directly contravenes fairness by rewarding dishonesty and penalizing integrity....

....MUCH MORE