Beware the Sand Mafia

India has, as we say, a situation, where new environmental laws have run into the law of demand, creating a “sand mafia” of illegal miners, which is funding a lot of politicians who are not just looking away, but actively punishing civil servants who try to enforce the rules!

Here’s a very interesting article on the phenomenon from the “Swaminomics” blog at the Times of India, and here’s a teaser from the article:

We have enough outrage at illegal activity. We need more outrage about limitations on legal activity. It sounds progressive to demand environmental impact assessments for sand and rock mining in every deposit, regardless of size. But state governments have neither the money nor expertise. They sorely lack the staff and capacity to implement even existing rules and laws, let alone new ones. Heaping ever more responsibilities on them simply generates cynicism and corruption.

and I liked this bit too:

despite having some of the world’s biggest deposits of coal and iron ore, we are importing both. Will we now import sand and rocks too?

Darn it. My ATM has a measly $500 / day withdrawal limit

Ah Somalia. The UN has issued a report saying that  “Despite the change in leadership in Mogadishu, the misappropriation of public resources continues in line with past practices.” (I know, I know. Please insert your favorite pot-kettle joke here)

In other words, the new government is stealing everything that’s not nailed down, starting with the money in the Central Bank.

“On average, about 80 percent of the withdrawals from the country’s Central Bank (CB) are made—not to run the government—but for private purposes.  The CB has become, in a way, an ATM for certain public officials, or as the report calls it a “slush fund.” A case in point, of $16.9 million transferred to the CB for government use, $12 million cannot be accounted for.”

And the head of this ATM / Central Bank? It’s none other than Abdusalam Omer, back in the saddle again after his days in the Washington DC City Government.

Phone call for Pete Leeson.



You got a receipt for that?

When Robin and I lived in Mexico, it took us a while to figure out how things worked. The first time we bought some stuff at an office supply store, the sales person asked us if we wanted a receipt. Being American, I said Hell yes I want a receipt! This caused general laughter in the line and a sigh from the clerk who started on an elaborate piece of paperwork.

It turned out you automatically got a normal sales receipt, but if for some reason you actually wanted to pay the VAT, you had to request an official receipt, which then you’d turn in to your organization for reimbursement. We never made that mistake again.

Looking back, I’m not sure if the clerk was just worried that I was a weird stickler, or was offering to sell me a higher bill for a contribution. I was reminded of this common tax avoidance in Mexico by the excellent article in Sunday’s NY Times about the fake receipt market in China.

The inventive Chinese people use these fake receipts creatively. To embezzle from their companies, to avoid taxes, to create slush funds for bribes and kickbacks, you name it.

It’s easy to roll our eyes at China and Mexico and their “corrupt” practices, but similar stuff happens in the USA.

Consider this recent story of academic officials at UCLA who, when UC changed their travel policy to “only coach” without a medical reason, quickly procured doctor’s notes certifying a medical need to fly first class.

Silly me, the only fake doctor’s notes I’ve worried about in academics are from students who missed exams.

The most despised institution in Brazil

In “Public Rage Catching Up With Brazil’s Congress,” The New York Times gives us a pretty good idea about why the Brazilian public is so fed up with their legislators.

Maurício Santoro, a political scientist, notes that “Congress is without a doubt the most despised institution in Brazil” and a big reason for that is the fact that the legislature “has a tradition of preventing its own members convicted of crimes from ever going to jail.”

Almost 1/3 of the current Congress have pending trials in the Supreme Federal Tribunal.  Legislators can only be tried in this tribunal, which means that there are huge delays. Even this is better than pre-2001 though, when  a politician could only be tried if Congress authorized it. Wow, I can see some bad incentives arising from that law.

And what are these legislators on trial for?  Unfortunately, it’s not just a matter of unpaid parking tickets.  Here is the rundown on some of the worst offenders, past and present:

a.”There is Hildebrando Pascoal, commonly called the “chain saw congressman.” When he ran for office, it was public knowledge that he was being investigated for operating a death squad in a remote corner of the Amazon, employing tactics like throwing victims into vats of acid or dismembering them with chain saws. But he still won by a large margin and served in Congress before he was stripped of his seat, convicted and sent to prison.

b. Another is wanted by Interpol after being found guilty of diverting more than $10 million from a public road project to offshore bank accounts.

c. A congressman was convicted by the tribunal of having poor female constituents, who could not afford more children, surgically sterilized in exchange for their votes.

d. In 1963, Senator Arnon de Mello shot dead a fellow legislator on the Senate floor, only to escape imprisonment, since the killing was considered an accident because he was aiming at another senator. (!)

e. That gun-wielding senator’s son, Fernando Collor de Mello, was elected president of Brazil in 1989 and impeached amid a flurry of corruption charges in 1992. Yet in a political resurrection that dismayed anticorruption activists, he was elected to the Senate in 2006 and retains his seat, even as he remains embroiled in a case in the Supreme Federal Tribunal in which he is accused of profiting from an advertising contract scheme during his brief presidency. The article notes that “Even when lawmakers are convicted and sentenced for crimes, it can be difficult for them to lose their seats.”

f. Talvane Alburquerque, a legislator from Alagoas in northeast Brazil, was found guilty in 2012 of ordering the murder in 1998 of another member of Congress, Ceci Cunha. That killing allowed Mr. Alburquerque, Ms. Cunha’s stand-in, to temporarily take her seat in Brasília. An appeals court rejected this month a request from Mr. Alburquerque to be paroled from prison.”

The public is also unhappy with the fact that legislators make $175,000 a year, with stipends to cover housing, gas, electoral research, and up to 25 aides.  In fact, “the frustration toward traditional politicians is so high that Congress now includes Francisco Everardo Oliveira Silva, a professional clown better known as Tiririca, or Grumpy, who was elected in 2010 to Brazil’s lower house with more ballots in his favor than any candidate in the nation’s history.” 


Argentine financial shenanigans (again)

Douglas Farah has a fascinating piece in Foreign Policy detailing the latest on Argentina’s financial follies. I’ve heard of many ways that governments have tried to acquire foreign currency, but I didn’t realize that Argentina had turned to encouraging money laundering in their quest for dollars.

Having suffered a 20% fall in foreign exchange reserves in recent months, the Argentine government passed a law last week that essentially “invited money launderers from around the world to put their dollars in Argentine banks with no questions asked.”

Not everyone was in favor of such a drastic move.  The auditor general, for instance, urged the Senate not to pass the law and “called the measure a huge invitation for criminal groups to have their money “legitimized through fictitious companies.”  Indeed.

Apparently, there have already been money laundering concerns about the country. Farah notes that the “State Department had already expressed concern that “money laundering related to narcotics trafficking, corruption, contraband, and tax evasion occurs throughout the [Argentine] financial system” and that “Senior members of the Fernández de Kirchner government are currently involved in a widely reported roiling money laundering scandal in which the president’s deceased husband and predecessor as president, was allegedly involved.”

There is much more reason for pessimism though–definitely check out the original piece because it has lots of interesting details about the group of young Peronists known as “La Cámpora,” (whose leader is Maximo Kirchner, the president’s son) who are the proud “architects” of great policies such as this.



Zimbabwe, part 2


I’ve never been a bigger fan of Facebook than after reading this article about an anonymous Zimbabwean (aka Baba Jukwa, or “father of Jukwa”) tormenting Mugabe and the ruling party via social media.

Baba Jukwa claims to be a “a genuine insider’s account of the factional battles and corruption with President Robert Mugabe’s Zanu-PF.”  He has posted numerous stories on the evil doings of party members, including tales of “rape, murder and corruption.” One of the best parts of the story is that he often gives out the said evildoer’s mobile phone number and urges concerned citizens to call them with their questions and complaints.

Some have questioned whether Baba Jukwa’s stories are credible, but the government (and its mouthpiece newspapers) certainly seems to be rattled.  For instance,

The Herald newspaper labeled Baba Jukwa’s posts as a “destructive, malicious… an imperialist takeover… working to destroy the revolutionary party from within by engaging in malicious and unholy alliances with the MDC-T party”.

In addition, Mugabe’s party, Zanu-PF, is “offering large rewards for the true identity of Baba Jukwa.”

So far more than 93,000 people have officially “liked” the FB page, which is a lot given the population of Zimbabwe is only 12 million, but “it is widely believed that many more follow him anonymously.”

This story makes me very happy.

Zimbabwe round-up, part 1

Two stories about Zimbabwe recently caught my attention.  The first is the news that Robert Mugabe and his family starred in a 2 1/2 hour reality television program. I’ll discuss it this morning and the second awesome piece of Zimbabwe news later this afternoon.

Here are some nuggets from the reality show:

1. Apparently, the Mugabe family all love each other very much (good to know, they could be the only ones).  They also hold Margaret Thatcher in great esteem (somehow I doubt it was mutual), but regards Tony Blair as fundamnetally dishonest.  They apparently call him Tony Bliar around the house (I’m sure Blair is very broken up about this. Mugabe, a well-known homophobe, once referred to Blair’s government as “the gay government of the gay United Kingdom“).

2. The sycophantic director asked Mugabe about his current wife Grace, who he started seeing while his first wife Sally was terminally ill.  The answer is truly unbelievable, even for Bobby:

“Mugabe blinks, as if holding back tears, and says: ‘Although it might have appeared cruel, I said to myself well, it’s not just myself needing children . . . my mother has all the time said “Am I going to die without seeing grandchildren?”

‘So I decided to make love to her. She happened to be one of the nearest and she was a divorcee herself. And so it was.’
Asked what Sally thought of his infidelity, Mugabe replies: ‘I did tell her and she just kept quiet and said “fine”.’

I’m sure the Zimbabwean public love him even more after hearing that touching story.

Why is New Jersey so corrupt?

Filipe Campante and Quoc-Anh Do have a fascinating new working paper called “Isolated Capital Cities, Accountability and Corruption: Evidence from US States.”

They find strong evidence that states with geographically isolated capital cities are also more corrupt (we’re talking about you Albany, Annapolis, Jefferson City, Trenton, and Springfield).  On the other hand, they do not find evidence that isolation prevents political capture. They note that “isolated capitals are associated with more money in state-level campaigns…[and]…that isolation is linked with worse public good provision.”

In short, having an isolated capital city offers a triple whammy of bad repercussions: more corruption, less public good provision, and more capture.  Could this be a reason why autocratic rulers are so fond of building new capital cities in the boondocks?’re doing it wrong!

I think all development economists and practitioners would agree that transparency is crucial in the distribution and spending of funds.  After reading this article about President Museveni in Uganda, though, I question whether everyone is using the same definition of transparency.

Yoweri Museveni, Ronald Kibuule

Here is the now infamous photo of Museveni giving $100,000 worth of cash in a white garbage bag to a youth group.  Note that he also gave out a minibus, a truck and 15 motorcycles at the same gathering.  The photo has stirred outrage in Uganda, as it is an obvious tactic to buy the youth vote in an area of the country where the president is weak.  The government, however, declares that the bag of cash was done in the name of transparency:

“Minister for the Presidency Frank Tumwebaze defended the donation, ‘Quite a few times people have requested the president for money and have stolen it. Giving it in broad day light means that the youth can see who has their money,’ he said. ‘The president is not taking the money to Las Vegas, he’s supporting income-generating schemes.'”

Unfortunately, Museveni has never shown a lot of respect for transparency.  For instance, he typically runs out of money halfway through the year and asks for supplemental funds.  The article notes that “Lawmakers approved $23 million for the president’s official household in the last budget, but at least $74 million has already been spent and more will be needed before the year is up, according to lawmakers handling the presidency’s latest budget proposal.”

The critics, making some sound counterpoints, note that:

a. “It sets a bad example in a country that depends on foreign donors to finance about 25 percent of its budget.”

b.  “There should have been a system to make sure the youth spend the money properly.”

c.  “There’s no system of accountability to make sure we get it back if these youth mismanage it.”

Indeed, it’s one thing to show the donation in public, it’s another to just hand over bags of cash with no accountability, no bureaucratic system of fund distribution, and no follow-up.