draining development.pdf - Khazar University

480 Draining Development?which these correlations are valid or reflect biases in the construction of theindicators and how far broad concepts such as rule of law reflect the kind ofproperty rights systems that are actually required to stimulate private investment(Andrews 2008; Haggard, MacIntyre, and Tiede 2008; Haggard and Tiede2011). For our present purposes, we can reasonably assume that relative nationalscores in the Worldwide Governance Indicators are substantively meaningful.See Worldwide Governance Indicators (database), World Bank, Washington,DC, http://info.worldbank.org/governance/wgi/index.asp.19. It is likely that some jurisdictions experience significant illicit inflows alsobecause they offer the advantage of such factors as tax holidays for foreigninvestment or temporarily high interest rates.20. To the extent that they wish to protect some of their own assets at home andprotect their families against the future loss of political influence, they mightcreate institutions such as capital markets as a way of laundering illicit wealth.However, capitalism has a powerful institutional logic. Institutions protectingproperty rights as private or club goods may expand to provide collective goods(McVey 1992).21. Reed and Fontana (2011) provide a basic introduction to this field of regulatinginternational transactions.22. Specialists in this field might like to compare this argument with BrigitteUnger’s work (2007) on money laundering. She detects 25 effects of moneylaundering, most of them adverse, but also explains well the difficulties ofmaking strong claims and of finding suitable evidence.23. Most anticorruption mechanisms operate only within individual jurisdictions.They are notoriously ineffective (Reed and Fontana 2011). It is as if the UnitedStates or some other large federal country decided to dispense entirely with anynational-level crime fighting agency, even for the purposes of coordinating statepolice forces.ReferencesAndrews, M. 2008. “The Good Governance Agenda: Beyond Indicators withoutTheory.” Oxford Development Studies 36 (4): 379–407.Baunsgaard, T., and M. Keen. 2005. “Tax Revenue and (or?) Trade Liberalization.”IMF Working Paper 05/112, International Monetary Fund, Washington, DC.Blundo, G. 2006. “Dealing with the Local State: The Informal Privatization of Street-Level Bureaucracies in Senegal.” Development and Change 37 (4): 799–819.Bornhorst, F., S. Gupta, and J. Thornton. 2008. “Natural Resource Endowments, Governance,and the Domestic Revenue Effort: Evidence from a Panel of Countries.”IMF Working Paper 08/170, International Monetary Fund, Washington, DC.Bräutigam, D., O.-H. Fjeldstad, and M. Moore, eds. 2008. Taxation and State-Buildingin Developing Countries: Capacity and Consent. Cambridge, U.K.: CambridgeUniversity Press.