How Corrupt Are Politicians? Less Than You Might Think!

The search for better economic policy.
April 26 2012 7:30 AM

How Corrupt Are Politicians?

Less than you might think.

Members of India's Parliament.
Members of India's Parliament attend a tribute on Dec. 13, 2011. Recent disclosure laws in India, which require that political candidates publicly list their bank balances and other assets, give us a glimpse into their wealth accumulation.

Photograph by Sonu Mehta /Hindustan Times via Getty Images.

What’s it worth to be a politician? In this country, we hear a lot about the rich lobbying and consulting earnings that lawmakers enjoy after leaving office. But at least while they’re still serving in government, with the exception of a few scandalous examples, our elected representatives take home pretty modest paychecks and nothing else. In many other parts of the world, politicians don’t wait till they’re out of office to reap the rewards of public service: There are rumors that Vladimir Putin has amassed a personal fortune in the billions; the same goes for the Suhartos of Indonesia, Libya’s Qaddafi family, and so on. But these stories of untold riches involve a lot of speculation and rumor, and, in any event, a few high profile cases tell us little about whether rank and file parliamentarians and senators are also profiting financially from their elected offices.

Recent disclosure laws in India, which require that political candidates publicly list their bank balances, the cars they own, and other assets, have given us a glimpse into the wealth accumulation of politicians in that country, which I analyze with coauthors Florian Schulz and Vikrant Vig in a recently posted unpublished study. What we find should be at least a little bit comforting to those who question their politicians’ scruples. Comparing the reported assets of politicians who have run for office in elections since 2003, we find that candidates who were elected to state assemblies fared only marginally better financially than runners-up. There is an exception: Politicians who get high-level cabinet posts do sometimes make out like bandits. But for politicians who never make it very far up the hierarchy, politics doesn’t really pay at all.

It used to be nearly impossible to measure the wealth of politicians, or the rate at which they grew their fortunes. But many countries now require elected officials—and even candidates merely running for office—to reveal their asset holdings. In India, it’s been possible to keep tabs on what politicians have stashed away since 2003, when the Association for Democratic Reform, a nonprofit group, successfully petitioned to have all candidates for public office provide detailed disclosure of their finances. This included a list of bank deposits and loans outstanding; their stock portfolios; and the value of cars, jewelry, buildings, land, and other potentially valuable holdings. (They were also required to list their educational credentials and any criminal history. A surprising fraction of Indian politicians—nearly a third—had criminal backgrounds to report.)

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That was almost a decade ago. In the interim, most states in India have had a couple of parliamentary elections for Members of the Legislative Assembly, which means it’s possible to look at how the wealth of an elected MLA has grown during a term in office, at least for the ones who seek re-election. Critically, there are also many candidates who lost in earlier elections who chose to run again. In fact, in many constituencies—about 500 of them—the winner faces off against exactly the same runner-up the next time around. This makes it possible to benchmark the wealth accumulation of an MLA against that of an otherwise similar yet unsuccessful would-be politician who had to make a living in the private sector until the next election.

The effect of holding office is fairly modest: The wealth of an elected MLA grows, on average, 6 percentage points faster relative to his runner-up. You might think that the candidate who prevails in the election is a smarter, better campaigner—that’s why he won—and his bigger brain may also mean that he is better able to pick stocks and otherwise earn money faster than his opponent. But we found that the “winner’s premium” for MLAs was even larger when we looked only at cases where the vote was decided by a margin of just a few percent—close enough that the election outcome was essentially a matter of random chance. (The attributes of winners and losers in these close elections were also very similar, with roughly comparable initial wealth, education, and criminal histories.)

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