Thursday
Dec062012

The End of 'Old Corruption' in Britain  

For a good part of the last month and a half, we have been studying different forces that led to the collapse of patronage politics in different countries (see  hereherehere, and here).

Patronage was an important problem in pre-modern Britain as well. The modern British state took a long time to build and patronage politics a long time to eradicate. It was only after 1485 and the end of the Wars of the Roses that the modern state started to emerge in Tudor England (as we discussed here).

And it was only after the Glorious Revolution of 1688 when the fiscal system expanded that the government started to create a meritocratic bureaucracy to collect the excise tax (as documented by historian John Brewer in his classic The Sinews of Power). But this did not end the patronage by any means.

The continuation of patronage politics in Britain, which came to be known as ‘Old Corruption,’ became one of the prime targets of radicals vying to change the British political system, particularly at the time of the French Revolution. Starting around then, a series of measures started to be implemented to eradicate it. For example, auctions for the sale of national debt were introduced for the first time to try to eliminate favoritism in the allocation of debt.

In recent work, for example, Elites and Corruption: A Model of Endogenous Reform and a test using British data, Mircea Popa of Harvard examines the forces that led to the eradication of Old Corruption. He argues that the fundamental source of Old Corruption was the executive and the King who used it to extract rents from the political system. Even though after 1688 Parliament was dominant, the King still formed the executive and nominated the Prime Minister, though such a minister had to command majority support in Parliament. Parliament tolerated this corruption for much of the 18th century because its worst features could be contained by threatening to reform the system if the executive was too egregious.

Popa argues that around the time of the French Revolution this implicit bargain fell apart because the conflict made the undersupply of public goods inherent in this system very costly. To expand the supply of public goods, Parliament would have had to grant the executive more tax revenue, but this made it very difficult to sustain the limited corruption equilibrium because the executive would have been tempted to grab the extra tax receipts. Thus Popa argues that the increased demand for public goods made it no longer possible to use implicit mechanisms to limit ‘Old Corruption’ and instead Parliament started to pass a series of legislative reforms which eliminated it.

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