Corruption Scandals, Moral Panics and Neoliberal Reforms

Contrasting ‘Mani Pulite’ and ‘Lava Jato’

Professor Alfredo Saad Filho
SOAS, University of London
SMALL GROUP PROJECT: MARCH 2018 – FEBRUARY 2019

Abstract

This research project compares and contrasts two of the largest corruption scandals in recent history, the Italian ‘mani pulite’ (1992-1994) and the Brazilian ‘lava jato’ (2014-present), aiming to offer: (a) an innovative analysis of corruption, corruption scandals and neoliberalism rooted on the political economy of systems of accumulation; and (b) an original account of the contribution of the Italian and Brazilian corruption scandals to the transition to neoliberalism in Italy and the deepening of neoliberal reform in Brazil.

Departing from the prevailing market-fetishising moralism that generally underpins public and scholarly debates on corruption, this research project focuses instead on the social structures, social and economic reproduction processes, and resource allocation mechanisms embedding corruption. This approach rests on the interdisciplinary conversation between political economy and heterodox economics. Thus, examining capitalism as a system of generalised commodity production for profit structured by value creating processes and distribution among distinct and often conflictual classes, this research project analyses the real economic activities, processes, structures and institutions connecting individuals and societies with the goods and services involved in their reproduction.

This research project contributes to knowledge by: (1) challenging conventional narratives positing corruption as an epiphenomenal encroachment on an imaginary perfectly competitive and ‘efficient’ socio-economic system, and (2) offering an original understanding of corruption as a socio-economic phenomenon intrinsically connected to capitalism in general and neoliberalism as its current phase, able to explain why anti-corruption movements often fail to address clientelism. Therefore, this research project’s value in realising the goals of ISRF lies in its advancing the social sciences through the promotion of an innovative mode of inquiry of corruption’s place in the dynamics of long-term economic development, and of corruption scandals as pivotal moments in the transition to neoliberalism.

The Research Idea

This research project compares and contrasts two of the largest corruption scandals in recent history, the Italian ‘mani pulite’ (1992-1994), and the Brazilian ‘lava jato’ (2014-present).

In both countries, the exposure of egregious cases of corruption triggered large-scale mobilisations against individuals, parties, and distortions in the political system. These movements supported investigations led by aggressive, media-friendly and increasingly popular teams of judges and police. Their findings fed media interest, leading to the further growth of the mobilisations. The momentum built by these mutually-reinforcing processes led to the downfall of powerful politicians, the collapse of several parties, and a crisis of legitimacy of the political system. A political era collapsed in both countries. The scandals led to wide-ranging reforms aiming to create a new relationship between the State, the economy and society, based on honesty, transparency and ‘republican values’.

Despite these high hopes, in both countries the investigations exhausted themselves, the scandals were only partly resolved, and the reforms replicated the perceived distortions of the political system, including clientelistic networks and systemic corruption. In neither case was a ‘clean’ polity achieved. In addition, an unexpected consequence of the scandals was the shift of the government to the right and rapid neoliberalisation of the economy and society (Fine and Saad-Filho 2017, Saad-Filho 2017). In Italy, neoliberal reforms made great strides in the early and mid-1990s, directly in response to mani pulite (Guzzini 1995); in Brazil, the impeachment of President Dilma Rousseff unleashed an unprecedented wave of neoliberal reforms (Saad-Filho and Morais 2017).

Background

Most studies of corruption define it as the abuse of public power for private benefit (World Bank 1997). This definition has been widely accepted by mainstream analysts and policy-makers, including the so-called ‘post-Washington Consensus’ and its ‘good governance agenda’ (Saad-Filho, 2011).

This approach is underpinned by neoclassical economics, utilitarianism and methodological individualism (Fine and Milonakis 2009): corruption is an exogenous attack on society and the State driven by fortuitous criminality, which destabilises the ‘proper’ functioning of political and economic processes, undermines accountability, distorts incentives, reduces efficiency and stifles economic growth (Harrison 2007). The focus is firmly placed on the behaviour of civil servants, implicitly suggesting that the State (as opposed to private firms) tends to work in expensive, incompetent and possibly criminal ways. This suggests that corruption ought to be addressed by market processes, not least those popularised by New Public Management and ‘audit culture’.

These conventional understandings of corruption, its consequences, and the appropriate remedies, are insufficient and misleading. They foster a moralising understanding of corruption, focusing on the ‘distortions’ that make real-world economic systems depart from the perfectly competitive ideal, which are presumably due to the criminal actions of a few ‘bad apples’. This approach also deflects attention away from the role of corruption in the system of accumulation, its role in wider political, economic, historical and social relations, and the systemic consequences of corruption itself.

The Focus

Countering conventional (neo)liberal accounts emphasising ‘crime’, ‘justice’, and ‘economic competence’, this research project argues that the Italian and Brazilian corruption scandals and the associated judicial investigations:

  1. Organically reached a point of exhaustion from which they retreated.
  2. Played pivotal roles in the transition to neoliberalism in Italy and the deepening of neoliberal reforms in Brazil.
  3. Increased political instability in both countries.
  4. Underpinned a political shift to the right in Italy and Brazil.

In order to examine these claims, this research project starts from how economies actually function, including the social structures, processes of social and economic reproduction, and the role of corruption in resource allocation. This approach is grounded on an interdisciplinary political economy and heterodox economics. While political economy examines capitalism as a system of generalised commodity production for profit, focusing on the structures and processes of value creation and distribution among distinct and often conflictual classes (Fine and Milonakis 2009), heterodox economics starts from the real economic activities, processes, structures and institutions connecting individuals and societies with the goods and services involved in their reproduction (Lee 2009).

An interpretation of corruption, corruption scandals and neoliberalism rooted in heterodox economics and political economy detaches corruption from the prevailing market-fetishising moralism that generally underpins public as well as scholarly debates. Instead, it locates those problems and processes within the wider set of social relations that distinguish the system of accumulation and the modalities of resource allocation, in order to offer distinctive and unique insights.

Theoretical Novelty

The shortcomings of conventional approaches make them unfit for the purpose of understanding why, despite extensive prosecutions and the destruction of the previous political system, social and political outcomes did not change much, why polities shifted right, and why economies turned in a neoliberal direction. In order to overcome the limitations of conventional interpretations, this research project focuses on three primary goals:

  1. A critical review the traditional literatures on corruption.
  2. An alternative analysis of corruption, scandals and neoliberalism, rooted on the political economy of systems of accumulation.
  3. A fresh examination of the Italian and Brazilian scandals, to offer an original account of their dynamics, the limitations of the judicial processes and political ‘reforms’, and how they fed these countries’ transitions to neoliberalism.

The framework developed through this research project will:

a) Address a gap in scholarship through the synthesis of existing literatures and their application to problems of growing importance in many countries.

b) Challenge conventional narratives of corruption, where it is an epiphenomenal encroachment on an imaginary perfectly competitive and ‘efficient’ socio-economic system.

c) Offer an original approach to corruption as a socio-economic phenomenon intrinsically connected to capitalism in general, and neoliberalism as its current phase.

d) Enrich current understandings of neoliberal ‘shock therapy’ in the wake of political crises, and the meaning and significance of the anti-corruption policies of the post-Washington Consensus.

e) Offer a novel explanation of why anti-corruption movements often fail to address clientelism, while the ‘reforms’ often bolster it.

Methodology

In order to provide a textured examination of the Italian and Brazilian scandals in the light of the goals explained above, this research project will address the following specific questions:

  1. What economic, political and social circumstances led the corruption scandals in Italy and Brazil to trigger large-scale investigations enjoying broad popular support?
  2. What circumstances led the scandals and the investigations to foster moral panics requiring ‘radical’ reforms?
  3. What was the nature of the ‘reforms’, and how were they connected to the movements which supported them?
  4. What made the anti-corruption movements prone to capture by political forces of the right, even when those movements had emerged from the left and were rooted in popular mobilisations against ‘corrupt elites’?
  5. How and why did the investigations, the supporting mass movements and the moral panics exhaust themselves?
  6. How and why did those scandals pave the way for the transition to neoliberalism (Italy) or the intensification of neoliberal reforms (Brazil)?
  7. How and why did the scandals contribute to long-lasting political instability?
  8. How and why did the scandals validate long-term shifts of the government to the right in both countries?
  9. What is the relationship between the social base of support of anti-corruption movements, and the reconfiguration of social blocs in a neoliberal direction?

Work Plan

This research project will comprise three major stages spanning over 12 months, including: (a) preparatory activities, (b) main research activities, and (c) dissemination and impact.

Preparatory activities will be dominant during the project’s first 2 months. They will include the recruitment of a Research Officer, collection of a comprehensive bibliography, and a planning meeting in London.

The middle 5 of the project will be focused on research activities, including a set of surveys of the literature, a historical review of the cases of Italy and Brazil, the development of the theoretical framework outlined above, and its application to review the conventional literature and the most influential accounts of the two country cases.

The final 5 months will involve writing up the outputs. This will require a meeting of the research team in Rome, in order to plan and organise the work.

Outcome

This research project will lead to the following outputs:

  1. Four refereed academic journal articles, focusing on (a) the conceptual analysis of corruption, (b) a detailed review of the case of Italy and why it still matters, (c) a detailed review of the case of Brazil and why it matters, and (d) a comparison between the two cases.
  2. One short jointly-authored monograph bringing together updated, revised and properly integrated versions of these outputs. The goal is to publish the manuscript with a reputed university press based in the UK or USA.
  3. One academic reader on corruption studies, to be published by a reputed publishing company based in the UK or USA.

This project will also help to support a much larger research proposal arguing that corruption is not anathema but, rather, a systematic consequence of neoliberalism; in turn, it demoralises the political system, undermines the functioning of the state, and supports the emergence of new forms of political authoritarianism, all of which potentially positing severe challenges to neoliberalism itself.

This argument will be tested through the examination of the role of corruption and corruption scandals in the onset of ‘new authoritarianism’ (Bruff 2014, 2016a, 2016b; Saad-Filho and Morais 2017; Tansel 2017) in several countries, including Brazil, Hungary, India, Russia, and Turkey.