Corruption In Systems Of Exchange


In The Social Construction of Corruption, Mark Granovetter observed that “many behaviorally identical actions may be interpreted very differently depending on circumstances.” For example, he explained that a “gift” or “loan” in one circumstance could be perceived as “bribery” or “extortion” in another.


Corruption, then, is not a universally defined type of exchange but rather a moral judgment based on the violation of local norms. Our interpretations of economic exchanges is influenced by our social, historical, and cultural frames of reference.


As an example, Granovetter cited Olivier de Sardan’s work on solidarity networks in Africa. Olivier de Sardan found that social networks in Africa involve a much stronger obligation for mutual assistance than those in Europe. He explained:

“One cannot refuse a service, a favour, a bit of string-pulling or compliance to a relative, neighbor, party comrade, or friends…. The circle of individuals to whom one feels obliged to render services is thus astonishingly wide.”

This preferential treatment for friends and relatives would be a violation of free-market principles in the West, but it’s a fundamental expectation in many African societies. 


Another illustration of the social embeddedness of corruption comes from Soviet Russia. There, the practice of exchanging favors through social networks arose when the market under state socialism was unable to provide all the goods and services that citizens desired. Kim Scheppele (qtd. in Granovetter 2007) explained that people came to protect their friends and family as insurance against an unstable economy. She said:


"The impersonal universalistic norms that allow people to turn their backs on friends to give a contract to the highest bidder or take a chance on a stranger are not in place…. What looks like corruption are the survival skills of people who are still living in uncertain times, and who have learned to be suspicious of universalistic ideologies.”

Granovetter added:

“Western advisors assume that when people are strangers to each other, their interactions will be more trustworthy, but much of the world doubts this.”


Norms and Violations in Systems of Exchange


Granovetter’s observations about the relative nature of corruption can be interpreted through the lens of Biggart & Delbridge’s systems of exchange. Each of the four systems of exchange involves a unique arrangement of social relations, orientations to other economic actors, and norms for appropriate conduct.


In the price system, actors are assumed to be autonomous and acting in self-interest. Inherent to the price system is the assumption that the greatest number of people benefit from keeping markets “free.” The fact that these assumptions underlie market relations in the United States is evidenced by anti-trust regulations and penalties for “nepotism” and “collusion.”


However, the mutually supportive behavior that is deviant in price systems is the norm in communal systems. Communal systems, such as the solidarity networks in Africa and Soviet Russia, involve preferential treatment toward people who share an association or aspect of their identity. It would be a breach of norms in the communal system to ignore these social relations and behave autonomously, as an economic actor in the price system is expected to do.


In speaking about Soviet Russia, Scheppele explained:


“Corruption can be seen...as occurring when people do not put their friends and family before others…. Bribery is not necessary unless you are an outsider. Bribery is where money substitutes for friendship networks.” 

Thus, the definition of corruption is closely linked to social norms and relations in a given system of exchange. Behavior that is considered deviant in one system of exchange is permissible -- even expected -- in another. 

Image by Christopher Dombres.



Citations:

  1. Granovetter, Mark. (2007). "The social construction of corruption." On capitalism: 152-172.

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