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Not just the Corruption, but the Spending

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Reading the newspaper these days in Brazil is a journey through chaos and despair. The country is a black hole.

Repulsive?

Your mind immediately thinks corruption and rent-seeking, at which Brazil has proven its eminence over the past few years. Few days go by when one does not read about tens or hundreds of millions – or even billions – being siphoned off in the most brazen and repulsive of manners. I always think to myself… if it became known that a governor of a US state led a scheme to defraud the state health system of US$92 million there would be riots, if not national and international outrage. In Brazil, this is relatively common fare.

California v. São Paulo

But I’m also thinking black hole in terms of just absurd expenditures. A first issue is the sheer amount of spending.

Comparisons help here. In 2016-17, California, a state with 39 million people spent US$135 million on its state assembly (p.469). Brazil’s São Paulo, a state of 43 million people, spent US$571 million on its state assembly (p.101). Go figure? A state with 9% more people, São Paulo, spends over 4 times what California does on its state assembly? Even more surprising, California has 120 legislators (80 reps, 40 senators) compared to São Paulo’s 94 deputies…

State Auditing Courts

In addition to colossal overspending, a second issue is the object of spending. In Brazil they have an institution called ‘auditing courts’ . The budget for the state auditing courts of São Paulo was US$335 million in 2016, which is more than 2.5 times what California spent on its state assembly…

The state auditing courts are ostensibly auditing institutions, but two-thirds of their members are appointed by the legislature, which is invariably controled by the governor. So you can imagine that not all auditing is on the up-and-up. I have a friend who worked for one state government who told me about being blackmailed by the state auditing courts, in the sense of: “we found irregularities…if you don’t pay X, we’ll make them a big deal”.

Overlap

In addition to the question of independence and institutional blackmail, there are two other issues. First, institutional overlap: many other institutions at the state level, such as the comptroller general of the state, the auditor general, and, to some extent, the public prosecutor, fulfill similar functions to the auditing courts.

19th Century Models for the 21st Century?

Finally, the auditing courts are predicated on a 19th century modus operandi. Here, the leading assumption is that only the state can audit the state, therefore, you need a large contingent of state auditors. I say, free the information of the state. That way, the news media, activists, academics, and opposition legislators can help a much-reduced contingent of auditors do a fine job of unearthing irregularities.

The issue here is freeing information and data, which is clearly the 21st Century solution and the best way of reducing both of the above ills – corruption and wastefulness.

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