Capturing Corruption in a Land of Free-Riders

Opinion Policy Analysis by Gaelle Nohra, Staff Writer

January 29th, 2021

After years of prevalence, corruption is no longer a simple term in our national dictionary yet transcended to a word making it to our daily conversations. Using the principal-agent and collective-action problems, this article will serve to redefine corruption and recapture its source in the Lebanese context. 

According to Michael Jensen of Harvard Business School and William Meckling of the University of Rochester[1], the principle agent problem occurs whenever one party’s representative fails to act in the best interest of this party. This problem could find specific relevance in the legislative field when lawyers head in a direction compromising the well-being of their clients. The principle agent problem is often referred to as an example of moral hazard, where a representative acts in his own interest given that he has immunity against any potential repercussions. One simple example is insurance. A car owner is less reluctant to expose his asset to risk when he knows another entity will eventually intervene and take care of damages. Asymmetric information stands among the core reasons for why the principle agent problem is present, it touches upon the barriers preventing the principal from properly monitoring the performance of the agent and develop accurate insights with regards to his intentions. 

This could be better understood by zooming into Lebanon. Corruption isn’t the only facet explaining why minimal legal action have been taken against public officials and political representees, the ambiguity prevailing within the system’s framework equally occupies a fair share as well. Narrowing this down, having evidence that X is corrupt is not enough for him to be condemned simply because the legal process through which X is going to be declared condemned, lacks transparency. 

In a similar context to the principle-agent problem, David Hume and in his 1973rd A Treatise of Human Nature, introduced the collective action problem where rational decisions taken by individuals serve to increase their very own payoff while reducing the overall payoff of a group. Not contributing to a street lighthouse is an example of this problem where the persons defecting are labeled as free-riders as they benefit from a good they had zero contributions for.

Various scholars described corruption as a concrete example of a principal agent problem where political representatives fail to portray the concerns of their representees and engage in power misusage schemes. Nonetheless, critics of this theory application stress that the “principal-agent theory mistakenly assumes that there will be ‘principled principals’ in civil society and in positions on power to actively oppose corruption and enforce anti-corruption reforms” (Marquette and Peiffer, Collective Action and Systemic Corruption, p.2), [2]arguing also that corruption  persists when it upgrades to an inevitable norm and resisting it results in very little gains especially when one individual isn’t convinced that his fellow citizens aren’t corrupted. Simply put, the collective-agent problem attempts at defeating the principal-agent problem by assigning the prevalence of corruption to the presence of free-riders inside a community. But the collective-agent problem from its end, also hasn’t escaped criticism. While it highlights the undesirable outcome a rationally and individually taken decision has on a certain group, it fails to foresee the fact that also, in a principal-agent problem, agents, who are also rational individuals, diverge from the behavior aligning with their principal’s interest because they recognize the little gains they personally end up with. Back our first example, in that case, the lawyer would perceive a higher benefit from backstabbing his client higher than the benefit he gets from the salary he might earn. As both theories assume individual rationality “both predict that people will engage in corrupt acts only when it is in their individual self-interest.” (Marquette and Peiffer, Collective Action and Systemic Corruption, p.11).

Lebanon 2021

The last argument brought forth and if applied to Lebanon, indicates that the principal-agent problem could often be perceived as a micro-example of the collective-agent problem except that in the former, more barriers to information on how the agent behaved corruptly exist while in the later, free-riders or agents feeding into corruption, can sometimes be easily caught or identified especially in small groups. 

In fact, the draining 2021 atmosphere in Lebanon reshaped the concept of free-riding by moving it from an errant behavior to a standardized one. Citizens being “free-rided” are now obliged to “free-ride back”. Here, the term “Free-rided” encompasses all of the burdens falling on the shoulder of the Lebanese community and resulting from a disabled state, ranging from the depositor’s inability to access his money to paying taxes without benefitting from proper services. On the other hand, “Free-ride back” consists of the Lebanese community punishing its state by refraining from fulfilling its duties (i.e, paying taxes, obeying lockdown measures, defaulting on loans). As if Lebanon has now become a land where free-riding forms the major interaction agents and citizens have now between each other.

A land of free-riding, ok. But who started? 

While the terminology “free-ride back” we contextualized in the article fairly elucidates upon the reason the Lebanese community might refrain from obeying its state, allocating the entirety of our flaws as citizens to the ruling elite is quite a misconception. Let’s face it, corruption is no longer a feature of our system yet turned, and over the years, into an integral part of the Lebanese identity that manifests itself with every activity we do. From recycling at home, to waiting in the line in front of an embassy, to refraining from cheating in a classroom, our corrupted genes gets now exhibited in our daily routine.

 In the end, it remains quite easier to speak out what corruption isn’t then what it truly is. Corruption is not exclusive to the ruling system when citizens are part of the system, Corruption, sadly, is no longer a persisting flaw in the country but turned into a crucial part for our life dynamics and a survival mode.  

[1] https://www.investopedia.com/terms/p/principal-agent problem.asp#:~:text=The%20principal%2Dagent%20problem%20is,roles%20of%20principal%20and%20agent

[2] Collective Action and Systemic Corruption, by Heather Marquette and Caryn Peiffer, University of Warsaw 29. Retrieved from https://ecpr.eu/Filestore/paperproposal/b5944a31-85b6-4547-82b3-0d4a74910b07.pdf