Tackling Corruption in La Paz

Emily MoirAuthor: Emily Moir, The Business of Cities.

In the new urban age, interest is growing in city leadership and in the skills, styles and character traits of successful city leaders. This blog looks at one city leadership success story – that of Ronald MacLean Abaroa, who was elected Mayor of La Paz, Bolivia four times between 1985 and 1996.

When Ronald MacLean first came to La Paz’s City Hall in 1985, he was the city’s first democratically elected mayor in forty years. He inherited a city in tatters. City Hall was literally crumbling and there was no money for repair works, telephone bills or lighting. Public works machinery was often missing, broken or outdated. Bureaucracy was so complex that many citizens paid ‘runners’ to guide through their applications or enquiries. In MacLean’s first month in office he was dismayed to find that the city had insufficient revenue to pay its improbably large workforce of 5,700 staff.[i]

The mayor set about making efficiency reforms immediately. He managed to convince union leaders that the public sector payroll was unsustainable (and in any case was not paying workers a subsistence wage) and needed to be cut by 2000 workers. He scheduled and prioritised public works projects, simplified the information service at City Hall, and removed troublesome staff. But MacLean soon realized that his reforms were having only the smallest impact on the city’s bottom line, and began to suspect that problems ran deeper than mere inefficiency. He asked Bob Klitgaard, one of his former professors at Harvard, to come to La Paz to review the situation.

Together, Klitgaard and MacLean quickly uncovered a staggering degree of corruption in the city. Bribes, collusion, extortion and kickbacks were widespread. The office for public procurement had no open or transparent bidding process. Labourers in the public works department were selling parts and fuel from city machinery. Property tax assessors under-valued property in return for payments. Corruption was evident at all levels of the administration. MacLean decided to put his faith in a formula devised by Professor Klitgaard, to help him to tackle corruption in La Paz:

Corruption = Monopoly Power + Discretion – AccountabilityLa Paz shutterstock_99511478

Klitgaard’s thesis centres on the assumption that corruption is not a question of morals or ethics, but rather is one of incentives and deterrents. MacLean and Klitgaard believe that those with an opportunity to be corrupt (i.e. those with monopoly power and limited accountability) carry out a rational cost-benefit analysis in making their decisions. They consider the potential financial gains of corruption, and whether these are outweighed by possible losses such as loss of reputation or potential to be fired.  In La Paz, incentives for corruption were strong. Extreme poverty pushed many individuals to feel they had no other choice but to supplement their incomes by corrupt means. Deterrents were weak. City Hall jobs were so poorly paid that the threat of unemployment was no disincentive. Corruption was so widespread that there was little shame attached to being found out. Indeed wealth obtained from corruption was flaunted rather than hidden.

MacLean and Klitgaard set about changing the incentive structure in the city. MacLean introduced harsher fines for corruption and publicly shamed some corrupt senior figures within the administration, notably the City Cashier who was fired and handed over to state prosecutors. The mayor used $1million of a World Bank grant to increase key city employees’ pay, and involved employees in assessing and correcting corrupt practices within the city, giving them ownership of anti-corruption solutions they came up with.

The results of MacLean’s actions were impressive. Within three years, he had significantly reduced corruption in all areas of city government. Top talent began to consider a career in City Hall. City revenues increased more than threefold, rising from approximately $7.8 million in 1986 to over $27 million by the decade’s end. Over the same period, the budget deficit declined from about 40 percent of total revenues to less than 10 percent[ii] and investment in city infrastructure rose by a factor of ten.[iii]

MacLean’s success in tackling corruption in La Paz has been internationally recognised. He is a founding member of Transparency International and teaches at the Harvard Kennedy School of Government. MacLean has also assisted in building a network of expert anti-corruption practitioners in 20 countries of the South Eastern Europe region – a network which was rewarded with a UN Public Service Award in 2011.

 

[i] Preventing Corruption by Reinventing Local Government
[ii] ibid
[iii] Corrupt Cities: A Practical Guide to Cure and Prevention (2000) Maclean-Abaroa, Kliitgard and Parris

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