both.
Profit seeking changed the cause and effect relationship between economic policy and scarcity. At first, Tanzania’s endemic shortages were the product of policy choices that resulted in poor economic performance. Before long, however, scarcities could not be explained as the unanticipated consequence of a well-intentioned but flawed set of economic policies. When it became clear that scarcity in official markets made for large profits in parallel markets, the public officials who participating in parallel markets had no economic interest in resolving the scarcity problem. The country’s failed economic policies became a matter of indifference or even a basis for wealth accumulation.
There was an ongoing dynamic of change at work in this process, however. As public officials deepened their involvement in the parallel marketplace, their economic interests underwent a further change. As rent seeking evolved into profit seeking, the presence of the state sector became a limitation on the accumulation of wealth. At a certain point, parallel market entrepreneurs stood to gain a great deal more if they could transform the official economy into a market economy where they could conduct business activities openly and expand them in scale. This change offers an important lesson in the dynamics of Tanzanian development. At first, public sector officials participating in the parallel economy had a stake in the preservation of the official economy because the scarcities it created raised the prices they could charge in their parallel market activities. As this stratum of officials developed into a more and more robust entrepreneurial class, however, the parallel marketplace, which at first had provided an important opportunity, became a constraint on their ability to expand and diversify their economic activities. The state economy now stood in their way.
This explains why so many Tanzanian public officials were at first opposed to economic reform and then began to welcome it. By the mid-1980s, many members of the political-economic oligarchy began to understand that they could accumulate greater wealth by extending their profitable activities to economic areas still dominated by the state, such as large-scale manufacturing, commercial real estate, and retail trade. To take over these areas of the economy, however, the governing elite needed to institute reforms that would legitimize such entrepreneurial activities. The tipping moment arrived when a sufficient number of Tanzanian entrepreneurs, many of whom had their start in the parallel economy, were ready to spread their wings by investing their resources in legitimate retail and productive enterprise. At that point, the presence of large-scale state enterprise was an obstacle in their evolutionary path. Liberal economic reform was the political precondition for illicit entrepreneurs in the parallel marketplace to become legitimate investors in large-scale enterprise.
What had begun as corruption for the purpose of supplemental income had led, in a series of stages, to the mutation of an entire social class. The first step in that transformation was for corruption to become the basis for concealed entrepreneurial participation in the parallel economy. The final step was for corruption to become the source of investible wealth that would make it possible for the highest-ranking members of the oligarchy to assume a dominant place in a legalized and rapidly expanding free economy. This evolutionary sequence explains why corruption has proven so difficult to eradicate. Although official corruption had its economic point of origin in the low purchasing power of public sector salaries, it has long been clear that wage improvements alone do not provide a solution.
Once corruption had begun, it metastasized through the society’s economic, social, and cultural systems in a variety of ways. The income that public officials obtained from rent seeking was not only built into their expectations as consumers, it was also built into their need for investible capital. The term that best suggests the full economic ramifications of corruption in Tanzania is primitive accumulation. Before long, the public officials who engaged in corruption did not treat their gains from this practice merely as supplemental income; they came to reckon it as an indispensable source of capital for the acquisition of land and other productive assets.
The opportunity for corrupt gains became a powerful motivation to pursue a public sector career. One source of this difficulty was that the heightened visibility of elite affluence during the era of reform gave rise to a completely new set of expectations about the lifestyle to which public officials could feel entitled. In Tanzania, extended family pressures added even further to the challenge of reducing corruption, as those fortunate enough to have lucrative public sector employment were expected to provide for relatives who did not. The result is that even as scarcities and prices eased during the period of reform, and even as public sector salaries have improved, Tanzania’s endemic problem of corruption has remained unabated. To the extent that is so, corruption is now functionally independent of the circumstances that first gave it rise.
Transparency International has taken the position that Tanzania’s highly centralized and extensively regulated economy was a major source of corruption.
Centralisation of the economy through nationalisation meant that the few powerful elites had a monopoly on the allocation of resources; in this situation, corruption was inevitable. Second, bureaucratic causes, such as red tape and rigid rules and regulations imposed by central and local government, contribute to increased corruption. Public officials were tempted to subvert these rules or were pressured into subverting them for individual or group gain, despite the fact that such acts were illegal. For example, one could not acquire a plot to build in Dar es Salaam unless one oiled the hands of bureaucrats.12
This was true as the initial source of the problem. Corruption, however, has persisted and even increased as Tanzania’s economy has become more open. If anything, the capital requirements for participating in the country’s expanding private economy have given many officials a greater incentive to engage in rent seeking.
Corruption thrived because it generated its own enabling environment. Ghanaian novelist Ayi Kwei Armah in The Beautyful Ones Are Not Yet Born described a perverse cultural universe in which government officials engaging in corruption became contemptuous of those who were not.13 Armah’s book describes a shame culture in which the few remaining honest officials became the objects of peer group derision and social pressure, often from their own families, to conform to the corrupt system. The force of this culture operated as a powerful motivation to accept the norm of corrupt behavior. The culture of corruption in Tanzania closely resembles that described by Armah. Even in the most prestigious organs of government, such as the court system, there are subtle social pressures to engage in corruption and, thereby, become a part of its normative environment. Jennifer Widner has described this phenomenon in the Tanzanian judicial system in her compelling biography of Chief Justice Francis Nyalali.
Social pressures meant that judges and magistrates who declined to take bribes were at once esteemed for the model they set, and chastised, for their inability to do better by themselves and their communities…. Observed Tanzanian judge William Maina, who had experienced the problem himself, “Magistrates were blamed if they did not engage in corruption. People would say, ‘He is a foolish person because he has not used his position.’”14
Tanzanian lawyer and legal scholar Dr. Edward Hoseah, also director-general of the PCCB in Tanzania, has written an important book on the extent and impact of corruption in his country.15 His research, which he bases partly on his role as a leading anti-corruption combatant, provides a compelling account of the effects of this problem. Hoseah observes that villagers in remote areas expect public officials from their village to return with gifts. When they do so, they are welcomed as heroes; when they fail to do so, they have shamed the village community.16
For the average citizen, the list of transactions with persons in authority is inexhaustible. Individuals seeking to obtain a driver’s license, receive medical treatment at a government hospital, enroll their children in school, report a minor crime at a police station, or mail a package at a post office—all encounter officials who expect an added financial inducement. One of the most common forms of corruption in Tanzania is the extortion of bribes by police for imagined offenses. According to a 2006 Commonwealth Human Rights Report, the Tanzanian
