We find anecdotal evidence suggesting that governments in poor countries have a more left wing rhetoric than those in OECD countries. Thus, it appears that capitalist rhetoric doesn't flow to poor countries. A possible explanation is that corruption, which is more widespread in poor countries, reduces more the electoral appeal of capitalism than that of socialism.
The empirical pattern of beliefs within countries is consistent with this explanation: people who perceive corruption to be high in their country are also more likely to lean left ideologically (and to declare support for a more intrusive government in economic matters).
Finally, we present a model explaining the corruption-left connection. It exploits the fact that an act of corruption is more revealing about the fairness type of a rich capitalist than of a poor bureaucrat. After observing corruption, voters who care about fairness react by increasing taxes and moving left. There is a negative ideological externality since the existence of corrupt entrepreneurs hurts good entrepreneurs by reducing the electoral appeal of capitalism.
... right-wing rhetoric is less extreme in poor countries than in rich countries while the rhetoric of left-wing parties appears more extreme in poor countries than in rich countries. Overall, this suggests that US- style, pro-capitalist political parties have electoral difficulties in the third world.
... perhaps the most important message of the model is that it points out that corrupt entrepreneurs can have a negative effect on all entrepreneurs by undermining the electorate's faith in markets. A limitation of our model is that good entrepreneurs and the public have no way of disciplining corrupt entrepreneurs.
- Poor countries are systematically dominated by the political left.
- The left prevails because naïve voters are fooled to believe that the government bureaucrats can restore "fairness" by increasing taxes.
- Honest entrepreneurs are damaged by the corrupt ones, and there's no way to defend themselves.
- The third world will, therefore, remain the third world.
There is a vicious circle of corruption, higher taxes, and ever more corruption. There is also no guarantee that a first-world country cannot fall into the same vicious circle.