The Brett Chulu
OUR series on the mechanics of corruption continues. I will argue that to get us out of the vicious cycle of economic decline and the (engineered) poverty trap, extractive political institutions and extractive economic institutions must be uprooted as a matter of national emergency. It is now the only game in town.
I share insights from my own four-year formal research that birthed the model of invisible entrepreneuring and link to research on extractive political economy institutions. In this instalment, we add more layers to the mechanics of corruption. We will look at the broad behaviours of micro-margin sensitivity and invisible pay-structuring.
Micro-margin sensitivity is the application of entrepreneurial licence by invisible entrepreneurs to deliberately avoid the smallest of personal economic losses and to leverage on the smallest of opportunities. Micro-margin sensitivity is conceptually similar to Hakel’s conservation and investment strategies in the context of students optimising personal resources. Micro-margin sensitivity is an invisible entrepreneur’s strategic response to the pressure wrought by targetising (drive to meet pressing socio-economic obligations).
Micro-margin sensitivity has temporal, spatial, and monetary dimensions. These three sub-patterns of micro-margin sensitivity represent the outcomes of an invisible entrepreneur’s omnipresent quest to increase the probability of stretching personal economic gain. In temporal micro-margin sensitivity, invisible entrepreneurs deliberately conserve margins of time in order to increase the probability of minimising the risk of losing out on a profitable opportunity.
A perfect example in this current economic environment is the tendency by retailers to continue accepting US dollar payments even after the promulgation of Statutory Instrument (SI) 212 and SI 213 that expressly prohibit quoting in forex or indexing Zimdollar payments to the forex rate. Some retailers have put up notices informing whoever cares that they do not accept payment in forex but continue to accept payment in forex. These have calculated that it will be a while, even if it were to be a short while before government comes up with practical mechanisms to enforce the two statutory instruments. The retailers are most probably banking on the poor economic environment enabling them to escape arrest through drawing those sent to deal with them into the invisible entrepreneuring net. So there could be a possibility that a structure to monitor those sent to deal with forex ban violators is needed. But that also means setting up monitors to monitor monitors—this will go on ad infinitum — in short such practical challenges spur invisible entrepreneurs to continue defying forex bans by leveraging on micro-margin monetary sensitivity. Certain government-related entities are reported to be mulling price adjustments in line with the movement of the interbank forex rate — this is an open defiance (even if they try to paint this as exemption) to the letter of SI 212 and SI 213. This is micro-margin monetary sensitivity at play.
By applying spatial micro-margin sensitivity, an invisible entrepreneur is intentionally exploiting unutilised spaces to engineer opportunities to stretch or defend personal income margins. It denotes an ever-present alertness to the economic opportunities to which space can be leveraged upon to stretch margins of income.
Examples are invasion of pavements, open spaces and parking lots to set up mobile shops. When invisible entrepreneurs exploit micro-margin monetary sensitivity, they are exploring non-spatial and non-temporal situations to either extract opportunistic monetary gains or insure against incidental or foreseeable monetary losses.
Temporal, spatial, and monetary micro-margin sensitivities can work in alliance. For instance, spatial micro-margin sensitivity can be leveraged upon to preserve temporal micro-margin sensitivity and vice versa.
Invisible pay-structuring refers to the tendency of invisible entrepreneurs to supplement their legitimate contractual rewards with a sophisticated array of income elements, albeit, invisible to asset owners. Invisible pay-structuring is a sophisticated attempt to assert or re-assert the invisible entrepreneur’s de facto ownership status.
Invisible entrepreneurs tend to unwittingly establish a professional remuneration structure. The visible (contractual) and invisible income elements viewed as a whole tend towards a professional pay-structure. Invisible entrepreneurs try to resolve the dual identity paradox of being both “employees” and de facto co-owners by way of invisible pay-structuring.
Invisible dividending is the tendency to extract income beyond the contractual limit for personal use independent of the level of business performance. It connotes a rent for invisible entrepreneuring. Invisible entrepreneurs unwittingly declare regular dividends to reward the risk of invisible entrepreneuring. The purpose of invisible dividending is about saving in anticipation of personal obligations to be settled either promptly or in the near future. The ever-present uncertainty of continued employment drives invisible dividending. Invisible dividending, in cases where an invisible entrepreneur’s income is wholly variable, serves as a form of guaranteed income, imposing a semblance of certainty to income to meet short-term personal obligations.
Invisible dividending tends to be driven by short-term personal needs that cannot be covered by contractual rewards. Invisible entrepreneurs look to invisible dividending to preserve their contractual rewards to meet regular obligations. For long-term needs, invisible entrepreneurs engage in invisible performance bonus.
Invisible performance bonus is a risk management strategy to provision for unforeseen contingencies by pocketing all marginal income gains above normative income targets. Invisible performance bonus is an invisible self-reward for exceeding the performance level set by the social structure controlling invisible entrepreneurs. The recent furore over a US dollar-denominated bond that was redeemed in ZW$ at above the 1:1 rate and offloaded on the back market, pushing rates up, is potentially an invisible performance bonus.
Invisible entrepreneurs hedge the risk of loss of future income by deliberately generating an invisible performance bonus. In the minds of corruption practitioners, saving for unplanned hazards that eliminate them from future rewards needs to insured against. The scientifically proven way to deal with corruption is to genuinely improve the performance of an economy and improve the people’s standards of living. Such an approach has seen corruption levels plummet drastically. The powers that be need to choose to deliberately destroy extractive political and economic institutions — institutions that are systematically architected to enrich a tiny group of citizens in order to perpetuate and preserve political power.
Celebrated research on extractive political and economic institutions has convincingly proven that such institutions bring poverty to the majority of citizens and hence spawn debilitating levels of corruption. The politics must change in order for the economics to change. Let me state it upfront: I am not advocating regime change—I am re-stating what research says—the politics must change because it is the politics that shape economic institutions to be either extractive or inclusive. Without this, change of political players will not guarantee economic revival—it will simply compound levels of extractive economics and corruption. The real fight against corruption is evidenced by a decided move to reverse extractive politics. Anything less has no scientific basis—it is empty talk whether by design or by ignorance.
Chulu is a management consultant and a classic grounded theory researcher who has published research in an academic peer-reviewed international journal. — firstname.lastname@example.org.