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Transparency and Equatorial Guinea

Nick Smith posits at CSIS:

Transparency has been a watchword in development circles for some time now, and the concept is usually linked to a faith in the rational workings of free markets. Researchers and policy makers have argued that overweening state structures in Africa have allowed corruption to proliferate, undermining prospects for broad based growth. Large state structures allow state officials to capture resources and corruptly funnel them through patronage networks. Such invisible patron-client networks work behind the formal state structure, causing distorted development outcomes. The solution, the experts argue, is to free the market from the state and allow it to work with as little government intervention as possible. As this happens, a state’s economy can more readily become embedded in the global market, which will strengthen the incentives for rational economic behavior and serve as a further check on corruption.

In Equatorial Guinea, however, the process has not worked out this way. Formal financial networks have proven opaque rather than transparent because they exist alongside and in conjunction with informal markets. This combination provides increased opportunities for illicit graft, but also simultaneously produces the conditions for wealth creation in licit markets. In this case, greater embeddedness in global markets did not solve the problem of corruption; it merely added new mechanisms through which officials could engage in graft.

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