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Guest Lecture: Professor John McMillanChecks and Balances: Lessons from Peru's Inadvertent Experiment

Page updated 20 Sep 2007

Slides, abstract and paper from Professor John McMillan's Guest Lecture presented at the Treasury on 07 July 2005.

Professor John McMillan

Stanford University

John McMillan is a New Zealander and Jonathan B. Lovelace Professor of Economics in the Graduate School of Business, Stanford University, Stanford, California.

Abstract

In the 1990s Peru, under President Alberto Fujimori, had in place the full set of democratic mechanisms: a constitution, opposition parties, regular elections, a presidential term limit, safeguards for the independence of the judiciary, and a free press.  Despite these checks and balances, the exercise of an elaborate system of bribes by Fujimori's secret-police chief - Vladimiro Montesinos Torres - drained Peru of its democratic substance.  The talk is based on research that uncovered fascinating details about the workings of the bribery system.  The lessons are a warning to all people who value democratic freedoms and are relevant for New Zealanders to better understand the challenges of building democracies in countries we are involved in through peacekeeping operations, or giving aid.

There are lessons also for a well-functioning democracy like New Zealand’s: because of the unique importance of the media, competition policy toward the media should take account of a broader set of criteria than is used for other industries.

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