CAN CORRUPTION EVER IMPROVE AN ECONOMY? by Douglas A. Houston (original) (raw)

Corruption Around the World: Causes, Consequences, Scope and Cures

1998

Corruption is attracting a lot of attention around the world. This paper surveys and discusses issues related to the causes, consequences, and scope of corruption, and possible corrective actions. It emphasizes the costs of corruption in terms of economic growth. It also emphasizes that the fight against corruption may not be cheap and cannot be independent from the reform of the state. If certain reforms are not made, corruption is likely to continue to be a problem regardless of actions directly aimed at curtailing it. [JEL E62, H1, H3, K4, N4] I. The Growth of Corruption I N RECENT YEARS, and especially in the 1990s, a phenomenon broadly referred to as corruption has attracted a great deal of attention. In countries developed and developing, large or small, market-oriented or otherwise, governments have fallen because of accusations of corruption, prominent politicians (including presidents of countries and prime ministers) have lost their official positions, and, in some cases, whole political classes have been replaced. For examples, see Johnston (1997). Corruption is not a new phenomenon. Two thousand years ago, Kautilya, the prime minister of an Indian kingdom, had already written a book, Arthashastra, discussing it. Seven centuries ago, Dante placed bribers in the deepest parts of Hell, reflecting the medieval distaste for 559 * Vito Tanzi is the Director of the IMF's Fiscal Affairs Department. An earlier draft of this paper was written while he was spending a short sabbatical at Collegium Budapest, Institute for Advanced Study (Budapest). The author thanks Hamid Davoodi and Shing-Jin Wei for their comments.

CHAPTER 3 3.0 IMPACT OF CORRUPTION ON THE NATION'S ECONOMY

From OHCHR's experience, corruption negatively impact the enjoyment of all human rights –civil, political, economic, social and cultural, as well as the right to development, which underscores the indivisible and interdependent nature of human rights. The impact on the realization of human rights depends on the level of pervasiveness, the different forms and levels of corruption. Corruption can affect human rights as an obstacle to their realization in general and as a violation of human rights in specific cases. Corruption in the public and private spheres and its proceeds are not confined within national borders, nor is its impact on human rights. It typically diverts funds from state budgets that should be dedicated to the advancement of human rights. It therefore undermines a State's human rights obligation to maximize available resources for the progressive realization of rights recognized in article 2 of the International Covenant on Economic, Social and Cultural Rights. Corruption undermines the fairness of institutions and processes and distorts policies and priorities. As a result, corruption damages the legitimacy of regimes leading to a loss of public support and trust for state and government institutions. Corruption impact on the ability of the State to protect and fulfills its human rights obligations, and to deliver relevant services, including a functioning judiciary, law enforcement, health, education, and social services. In countries where corruption pervades governments and legal systems, law enforcement legal reform and the fair administration of justice are impeded by corrupt politicians, judges, lawyers, prosecutors, police officers, investigators and auditors. Corruption in the rule of law system weakens the very accountability structures which are responsible for protecting human rights and contributes to a culture of impunity. Since illegal

Determinants of Corruption in Developing Countries: The Limits of Conventional Economic Analysis

Corruption takes place when public officials break the law in pursuit of their private interest. But public officials can break different laws in different ways with different implications for the public good. The factors driving corruption and the effects of corruption can therefore vary widely. Understanding the causes and consequences of corruption is particularly important in developing countries, which almost without exception suffer from high levels of corruption. The virtual uniformity of this evidence strongly suggests that developing countries must share some powerful common drivers of corruption that are different from those that affect advanced industrial countries. At the same time, the very diverse economic performance of developing countries suggests that not all developing countries suffer from the same types of corruption. These two observations, summarized in our first section, provide the backdrop to my analytical investigation. I begin this investigation by identifying the drivers of corruption implicit in most conventional neoclassical economic analysis of the topic. Although these drivers are undoubtedly important in many contexts, I next argue that a number of other drivers of corruption may be more important in developing countries. These countries have several critical structural features that are recognized in the broader social science literature but the implications of these features for the economic analysis of corruption have not been adequately developed. We argue that the types of corruption generated by these structural features of developing countries are much less amenable to the types of anti-corruption measures that are prescribed by the conventional analysis of corruption. I then use this analysis to provide an alternative classification of types of corruption in developing countries and suggest that policy has to be appropriate to the drivers of corruption most relevant in particular countries. The implications of this analysis for anti-corruption strategies in developing countries are discussed in the final section.

The Impact of Corruption on Some Aspects of the Economy

International Journal of Economics and Finance, 2013

Theoretical and empirical debate on the impact of corruption on the economy remains unclear. Many studies on corruption seem that the world is occupied by two kinds of people, "sanders" and "greasers". It depends on what the meaning of "corruption" is for them. Some scholars argue that corruption is an obstacle to economic growth, whereas others believe that corruption can (in some circumstances) endorse growth. Corruption also has a negative impact on investment, Foreign Direct Investment, and economic development as a whole. Measuring corruption is still an issue for most economists due to the difficulties of defining it, and also different forms of corruption require different objective measures. Nevertheless, recently, some measures of corruption have been widely accepted and recognised by researchers. This paper is a critical review at these positions by reviewing the theoretical literature on the impact of corruption on an economy as a whole. It is concluded that there is not enough evidence to support the "greasing the wheels" hypothesis. Instead, this document reviews different measurements of corruption to reveal that corruption is harmful for the economy.

Corruption in the Twenty-First Century Global Era: Meaning, Extent, and Prevalence

EJMSS, 2024

The term "corruption" carries both a qualitative and moral meaning. Because corruption is unethical, it must be eradicated. It has existed for all of recorded history. The corruption perennial's resilience and capacity to spread throughout almost any setting does not appear to have decreased. Every day, the media serves as a constant reminder that unethical behavior persists. It happens in all spheres of society and economic systems, from open capitalist economies like the United States (US) to centrally planned economies like the former Union of Soviet Socialist Republics (USSR), and in both democracies and military dictatorships. In recent years, corruption has evolved from primarily being a national or regional problem to one that is a worldwide revolutionary force. The global outcry against corruption has spread over the political scene like a blaze in less than five years. Nations have collapsed. Long-standing ruling parties have faced pressure to leave power. Prosecutors have questioned and herded presidents, prime ministers, lawmakers, and once-powerful business chieftains into the docket. Hardly any nation or area has been exempted from this. This paper holds that there are several reasons for the emergence of corruption and that it is challenging to define corruption in a way that would apply to all nations. In several nations, there have been apparent and actual rises in corrupt practices. This paper investigates the allocation of government benefits, costs, and employment (which become valued when corrupt possibilities exist) to examine the motivations for engaging in corrupt actions. It also covers the variables that affect the scope and frequency of bribes, such as the advantages offered, the authorities' discretion, the dangers connected with them, and the relative bargaining strength of the two sides participating in the bribe transactions. This paper explores the financial consequences of corruption, such as increasing social inequality, diminished political legitimacy, and possible inefficiencies in government procurement and services (red tape and delay). It also looks at the utilization of bribe profits (capital flight). This paper delves deeper into potential strategies to mitigate the worst impacts of corruption, such as raising the stakes and expenses of detection and decreasing the chances and incentives for corruption. Keywords: Corruption, Bribery, Bribes, Bribers, Bribees, Social Inequity, Political Legitimacy.

Consequences of Corruption at the Sector Level and Implications for Economic Growth and Development

2015

Oecd Organisation For Economic CoOperation And Development This report provides an analysis of the impact of a range of corrupt practices on economic growth and development in four key sectors: utilities and infrastructure, extractive industries, health and education. As quantification of the impact of corruption on economic growth at a macro level remains challenging, this report presents evidence at the micro and sectoral level to capture the various consquences of this phenomenon. Prepared by the Oecd as a contribution to the G20 efforts to fight corruption, this report aims at increasing the understanding of the channels by which corruption inhibits economic growth and assist countries in further integrating anticorruption in their efforts to foster inclusive, sustainable growth and development. Drawing lessons from the cross-cutting analysis, the report encourages countries to design comprehensive anti-corruption strategies for which progress could be measurable and which would be tailored to specific country circumstances and economies to achieve the best results for economic growth and value-for-money.

The Incidence and Persistence of Corruption in Economic Development ∗

2003

Economic development and bureaucratic corruption are determined jointly in a dynamic general equilibrium model of growth, bribery and tax evasion. Corruption arises from the incentives of public and private agents to conspire in the concealment of information from the government. These incentives depend on aggregate economic activity which, in turn, depends on the incidence of corruption. The model produces multiple development regimes, transition between which may or may not occur. In accordance with recent empirical evidence, the relationship between corruption and development is predicted to be negative. 1

Corruption, institutions, and economic development

Oxford Review of Economic Policy, 2009

Many scholarly articles on corruption give the impression that the world is populated by two types of people: the "sanders" and the "greasers". The "sanders" believe that corruption is an obstacle to development, while the "greasers" believe that corruption can (in some cases) foster development. This paper takes a critical look at these positions. It concludes that the evidence supporting the "greasing the wheels hypothesis" is very weak and shows that there is no correlation between a new measure of managers'actual experience with corruption and GDP growth. Instead, the paper uncovers a strong negative correlation between growth in genuine wealth per capita -a direct measure of sustainable development -and corruption. While corruption may have little average e¤ect on the growth rate of GDP per capita, it is a likely source of unsustainable development.