Corruption: nature, effects and remedies
Public corruption is an institutional disease that is difficult to detect and to control. In general, corrupt transactions entail benefits to either one or the two parties and for various reasons this unwritten contract is bound to remain secret. Because of this and other specific features, corruption is often difficult to detect, let alone measure it. Although it is present in all countries, corruption is cumbersome throughout the developing world. In 2004, Transparency International noted that corruption was rampant in 40% of the countries ranked in their index. The extent and persistence of public corruption is so large that corruption is viewed as one of the greatest obstacles to achieving sustained growth in the developing world. Addressing corruption requires an examination of its nature, effects and determinants to elaborate relevant policies aimed at reducing its impact.
In order to analyze the causes, consequences and remedies for corruption we must first acknowledge that corruption is a multi-faceted phenomenon. There are different types of public sector corruption that affect a society in different ways. Two of these, namely bureaucratic and political corruption, receive the most consideration by both scholars and policymakers. Bureaucratic corruption is often defined as the abuse of public office for private gain. On the other hand, political corruption involves political decision-makers. In other words, political corruption takes place at the decisional level whereas bureaucratic corruption occurs at the implementation level.
Both bureaucratic and political corruption generate negative effects on economic, political and social outcomes. Despite some existing theories about efficiency-inducing corruption (efficient grease theory), there is overwhelmingly abundant evidence on the negative effects of corruption on economic development. This is due to the damaging impact that corruption has on local and foreign investment, taxation, foreign aid and also the mix of economic activities. These effects are aggravated if corruption is disorganized as opposed to organized. If everybody knows who to bribe and by how much in order to be granted a public service, then the level of aggregate corruption may be lower than if otherwise. The political consequences of corruption are dependent on the extent and organization of corruption but involve distortions to the decisions that politicians make. In general, corruption weakens the government institutions and also reduces political legitimacy. There are two related characteristics that influence the way corruption affects the polities of a country. The first is the relative of the position of the ruling government to the other actors (rival parties, interest groups, unions, etc.). Strong states are able to control bureaucratic and political corruption better than weak states since they have the power to set the rules of the game. The second characteristic is the form of government. Democracies are in general better equipped to reduce the level of corruption due to existence of several checks and balances. In authoritarian regimes, corruption takes place without any check on the ruling government. Corruption may also affect a society through a reduction in trust, the deterioration of moral standards and the rise of social and group tensions in heterogeneous societies.
Understanding the consequences of corruption is essential to become aware of the devastating effects it may cause. Equally important is to identify and understand what causes corruption to be different across countries, or in other words, the determinants of corruption.
This is of critical importance in order to elaborate adequate policies and remedies to deter corruption. When it comes to identifying the causes of corruption, there are theories and evidence aplenty. A large number of causes have been identified, ranging from economic aggregates to religious influences. We may group them into economic and non-economic determinants. The main economic reason why countries differ in their corruption levels is the level of economic development. Put it simply, poor countries tend to have higher corruption levels. It is important to note that corruption both influences and is influenced by economic development yielding a two-way causation between them. Scholars are less certain about the channels and the intermediary variables that are behind this negative relationship. Freedom of the press, long-standing democratic institutions, Protestant majority, political stability, British colonial heritage and unitary tradition are among the most important non-economic determinants associated with lower corruption levels.
It can be observed that the causes of corruption are diverse in nature and some of them are related to the cultural heritage of a society. Therefore, the design of a set of policies as a part of an anti-corruption strategy should consider the heterogeneity of its determinants. Also it is clear that the fight against corruption should be part of a broader agenda involving democratization processes and sustained economic growth. The fight against corruption should ideally come from different sources. Firstly, there is the role of the international community. It is important to not only set standards of good governance, accountability and efficiency but to also develop programs and pilot strategies aimed at institutional improvement. The fight against corruption can be viewed as an international public good and it may carry important positive externalities. Secondly, the internal challenge to corruption should come from above (top-down approach). This involves the ruling government raising awareness, introducing legislation, and clamping down on corruption. Even if there are corrupt politicians this challenge to corruption could be still effective if there is a strong parliament or judiciary or if other checks as the media or regular elections are active. Thirdly, there is the need for the regional and local levels to get involved in this fight (bottom-up approach). Strengthening local democracy, improving accountability, reducing local capture of politicians and bureaucrats, promoting efficiency in the public office through hiring professional and qualified staff, monitoring and auditing of public tenders by independent commissions, and the generation and reliance on own sources of revenue are policies aimed at tackling corruption. It is essential that the external and internal challenges to corruption are coordinated and complement each other. This is especially the case for the vast majority of developing countries where corruption is rampant, institutional quality is poor and there exists a culture of corruption.
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