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Corruption Bad: Undermines Support for Assistance
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- Corruption Bad: Regressive, Exacerbates Inequalities
- Corruption Bad: Negative Effects Outweigh Positives
Corruption Bad: Undermines Support for AssistanceFAILURE TO ADDRESS CORRUPTION TURNS CASE – UNDERMINES PUBLIC AND NGO SUPPORT FOR AID Robert Charlick, Political Science Professor, Cleveland State University, 1993, Corruption and Reform 7:177-187, p. 177 With the end of the Cold War in Africa international donor agencies have begun to say openly what they could previously only privately muter – that corruption, rent-seeking, or other such euphemisms, is a major impediment to the economic development of many African countries. Perhaps just as important, it is a threat to donor programs as well. Not only are taxpayers and their representatives displaying an increasing impatience with the waste of public resources which systematic administrative corruption entails, private sector actors are decreasingly willing to tolerate the high cost of doing business in societies with “informal” transaction costs are so steep. As business interests in Africa falls, even for traditionally African oriented investors like the French, public support for aid will inevitably decline as well.
Madalene O’Donnell, NYU Center on International Cooperation, 2006, Post-conflict Corruption: A Rule of Law Agenda?, Draft Chapter for International Peace Academy, Civil War and the Rule of Law, [http://www.worldbank.org.ezp1.harvard.edu/wbi/governance/pdf/corruption_conflict_and_rule_of_law.pdf], p. 7-8 Until recently, the social costs of corruption received little attention in policy discussions. Studies now show that corruption is associated with lower health and education outcomes and with lower levels of education spending. Corruption exacerbates inequalities; women, the poor, and rural areas are disproportionately affected. Studies of public expenditures at the local level indicated that better-off communities experienced less “leakage” in education funding, resulting in de facto social spending that was even more regressive than de jure allocations.
Michael Johnston, Political Science Professor Colgate University, 1993, Corruption and Reform, 7:189-204, p. 191 The more obvious linkage is that between corruption and undemocratic politics. While corruption can sometimes distribute small benefits to a large proportion of the population, and can break through bureaucratic and political stalemates, more often it is a “regressive” form of influence, benefiting the wealthy and the well-connected while depriving the have-nots of their liberties, political choices, and material resources. For three decades we have seen corruption offered as justification for coups and one-man, one-party politics in numerous nations in Africa. While we await the results of Nigeria’s transition from military rule to a Third Republic in 1993 with much anticipation, it is fair to say that the “strongman” approach to fighting corruption has produced dismal results. Indeed, often it has led to more corruption, in more disruptive forms (on this last point, see section IV, below).
Kempe Ronald Hope. Center for Graduate Studies, Atlanta University, 1987, Corruption and Reform, 2:127-147, p. 133-4 Administrative corruption in developing states has become very pervasive and, despite the fact that some writers have argued that there are benefits of corruption, the evidence and data suggest that corruption impairs administrative efficiency and has negative effects on the process of socio-economic and political development. First, there are the economic costs. Corruption increases the cost to governments for doing business. Kickbacks and illegal commissions which have to be paid to high ranking bureaucrats are simply added to the final costs of contracts, equipment, supplies and so on. This not only increases government expenditures and siphons off scarce funds, but eventually leads to the need to increase revenues either through more taxes or by borrowing or by cutting back on other policy programs of greater importance and ultimately leading to a general welfare loss for the country. In the Philippines, for example, it was estimated that the economic gain from one corrupt activity in 1983 was roughly equivalent to the national government budget for natural resources and was 183 percent of that year’s budget for social security, labor and employment. In the area of trade corrupt activities result in capital flight and price increases at both the wholesale and retail levels. Corruption in the trade sector is the most systematic and legendary type of corruption in developing states. The role of trade in these economies and, hence, the importance of the import-export sector, loom large and provide many opportunities for corrupt practices to be implemented. Bribes have to be paid for the clearance of goods through customs, for obtaining import licenses, for the shipping of contraband, for exclusion from taxes and fees, and so on. In May 1986, for example, the government of Trinidad and Tobago announced the suspension of a “high official” of the Ministry of Industry and Commerce for issuing licenses for the illegal important of rice from the United States and thereby defrauding the National Flour Mills – the organization which has the sole authority to import rice. The next month the Trinidad and Tobago Mirror newspaper further announced that the police had “unearthed a multi0million dollar bribery racket involving important of goods banned by the Trinidad and Tobago government.” The newspaper claimed that twelve senior officials from the Local Industry Ministry and the Customs Department were under investigation for the collection of over US$ 2 million in bribes to give approval for the importation of gods on the government’s “negative list.” Also, in May 1986, United States Customs officials discovered US$ 35 million worth of illegal drugs that arrived in a shipment of cement from Jamaica through the fraudulent issuance of a valid Jamaican export license to an unauthorized exporter. In June 1986 both the Jamaican and Indonesian governments announced that, through the use of agents of the Swiss firm, Societe General de Surveillance (SGS), they discovered a substantial number of cases of over-invoicing, under-invoicing and bribery being used by importers and exporters. It was estimated that such practices added up to US $ 200 million annually in Indonesia. Through the practice of over-invoicing foreign exchange is lost, while revenue in duties is lost through under-invoicing. Secondly, there are the detrimental effects on political development. Administrative corruption that is aided and abetted by political corruption generally becomes entrenched in the structure of the state and in the structure of all other social institutions. It thus becomes the status quo, the maintenance of which results in the use of repressive tactics which in turn suppresses political opposition and the possibility of public criticism of the regime’s activities. Such repression, however, destroys the necessary means for political development: without the freedom to organize politically, of speech and, of assembly, life dies out in every public institution and only the bureaucracy remains an active element. In other words, corruption threatens the pillars of democracy and the democratic experience. Finally, there are the effects on administrative development. Administrative corruption hinders administrative development and performance in developing states partly because of its institutional spillover effects. It has been found that corrupt administrators and leaders export their corrupt activities to other institutions by exerting influence and pressure on other public officials as a means of sustaining rent-seeking opportunities. Moreover, such corrupt activities can move from a passive to an active player where civil servants do not wait to be approached and bribed but go out and actively solicit individuals to offer bribes in return for the provision of public services. In India, this is referred to as “speed money” – payment for expediting transactions. In other countries, such as Jamaica and Nigeria, such payments are regarded as necessary and routine and do not guarantee that transactions will be expedited. However, if such payments are not made, it does guarantee that there will be no action whatsoever taken on the transactions. In other words, this type of corruption has become the unofficial but operating administrative order in those countries. Administrative corruption can also affect professionalism in the public service and lead to frustration on the part of honest public servants to the extent that it affects their on-the-job performance and significantly reduces their productivity. In many instances this frustration leads to emigration, particularly among those who are highly skilled and qualified. This, in turn, contributes to the brain drain dilemma of the developing states and thereby further impairing national productivity and output. NEGATIVE EFFECTS OF CORRUPTION OUTWEIGH THE POSITIVES Phil Williams, Rand, 2003, Faultlines of Conflict in Central Asia and the South Caucasus, ed. Olga Oliker & Thomas Szayna, [http://192.5.14.110/pubs/monograph_reports/MR1598/MR1598.ch4.pdf], p. 71-2 In assessing the prospects for stability in Central Asia and South Caucasus, it is essential to consider the impact of crime and corruption. Since the collapse of the Soviet Union there has been a process of criminalization in both subregions that make up CASC, involving drug trafficking, organized crime, shadow economies, and corruption and rent seeking. Once on the margins—or more accurately in the shadows—of the Communist systems, in the post-Soviet world these phenomena have moved to the center of political and economic life. They play a critical role in the success or failure of transitional measures toward democracy and free markets. It is generally assumed that their impact is negative, not only complicating and inhibiting the transition process but contributing significantly to instability and creating new insecurities in society. Yet their effects do not point unequivocally in this direction: the criminalization of societies has many negative consequences but also provides some benefits. The precise balance between positive and negative varies from country to country and changes over time. Indeed, in the short term, organized crime, drug trafficking, and the operation of shadow economies and informal markets give to many citizens means of economic advancement that are not available in the legal economy. Consequently, they act as both a safety valve and a safety net. But this is not to ignore either their negative short-term consequences or their even more serious long-term effects. In the long term, the criminalization process is likely to add significantly to the prospects for instability. The choice of illegal over legal economic activity is a rational short-term choice, but it chokes off legitimate activity and reduces the flow of resources to the state by avoiding taxation. These negative consequences are particularly marked in relation to the fourth component of this criminalization syndrome: corruption and rent seeking by political elites. Long-term political corruption combined with inadequate state capacity in other areas can ultimately lead to widespread disaffection. In such circumstances protest movements, whatever their origin or impulse, will very likely garner widespread support, not necessarily because of their intrinsic appeal to populations but as a means of channeling broader political and economic dissatisfactions. Indeed, Central Asia has already witnessed the emergence of an Islamic insurgent movement fueled not only by support from elsewhere in the Islamic world but also by the alienation of populations that are politically oppressed and economically depressed.1 If one component of the criminalization process is likely to catalyze support for insurgencies, such movements can also benefit from the direct or indirect involvement of their own in illegal activities. Crime can be lucrative, and drug trafficking in particular can provide opportunities for insurgent groups to fund their activities—either through direct participation or through the imposition of taxes on traffickers or growers. This pattern has been evident elsewhere in the world, particularly Colombia and the Balkans, and it is unlikely that Central Asia deviates markedly from it. Thinking 10 to 15 years into the future, therefore, it seems likely that any short-term stabilizing effects of the criminalization syndrome will be more than outweighed by the long-term destabilizing consequences.
Madalene O’Donnell, NYU Center on International Cooperation, 2006, Post-conflict Corruption: A Rule of Law Agenda?, Draft Chapter for International Peace Academy, Civil War and the Rule of Law, [http://www.worldbank.org.ezp1.harvard.edu/wbi/governance/pdf/corruption_conflict_and_rule_of_law.pdf], p. 6-7 Corruption may have paradoxical effects. For example, one study on Morocco found that corruption in land reform was functional for the survival of the regime and dysfunctional for the economy. But over time, the onus of scholarship has shifted decisively away from arguments in the 1950-60s about the utility of corruption, to mounting evidence in the 1980-90s of the costs of corruption. Contributing factors included the spread of democratic regimes (in which the costs of corruption were quite significant) as well as new tools to measure corruption and quantify some of its impact. As Cartier-Bresson recently argued, Theoretical and empirical analyses of the causes and consequences of, as well as the means of fighting against, corruption have reached a certain level of maturity. The functionalist currents, which viewed corruption as a system that lubricates the cogs of the bureaucratic machine, have disappeared. Economists have reached a consensus on the very negative effects of the phenomenon…Unfortunately, this maturity has still not paved the way for a meaningful advance in the improvement of governance, for the political barriers erected by the losers of such reforms are formidable. Corruption slows economic growth primarily by reducing investment but also by reducing the quantity and effectiveness of international aid and the quality of infrastructure, and is associated with weak rule of law, insecure property rights and declining government effectiveness, which are also detrimental to investment and growth. NEGATIVE EFFECTS OF CORRUPTION AND CRIMINAL ACTIVITY OUTWEIGH THE POSITIVES Phil Williams, Rand, 2003, Faultlines of Conflict in Central Asia and the South Caucasus, ed. Olga Oliker & Thomas Szayna, [http://192.5.14.110/pubs/monograph_reports/MR1598/MR1598.ch4.pdf], p. 93-4 Criminalization can be understood in part as coping mechanisms for people in societies and economies that are not working effectively. From this perspective, drug consumption is a means of escape from difficult social and economic conditions; drug cultivation is a means of subsistence; and drug trafficking is an opportunity to become part of a transnational business that provides one of the few forms of regional economic integration in Central Asia. Similarly, organized crime is a form of entrepreneurship, providing economic opportunities, a basis for capital accumulation, and multiplier benefits that would otherwise be absent in economies characterized by slow economic growth or even decline. On occasion, criminal organizations can even be paternalistic, sharing the spoils of their activities, an approach that often results in increased information and support from citizens. Even corruption can be understood as a way of circumventing regulations and allowing things to happen that would otherwise be severely hampered. Low-level corruption by police and other public servants is a form of income augmentation that is essential given the low wages they typically receive. Finally, the informal or shadow economy is a means of subsistence. Shadow economies flourish when, for whatever reason, legal economies are not working effectively in providing jobs and incomes. Indeed, organized crime, drug trafficking, corruption, and shadow economic activity can be understood as symptoms of underlying problems in both political governance and economic management. The presence of these phenomena, particularly on a large scale, is a critical indicator that other things are going wrong. The difficulty, of course, is that they exacerbate the conditions that give rise to them and render the underlying problems even more resistant to solution. The positive aspects of criminalization cannot be ignored, but they are far outweighed by the negatives. Criminalization has seriously adverse implications for the effective functioning of the economy, for the integrity and legitimacy of the state and its institutions, for public confidence and faith in the transition process, and for the stability of society. Criminal capitalism inhibits the development of legitimate capitalism: it is difficult for legitimate entrepreneurs to compete with organizations that combine a maximum of liquidity with a minimum of accountability. Consequently, drug trafficking and organized crime can have a dampening effect by hampering economic competition, stifling legitimate entrepreneurship, and discouraging foreign investment. In short, illicit capital either frightens off or pushes out licit capital. Another consequence of drug trafficking and organized crime is the creation of a class of nouveau riche citizens who combine ostentatious wealth with political power. The danger is that in straitened economic circumstances and amidst widespread unemployment, these newly rich will be objects of emulation, with little consideration given to the manner of money making. The obvious result is an increasing number of recruits for drug trafficking and criminal organizations; the less obvious result is the development of a form of economic Machiavellianism in which the end—the accrual of wealth—justifies any means. Once again, licit entrepreneurship is placed at a major disadvantage. In the final analysis, drug trafficking and organized crime are sources of illegitimate wealth and power, provide an important means of finance for terrorist and insurgency groups, and can spark conflict among rival clans or factions seeking control of lucrative routes and markets. Similarly, corruption undermines the functioning of government and the operation of civil society. High-level rent seeking by political and administrative elites provides personal enrichment at the expense of the state and its citizens. Moreover, the interplay among these phenomena significantly increases their adverse impact—particularly in CASC, where the vulnerability to instability is accentuated by the very nature of the regimes, the lack of state capacity, and the contrast, in many cases, between strong leaders and weak institutions. Indeed, the nature of the regimes in the CASC countries—and the relationship to criminalization—must now be examined. CONSENSUS VIEWS THE HARMS OF CORRUPTION TO OUTWEIGH BENEFITS Zoe Pearson, Doctoral Student, Australian National University, 2001, Corruption and anti-corruption, P. Larmour & N. Wolanin, eds., p. 40-1 There has been some disagreement about the importance of combating corruption. Some authors have claimed that corruption may in some cases be desirable, facilitating and benefiting the development of a country. This view considers that corruption improves the efficiency of the country by providing a way around unnecessary, cumbersome regulations and bureaucratic delays. It is also seen as beneficial as it supplements the incomes of officials who may otherwise be poorly paid. This sort of view, however, is becoming less prevalent, as emerging empirical studies suggest that there is a negative correlation between corruption and the development of country. The World Bank comments that such arguments are focused on the short term and therefore fail to take into account any objective other than enhanced efficiency in the short term. There are not only direct costs of corruption – diversion of money – but also indirect negative consequences, costly in the long term (Morgan 1998). The World Bank notes that it in the long run, “the results are likely to be costly in terms of economic efficiency, political legitimacy, and basic fairness.” Such arguments also fail to address the underlying issue of what causes corrupt practices in the first place – the essential underlying structural inequalities and distortions within society that lead to corruption (Ward 1989). Hence, there appears to be more of a consensus on the need to develop policies and measures to combat corruption, both in the literature, and also increasingly in practice at the national and international levels. While debates continue at the academic level, about the definitions of corruption and on aspects of cultural relativity, it seems clear that corruption is a hindrance to the development and prosperity of a county. “Governments can no longer deny its pernicious effects. Debunking this myth has been a crucial first step for building political will for any anti-corruption policy.” There is much discussion in the literature as to the possible benefits of eliminating corruption in countries, and these differ in emphasis depending on the discipline from which they come. On a general level, much of the literature focuses on the possibilities for increased development of countries. There is also focus on the opportunities for countries – and the poor especially – arising from escaping the distortions of government expenditure on public services and infrastructure that are created by corruption. Those involved in business and trade anticipate benefits from the efficiencies of a corruption-free system, such as increased certainty in business transactions and increased opportunities for investment (Joongi and Jong 1997). CORRUPTION IS ON BALANCE HARMFUL TO INDIVIDUALS AND STATE DEVELOPMENT John MacFarlane, Australian Federal Policy, 2001, Corruption and anti-corruption, P. Larmour & N. Wolanin, eds., p. 143 Corruption is a major threat to democracy, economic and social development and good governance. It has been described as a “moral and financial gangrene which stops society from functioning normally.” It is an economic as well as a moral problem in that it discourages good business practices and, by creating a barrier against trade and investment, acts as an impediment to development. It raises the cost of goods and services. It gives rise to waste and inefficiency through diverting tenders away from the best and most suitable supplier. The losses caused by corruption by far exceed the sum of the individual profits derived from it, because it distorts the whole economy. Finally, it taints the international reputation of the country concerned, making it more difficult to attract foreign investment. Even more importantly, corruption is damaging because it strikes at the core of integrity and trust in the state and the way it operates, through undermining fairness, stability and efficiency. As an African Head of State once observed, ‘young people in my country now have as their role models the leaders who have made money from corruption. Corruption is destroying the future of our society” (Olesegun Obasanjo, 1994). President Jiang Zemin has repeatedly called the fight against corruption in China ‘a matter of life and death for the party and the state.’ NET EFFECT OF CORRUPTION IS NEGATIVE Robin Theobald, Senior Lecturer in Sociology, Polytechnic of Central London, 1990, Corruption, Development and Underdevelopment, p. 130-1 Having outlined the main costs and benefits of corruption it has to be admitted that it is extraordinarily difficult to balance one against the other in any concrete situation. This is primarily because corruption is frequently claimed to bring about diametrically opposed effects: promoting economic development and obstructing it; encouraging entrepreneurship and stifling it; furthering national unity and undermining it, and so on. Whilst it is certainly conceivable that corruption may do all of these things, unless we can specify the point which benefits become costs such claims are relatively meaningless. To date, no writer has been able to do this mainly because there are so many unknown and unquantifiable elements which interrelate in a variety of highly complex ways with basic variables such as economic growth and political development. In the face of uncertainty, the general consensus seems to be that whilst having some positive consequences corruption is generally speaking, undesirable and should be controlled as far as possible. Not the least of the objections to it is that it is virtually impossible to confine corruption to those areas where its effects are deemed to be beneficial. The position of the World Bank here would seem to represent current development orthodoxy. Corruption, the Bank maintains, weakens the effectiveness of governments since attempts to contain or conceal it entail a diversion of scarce resources. If persistent, corruption may undermine public confidence in the public service to the degree that it may provoke and provide the justification for violent changes of government. In states where corruption is pervasive “rent seeking” becomes an obsession among public officials who will do nothing without bribes. In such situations members of the public are employed unproductively in buying their favors. In extreme cases, in countries which are major exporters of illegal drugs for example, whole areas of the administration come under the sway of private interests. Lastly, corruption favors the wealth and those who have political power as well as benefiting unscrupulous people at the expense of law-abiding citizens. 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