International Anti-Corruption Day: How corruption ruins lives and economies (Dr Rob Gillanders)
DCU Business School
Corruption ruins lives and destroys economies and so it is fitting that today has been designated International Anti-Corruption Day by the United Nations.
According to Transparency International, six billion people live in corrupt countries. While many disagree about the exact definition of corruption, a useful way to think about it is as the abuse of public power for private gain. A mountain of evidence from social science points to corruption as being an extraordinarily harmful force that inflicts substantial damage not just on markets, firms and macroeconomic indicators, but on people – especially vulnerable people.
The effects of corruption
Evidence has shown that even new-born babies, a vulnerable group if ever there was one, suffer on account of corruption. Vaccination rates in the Philippines are lower in areas that are more corrupt as funding intended to provide supplies and facilities are misspent.
Older children suffer too. An eye-opening study in Uganda found that in the early 90s only 13% of funding intended for schools reached the intended recipient with most receiving nothing at all. Victims of crime in Peru were more likely to be shaken down by police. Police collusion with criminal gangs is a scandal that has rocked many countries and facilitated the illicit drugs trade and other activities that often hurt the poor and desperate the most.
The effects on private economic activity are no less serious and can strand countries in low development traps. Corruption is a great driver of red tape, increasing the cost of starting a business and reducing incentives for innovation and entrepreneurship. Simple bribery and embezzlement also deter potential entrepreneurs, tipping the economic scales of cost and benefit away from activities that would lead to personal and social gain. Firms and countries alike grow more slowly if they must contend with corruption.
We should never allow ourselves to think that corruption is a “poor country problem.” Every country has problems with corruption. Even Finland and Denmark, countries with a well-deserved reputation for transparency and good governance have had recent high profile scandals. In Finland, the former head of the Helsinki drug squad was recently convicted of a slew of offences, including drug trafficking.
Eurobarometer surveys tell us that 40% of firms in the EU think corruption gets in the way of them doing business and two-thirds of citizens think that corruption is widespread within their country. Corruption, being secretive, is hard to measure but depending on what measure you put your faith in, a recent report submitted to the European parliament estimated that the total direct and indirect costs to the EU are between €179 billion and €990 billion per year. Even at the low end, this exceeds the 2018 EU budget of €160 billion.
Complacency about corruption is dangerous. Even the perception of corruption can deter investment, foreign or otherwise, and undermine public trust in the democratic institutions that too many of us take for granted. Permitting corruption to go unchecked and unpunished undermines the legitimacy of a state and its leaders. There is also worrying evidence that people converge on bad behaviour more readily than they move towards good outcomes. Failing to crack down on corrupt behaviour can lead to a relatively quick collapse of standards in public office.
So what can we do to fight corruption?
Supporting the freedom of the press and its diversity is one of the most effective ways to stamp out corruption. Journalists and their employers have clear incentives to uncover and expose wrongdoing. Evidence supports this with one classic paper showing that corruption in sumo wrestling declined when the world’s media gaze fell on the sport following scandals. It is not surprising that dictators (wannabe or actual) often try to undermine the freedom of the press or its standing in the eyes of the public.
Ultimately, vigilance and a realistic threat of a meaningful punishment are the most effective anti-corruption strategy. To create a meaningful threat of being caught and punished, adequate resources are essential and they must be structured in an efficient way. In Ireland, too many agencies have overlapping responsibilities. This has diluted the budget and expertise available and concerns exist about the flow of information. A centralised anti-corruption authority may help to secure convictions for corruption offences that stick.
In contexts in which the state cannot or will not provide this level of oversight, there is still the space for civil society and industry to work together to fight corruption. Supporting whistle-blowers is vital, as they are one of the main routes through which fraud and corruption are exposed. Political parties and citizens alike should not tolerate corruption. New technologies such as IPaidABribe.com have shown the potential for accountability and pressure to arise from participatory citizen action and engagement outside of any state involvement. Schools and parents can work to establish a strong anti-corruption norm in the next generation, raising the mental cost and anguish that people suffer when acting corruptly.
Given all we know about the costs of corruption, we owe it to ourselves and to our children to take the fight against corruption seriously – not just today but every day.
Dr Robert Gillanders is an Economist at DCU Business School and Ireland’s main anti-corruption expert for an EU wide network reporting to the Directorate-General for Migration and Home Affairs within the European Commission. His full profile can be found here https://business.dcu.ie/staff/dr-robert-gillanders/
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