By Henry J. Schumacher | Special to the BusinessMirror
Consequences of corruption
We can say with some certainty that corruption is not good for economic growth. It is quite possible that the three types of corruption identified in one of my earlier columns have very different effects. There is no doubt that corruption—both in government and in the private sector—introduces distortions in markets. It can lower tax revenues (and, hence, funds available for public investments and services), because corruption induces inefficiencies in the tax-collection system (we are happy to note that the new Internal Revenue Commissioner Caesar R. Dulay is determined to address this).
Corruption is known to deter investment because it can negatively affect assessments on the risks and returns associated with an investment. This is the reason we started the project “Integrity for Jobs”, creating Integrity Circles in LGUs that are committed to ethical operations.
Additionally, corruption will direct talent away from productive activities toward rent-seeking activities. More important, while corruption affects the whole economy, it seems to target the poor. It hurts the poor as it introduces costs and benefits that create a bias against the poor; corruption can causally be linked to the worsening of income distribution.
Fighting corruption
Given the consequences mentioned above, perhaps the most important, and the most difficult, question is ‘how can we reduce or better eradicate corruption’? Attempts to fight corruption face a fundamental contradiction: Reducing corruption requires the commitment and cooperation of those who benefit from corruption, which is not in their self-interest. In order for a campaign against corruption to succeed, it will require a strong moral commitment from the segment of leadership in the government and the private sector to reduce and better eradicate corruption in addition to sufficient support from the public. Remember: Integrity starts with I—I commit to be part of the solution!
There are but a few examples of successful fights against corruption. More often than not, a reduction in corruption accompanies economic growth in open societies, where the cost of corruption begins to exceed the ability of those who benefit from it to purchase compliance from others in the government and the private sector.
Hong Kong was able to fight corruption in the 1970s after an Independent Commission Against Corruption was established in 1974. Georgia claims to have reduced its corruption significantly in recent years, as demonstrated by Tamara Kovziridze, former Deputy Minister of Economy of Georgia, at an ADB sponsored event last year called: Evaluating and Monitoring Anticorruption Reforms and Programs’.
Successful campaigns to fight corruption occur along three dimensions: Laws must be strong enough to create a deterrence, however, there must also be a will to implement them.
Corruption cannot be tackled without a strong civic society. The population must have powers to challenge politicians, bureaucrats and erring company managers. Governments must agree to introduce transparency in their operations and allow information to flow freely. The Right to Information Act in India that allows citizens to demand information from bureaucrats has given much hope to activists in India. In the Philippines the Freedom of Information bills are not moving in Congress.
Barriers to participation in the economic life of a society must be removed. Corruption has its losers—the population at large and those who are denied participation in economic activity. When those who are hurt by corruption are allowed to voice their discontent, the chances of a decline in corruption increase.
Neither corruption nor its study is new. Interest in the subject, however, has become central to the discussion of economic performance. This has followed the realization that corruption may be the biggest barrier to removing poverty in the developing world.
There is very little doubt that corruption hurts societies. We have clearly seen in our
work in the “Integrity Initiative” that temptation to succumb to corruption far exceeds any moral constraints or compassion for those who may suffer as a result. Constraints on the behavior of leaders of societies may also have to come from outside—a global leadership that places value on the reduction of poverty and suffering, and the resulting peace dividend. This belief is part of the creation of the Open Government Partnership formed by the Obama administration, of which the Philippines is a member. In turn, the Integrity Initiative is part of the Open Government Partnership Committee, created by the Philippine government.
Finally, arriving at the type of en-lightened approach in anticorruption we all dream of, is likely to take some time; in the meantime, you and I will have to commit to fight corruption.
Image credits: Nuvolanevicata | Dreamstime.com