How Corruption Affects The Economy

How Corruption Affects The Economy – Over the past decades, corruption has become an important issue in many countries and internationally. About twenty years ago, this issue began to receive more attention. Organizations such as the United Nations, the Organization of American States, the International Chamber of Commerce, Transparency International and the Organization for Economic Co-operation and Development have joined the fight against corruption (Glynn et al., 1997: 8). This is a significant change compared to the situation before the 1990s. At that time, many people did not consider it as a big problem. In fact, it was considered an important part of marketing. Many European countries allow bribes to be tax deductible. Even the World Bank, not forced by such national problems, avoided the subject (Galtung, 2000: 19ff).

The changing concept of corruption has many causes. More importantly, the political climate changed dramatically. During the Cold War, governments were supported, despite their corruption, to ensure that they did not join the Communist Party. After the end of this ideological competition, the need to tolerate and not deal with corruption and the use of political power ceased to exist. In addition, in various countries citizens are against the dictatorship and the liberal media is exposing corruption all over the world. Finally, but not least, the USA, not politically constrained, has an economic interest in putting the subject on the agenda. Although US companies offer bribes abroad, many other developed countries have actively started doing business abroad. Therefore, the US has a special interest in enforcing anti-corruption laws to level the playing field for its companies (Galtung, 2000: 21f).

How Corruption Affects The Economy

How Corruption Affects The Economy

From a Western perspective and morality this fight against corruption at the international level seems to be a desirable development. However, if those are the only reasons for this religious war, it can be avoided as another example of the imposition of laws from the Global North and the South South. Also, if corruption has negative aspects, besides moral concerns, it will make the organization more supportive. Widespread corruption can affect the development and performance of a country’s economy. In today’s perspective, economic development and performance include various indicators, such as Gross Domestic Product (GDP), appropriate income distribution, environmental protection, good industry and other aspects. everything that makes people’s lives better.

These Are The World’s Least Corrupt Nations

Therefore, when we understand the definition of corruption as understood in this book, we will examine the relationship between corruption and some of these signs. After this basic analysis, the relationship between economic growth, as one of the indicators of development, and corruption will be clearly highlighted. This question, whether there is a causal relationship with the channel of the connection will be investigated. Finally, the data collected in this paper will be summarized and concluded.

In the literature, people can find different definitions of corruption, some classifying the issue into different types of corruption while others use a broader definition. In most of them including the work of the government, corruption is described as another type of distorted relationship between the government and society. It is often understood as the misuse of public resources and authority given by a public official for personal gain. Definitions of the World Bank, Transparency International and other organizations define corruption as “the misuse of public power for personal gain (or profit)” (Andwig et al., 2000: 11) . This will be the understanding of corruption within the framework of this book.

A first impression of whether there is a relationship between development and corruption can be seen if one looks at numbers 1-4. This is the Perceptions Index

Figure 1-4: The relationship between corruption and GDP per capita/Gini-Coefficient/Education Expenditure/Life Expectancy (figures. Data taken from (Central Intelligence Agency, 2009) and (Transparency International, 2009) ) )

Trust In Public Institutions: Trends And Implications For Economic Security

The top left figure shows a clear correlation between high GDP and low corruption. Similarly, other graphs show that in low-income countries corruption inequality, as measured by the Gini-Coefficient, tends to be low and countries with low corruption invest more in education. Also life expectancy tends to be lower in countries with high levels of corruption. Therefore, when one accepts the indicators as a picture of the development level of the country, it means that there is a negative relationship between the level of corruption and the level of development of the country. However, the charts do not say anything about the causality of this relationship. Is it because of their high level of corruption that some countries grow more slowly than others, or is it that developing countries do not have the money to fight corruption effectively? Both explanations are possible. But maybe none of them is true, and it is just a false relationship, and the explanation is there somewhere. Therefore, without a thorough analysis of the relationships, no clear conclusions can be made. Therefore, the next part of this paper will examine one of those relationships, which is the relationship between GDP and corruption.

Corruption can affect growth in different ways. Some theories predict that corruption increases efficiency and has a positive effect on economic growth. Here, bribery is seen as a tool to “grease the wheels”. To achieve this, it is considered that the second world is the best. Government policy is seen as ineffective and structured to reduce economic activity. Some researchers have shown in the form of rules that hands can speed up the process in some sluggish companies. In addition, the opportunity to collect bribes can be considered as an additional payment to government officials. Therefore, some skilled workers who can choose other jobs can apply for government positions, therefore, the productivity of government jobs increases. Similarly, bribery can work in the same way as salary, thereby increasing the efficiency of public officials. Also, if the government discriminates against minorities or has a bad attitude towards business, corruption can reduce the negative effects of such ineffective laws. However, the positive effects of corruption only occur, when there is already an efficiency, which is bad governance (Meon and Weill, 2008: 4f). Viewing corruption critically, the positive effects of corruption on growth can be ruled out. Kaufmann said government officials have a lot of discretion in creating, promulgating and interpreting laws and regulations. Bribes can be obtained for helping people to continue with certain standards, so it can act as an incentive to enforce other laws that increase the number of bribes. Therefore, corruption, over time, can increase government barriers to business, and thus can harm growth (Kaufmann, 1997: 115). Apart from logic, when you look at the population you have to ask a good question between growth and corruption. Figure 5 looks at the relationship between the exchange rate in the period 1975 – 1996 and the average CPI-Index of the country in the period 1980 – 1985. Here it can be clearly seen that corruption affects growth .

Figure 5: Growth rate of per capita income, 1975-96, against corruption, 1980-85. Growth rates are adjusted for initial income effects (Source: (Gerlagh and Pellei, 2004: 435)

How Corruption Affects The Economy

These CPI figures reflect the level of corruption of public institutions in a country, a higher level indicates a lower level of corruption (Transparency International, 2009). This abuse of public office for personal gain undermines public trust in government and institutions, makes public policy ineffective and unfair, and deprives people of funds. taxes on schools, roads and hospitals.

How Corruption Affects Emerging Economies

Although the money lost is important, the cost is high. Corruption undermines the government’s ability to help grow the economy in a way that benefits all citizens.

But the political will to build strong and transparent institutions can lead to a crackdown on corruption. In our new financial monitoring group, we shine a light on financial institutions and policies, such as tax systems or trading systems, and show how they can fight corruption.

We analyzed more than 180 countries and found that many corrupt countries collect low taxes, while people pay bribes to avoid them, including tax breaks designed to change payments. Also, when taxpayers believe their government is corrupt, they are more likely to avoid paying taxes.

We show that on average, the least corrupt governments collect 4 percent more GDP and taxes than countries at the same level of economic development with the highest level of corruption.

The Problem Of Monopolies & Corporate Public Corruption

A few countries’ reforms brought even more money. For example, Georgia reduced corruption significantly and tax revenues doubled, rising to 13 percent of GDP between 2003 and 2008. Rwanda’s anti-corruption reforms since the mid-1990s have borne fruit, and tax revenues head increased by 6 percent of GDP. .

Corruption also prevents people from fully benefiting from the wealth of their land. Because oil exploration or mining generates huge profits, it creates strong incentives

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