Corruption: A governance problem

Corruption is a universal phenomenon which existed in one form or another since time immemorial. A review of penal codes used in ancient civilisations clearly indicates that bribery was a serious problem among the Jews, the Chinese, the Japanese, the Greeks, the Romans as well as the Aztecs of the New World. Large-scale corruption dominated public life in ancient India as well.
The World Bank has defined corruption as the abuse of public office for private gain through bribery, extortion, patronage, nepotism and the theft of state assets. The private gains include both the benefits that flow to public officials and those obtained by private individuals and firms. It is widely identified as a governance problem. It is a signal that something has gone wrong in the management of the state, since the institutions designed to govern the interrelationships between the citizens and the state are used instead for personal or group enrichment and gains.  
Different authors and researchers around the globe have applied socio-economic, governance and behavioural criteria while explaining the causes, magnitude and costs of corruption.
D.J. Gould and J.A. Amaro-Reyes examined data covering countries in Asia, Africa and Latin America and claimed that corruption had a deleterious, often devastating effect on administrative performance and politico-economic development, corroding public confidence, perverting institutions, processes and even goals, favouring the privileged and powerful few and stimulating the use of non-rational criteria in public decisions. Heineman and Heimann claimed, "Corruption distorts markets and competition, breeds cynicism among citizens, undermines the rule of law, damages government legitimacy, and corrodes the integrity of the private sector. It is also a major barrier to international development - systematic misappropriation by kleptocratic governments harms the poor."  
According to I. Hors:  in most developing countries today, corruption is widespread and part of everyday life. Society has learned to live with it, even considering it, fatalistically, as an integral part of their culture. Not only are public or official decisions - for instance, on the award of government contracts or the amount of tax due - bought and sold, but very often access to a public service or the exercise of a right, such as obtaining civil documents, also has to be paid for. Several mechanisms help to spread corruption and make it normal practice in these countries. Civil servants who refuse to toe the line are removed from office; similarly, businessmen who oppose it are penalised vis-à-vis their competitors. Furthermore, an image of the state has grown up over the years according to which the civil service, far from being a body that exists to implement the rights of citizens - rights that mirror their duties - is first and foremost perceived as the least risky way of getting rich quickly. All of which helps to make corruption seem normal.
Johnson, Kaufmann and Zoido-Lobaton found that higher levels of corruption were linked to a larger unofficial economy. "Even when corruption and economic growth co-exist, payoffs introduce costs and distortions that harm the poor, not least by worsening bureaucratic inefficiency with which corruption is highly correlated. Corruption encourages excessive public infrastructure and capital investment relative to private investment and makes it difficult for governments to raise tax revenues as firms go underground as a means of avoiding corruption.
According to Klitgaard, corruption exists when individuals or organizations have monopoly power over a good or service, discretion over making decisions, limited or no accountability and low levels of income. Mauro demonstrated that high levels of corruption are associated with lower levels of investment as a share of gross domestic product (GDP). Ouma argued that corruption was a product of self-aggrandisement and unrealistically low remuneration making it impossible for the public servants to live within their legitimate means, and a closed political system which tended to exclude aggregate interests.
According to Pope, corruption at the highest level distorts competition, so denying the public access to the competitive marketplace. It induces wrong decisions resulting in wrong projects, wrong prices, wrong contractors and substandard delivery to recoup overpricing, promotes corruption at lower levels and erodes public confidence in leaders. At lower levels, petty corruptions are damaging because they add to transaction cost, exclude those who cannot pay, foster contempt for public servants amongst the public and erode the capacity for revenue collection.
Rose-Ackerman identified six important structural features that created incentives for corrupt behaviour:  Bribes clear the market in a situation when the government may allocate a scarce benefit to individuals and firms using legal criteria other than willingness to pay. Bribes act as an incentive payment when public officials may have little incentives to do their jobs well because of low pay and inadequate monitoring. Bribes lower cost for those who pay them at a time when individuals and firms may seek to lower costs of taxes, duties and regulations imposed on them by the government. Bribes affect the level of monopoly rents and their allocation between private investors and public officials in a situation when the government confers large financial benefits on private firms through contracts, privatisation and concessions. Bribery of politicians buys influence, and bribery by politicians buys votes at a time when bribes are used as substitutes for legal forms of political influence. Bribes can override legal norms when judiciary have the power to impose costs and transfer resources between litigants.
Theobald argued that the phenomenon of administrative corruption - the illegal use of public office for private gain - can be understood only against a background of social and economic change. He preferred to view corruption as perversion or destruction of integrity in the discharge of public duties by bribery or favour and opined that corruption impeded economic growth, stifled entrepreneurialism, misused scarce national resources, weakened administrative capacity, contributed to serious political decay and undermined stability, democracy and national integration. According to Theobald, corruption was deeply rooted in the psychological and social structures of countries. Consequently, its elimination could not be realistically anticipated until certain fundamental changes had taken place. The most important of these were the rise and predominance of universalistic norms, the emergence of new centres of power outside the bureaucracy and the development of competitive party politics. Such changes, however, could come about only after a long period of social and economic development.
Dr. Helal Uddin Ahmed is a former editor of Bangladesh Quarterly, currently a freelance writer cum translator.
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