By Bekan Bekele
Oxford Dictionary defines corruption as “a dishonest or fraudulent conduct by those in power typically involving bribery”. Corruption is not a new phenomenon. In fact, the First Dynasty (3100–2700 BC) of ancient Egypt noted corruption in its judiciary.
According to World Economic Forum, corruption costs developing countries $1.26 trillion annually. So, roughly two pct of the Global GDP. Corruption seeps in at all levels, from low-level public servants accepting petty bribes to national leaders stealing millions of dollars.
Although corruption is prevalent in developing countries, no country in the world has been able to get rid of it completely.
The main problem of corruption is not a morality one, especially in developing nations. It’s that it leads to an uneven distribution of wealth as small businesses face unfair competition from large companies that have established illegal connections with government officials. It would also cause an inefficient allocation of resources, and unqualified companies will win government contracts through bribery; as a result, it will reduce the quality of infrastructure, education and healthcare, leading to an overall lower standard of living for the country’s populace.
Why do countries become corrupt?
Corruption occurs because certain individuals are willing to use illegitimate means to maximize personal or commercial gain. However, for these people to have the ability to elicit those means, there must exist specific settings to enable them and a lack of an effective system to discourage corrupt behavior.
The GIACC (Global Infrastructure Anti-Corruption Center) has laid out possible factors that facilitate corruption at a project, national, and international level through various infrastructural projects. These are:
- The nature of infrastructure projects, through a complex contractual structure; the diversity of skills and standards; the lack of transparency in the sector; the extent of government involvement; and most of all, the absence of anti-corruption measures.
- Corruption in developing and developed countries’ governments contributes to infrastructure corruption. Such corruption may occur, for example, when ministers or other political figures extort bribes or require projects to be carried out for corrupt personal benefit. These problems are reinforced by; a lack of consistent anti-corruption policy within the government, Insufficient reporting of corruption, Insufficient prosecution of corruption, and the vulnerability of project owners’ employees to bribery.
- Insufficient cooperation between governments will facilitate corruption. There should be cooperation and the development of a consistent approach concerning the provision of government aid to countries where corruption is widespread, the requirement for the implementation in government and on projects of effective anti-corruption measures, the investigation and prosecution of corruption, and the enforcement of anti-money-laundering provisions. Without a coordinated approach on these matters, there will be; a lack of proactive steps by funders to limit corruption on projects, a lack of joint action between various participating actors, and a lack of sufficient debarment of corrupt organizations.
What causes corruption?
The political and economic environment strongly influences the phenomenon of corruption. The more a country’s economic activity is regulated and restricted, the greater the authority and the authority of officials in decision-making and the greater the potential for corruption as individuals are willing to make or provide payments to circumvent restrictions. The potential for corruption is exceptionally high when regulations give officials discretionary powers. On the other hand, however, ineffective and unclear regulation leads to restraints, inviting regular individuals to pay bribes to speed up the bureaucratic processes.
The leading cause for corruption has been the existence of low wages. A study conducted by Allen F Qian in 2015 demonstrates that; Corruption is strongly influenced by the low salaries of public sector employees (state officials) that try to improve their financial situation through bribes. As a result, the socio-economic status of government officials also influences the phenomenon of corruption. Their study states that corruption occurs because authorities, institutions, and governments can no longer control corruption effectively due to low wages for government officials (Qian, 2015).
Although low wages are the leading cause of corruption, it’s far from being the only reason. Job satisfaction has often been cited as a significant cause of corruption. Sarjoska and Tan (2009) found that the private sector is ethical because it has higher ethical values than the public sector, especially those that affect job satisfaction (especially concerning theft and corruption). Svenson (2005) also indirectly confirms this, stating that, generally, a public employee’s salary level influences their acceptance of bribes (the higher the salary level, the less likely a person is to become corrupt). However, he says higher salaries give officers more bargaining power, leading to more bribes. It also points out that it is tough to determine whether higher wages reduce corruption. Salary level is not the deciding factor, but is just one of many.
The central premise of increased wages supposes that once government officials/employees receive higher salaries, they would significantly value their position to the extent that will discourage the acceptance of bribes. In addition, if wages paid to government officials are increased, they will not need to seek alternative sources of revenue (Samuel Alemu, 2018). According to Transparency International, salary top-ups create distortions in the labor market, the public sector, and the pay/skill balance may create inflationary pressures, thus affecting the macroeconomic situation. These distortions could create opportunistic behavior in governmental offices. These behaviors could range from nepotism to preventing civil service reforms (which is crucial for public sector employees).
Conclusion
Bribery tends to produce ineffective economic outcomes, discourage long-term domestic and foreign investment, redeploy income-based talent, and distort decisions about sector priorities and technology (e.g., encouraging investment in local specialty clinics and health care). This drives corporations “underground” (outside the formal sector), weakens the government’s ability to raise revenues, and causes higher and higher rates of taxes to be collected from fewer and fewer taxpayers (due to under-collection) – resulting in a reduction in the state’s ability to provide adequate investments, public goods, as well as in implementing the rule of law.
Although higher wages seem like a tempting proposition, it’s still a cause for other concerns. The results of empirical studies in Africa have demonstrated that the effects of higher salaries on corruption and bribery are either unclear or nonexistent (Haan et al., 2013).
Corruption is complex and encompasses a multitude of variables. Solving the issue of wages can only take it so far (with all its other underlying problems), especially for developing countries. Correspondingly, most economists agree against salary top-ups because of the multi-faceted nature of corruption and its potential inflationary issues.
Bekan Bekele is an Economic researcher based in Ethiopia, you can find him at bekan.bekele74@gmail.com
