I was quite excited to find this blog post but now that I’ve read it, I’m a little disappointed. It’s a bit wishy washy in the way academic articles can be and doesn’t really get much further than defining corruption and categorising it as high-level and low-level.
The reason for that is probably the extreme complexity of the issue under examination — simply taking a handful of countries and establishing some relationship between their respective levels of corruption and growth doesn’t make sense because there are too many other factors at play. Economists always try to take a ‘partial derivative’, linearised view of the world (ie, all else equal, find a single driving variable), since that’s the most obvious way to decompose a complex issue into aspects that can be studied individually, but there are inevitable limitations to how effective this approach can be at the macro level, where there are dozens of significant variables, with unknown cross-effects that are likely deserving of separate study.
It’s clear that corruption impedes growth and development, indirectly through economically suboptimal allocation of resources and directly through the increased costs it imposes. Beyond that, it’s pretty hard to make any substantial, justifiable statement. Perhaps rather than drilling until some tenuous relationship is established, the focus should be to establish how corruption becomes systemic and what measures can be taken to prevent this from happening. In places like Pakistan where corruption is an everyday occurrence, people simply assume it will continue unimpeded and price it in as a cost of business. We know there it is exacerbated by extreme social inequality, exceptionally poor pay for officials, and a bizarre mindset (particularly in communities like the Memons) that considers bribes a mark of respect and an essential element in building necessary relationships with officials. In short, there’s a significant cultural component to corruption that must not be obscured by the economic aspect.
Of course, once corruption becomes so commonplace that society’s perception of it vacillates between necessary evil and competitive advantage, obvious steps like making examples of a few chosen offenders become useless, and even attempts to tackle the root issues — such as the double-salary schemes offered by the Federal Board of Revenue under reforms agreed with the World Bank — are only marginally effective. Certainly, gimmicky (the National Accountability Bureau is a massive sham) and/or highly focussed measures (the double-salary scheme was only offered to key officials) are a waste of time and not deserving of discussion. Bold steps, applied with commitment and consistency and monitored actively, are needed in order to remove the root causes and steadily (if slowly) rub out corruption. And of course, these steps would need to address each facet of the problem.
One bold step might be to draw the problem out into daylight by legitimising and regularising the bribes officials are already taking in the form of some minimal extra fee; this would be additional remuneration for providing a service. This immediately circumvents the problem of burdening the government with higher payroll and actually encourages efficiency in directing the remuneration to those who have earned it. In an indirect way, it might also go some way in addressing the cultural issues (continuing to pick on Memons — assuming they don’t pay doctors more than their quoted fee, I don’t see why they would feel obliged to push further bribes on officials). Doing this would likely create issues of nepotism in the allocation of official duties and potentially harmful competition between colleagues, but these are straightforward problems with more obvious solutions. The government would simultaneously have to empower citizens to report negligence or incompetence or — more tricky — officials charging in excess of the permitted fee. With sufficient political will and clout to aggressively prosecute citizens and officials who continue to flout the law, maybe we would have a workable system.
(Holy never-ending-sentence-alert, Batman! My brain isn’t working these days…)