what are the causes of corruption

7/30/2019 What Are the Causes of Corruption

1/49

1/ What is the definition of corruption?

2/ Tell of various kinds of corruption

3/ Explain in detail some of the most striking causes of corruption

4/ what are the consequences of corruption? Analyze some of them.

5/ Raise some of the most effective solutions to or cures for corruption

What Are the Causes of Corruption?Wendy Updated: 2004-02-09 09:30

What Are the Causes of Corruption? Why do people choose to be corrupt rather than honest?

For some, being corrupt may be the easiest way-or indeed the only way-to get what they want.

At times, a bribe may provide a convenient means of avoiding punishment. Many who observe that politicianspolicemen, and judges seem to ignore corruption or even practice it themselves merely follow their example.

For some, being corrupt may be the easiest way-or indeed the only way-to get what they want. At times, a

bribe may provide a convenient means of avoiding punishment. Many who observe that politicians, policemen

and judges seem to ignore corruption or even practice it themselves merely follow their example.

As corruption snowballs, it becomes more acceptable until it is finally a way of life.

People with pitifully low wages come to feel that they have no option. They have to demand bribes if they wato make a decent living. And when those who extort bribes or pay them to gain an unfair advantage go

unpunished, few are prepared to swim against the tide.

"Because sentence against a bad work has not been executed speedily, that is why the heart of the sons of m

has become fully set in them to do bad," observed King Solomon.-Ecclesiastes 8:11.

Two powerful forces keep stoking the fires of corruption:

**selfishness **and **greed***.

Because of selfishness, corrupt people turn a blind eye to the suffering that their corruption inflicts on others,

and they justify bribery simply because they benefit from it. The more material benefits they amass, thegreedier those practicers of corruption become.

"A mere lover of silver will not be satisfied with silver," observed Solomon, "neither any lover of wealth withncome." (Ecclesiastes 5:10)

Granted, greed may be good for making money, but it invariably winks at corruption and illegality.

Unit 2: Causes of CorruptionIntroductionThe antithesis to corruption is good governance. The term governance alone refers


2/49

to the way government carries out its work through decision-making andimplementation. Good governance accomplishes the functions of governance withoutabuse and corruption, and with regard for the rule of law. When there is notevidence of good governance through such qualities as accountability,responsiveness, transparency, and efficiency (see Unit 2), when policies are not

effectively implemented, and public services are ineffective or unavailable, there iscorruption. Put simply, one could conclude that corruption occurs where goodgovernance is lacking. The question remains, if good governance benefits thepopulation and corruption causes suffering, as we learned in Unit One, why wouldpeople participate in corrupt behavior?This unit takes corruption apart by looking at the possible scenarios that wouldmotivate people to participate in the unethical and dishonest behaviors that define it.The unit also explains what situations cause dysfunctional governments to foster amore corrupt world.Motivation for Engaging in CorruptionLearning Objectives

What causes corruption?After studying this unit, you should be able to: Define good governance; Provide some motivating factors for participating in corrupt behaviors; Name and describe the pillars of good governance. 2Henry Kissinger once said, Corrupt politicians make the other ten percent look bad.From a personal desire for an unfair advantage, to distrust in the justice system, tocomplete instability in a nations identity, there are numerous factors motivatingpeople of power, parliamentarians included, and indeed ordinary citizens, to engagein corrupt behavior.Governance problems can be more or less serious, and can vary from one part ofgovernment to another. It is one of the key governance problems that a country mayface. Governments are vulnerable to corruption when their institutions are: Involved in clear cases of corruption; Inefficient; Unresponsive; Secretive; or Inequitable.In this unit, we take apart these most common motivating factors for corruption inthe governance process and among government agents.Desire for an Unfair AdvantageMany officials are motivated to participate in corrupt behavior because of theinherently selfish desire to have an unfair advantage over their peers. Throughbribery, extortion, embezzlement, nepotism and other means, corruption can helpdishonest people get ahead while the public pays the price. A corrupted politicianmay seek to sway a persons opinions, actions, or decisions, reduce fees collected,speed up government grants, or change outcomes of legal processes. Throughcorruption, people seeking an unfair advantage may pay courts to vote in their favoror, as with police, customs units, and tax collectors, to disregard a penalty. Briberymay be paid to allow for otherwise unacceptable building and zoning permits, to


3/49

sway school exam results or allow acceptance by an unqualified student into a schoolsystem. People in the private sector may pay off politicians so that they dismiss rulesand regulations to protect employees in the workforce. Corruption motivated by an 3unfair advantage may also occur in immigration, passport and visa offices in whichunqualified individuals may be allowed an unfair advantage to obtain these important

documents, at the expense of others.In order to obtain an unfair advantage, governments and government officials mayapply any number of methods to abuse their power over the citizens. First, apolitician may apply diplomatic, political, or financial pressure, for example tradeembargoes. However such pressures may also work to effectively bully vulnerablecitizens. Also, many countries are the recipients of development aid, which mightcause politicians who seek an unfair advantage to earmark this funding towards theirparticular cause. The threat of reduced foreign aid, defense ties, arm deals, and giftsmay help politicians to obtain an unfair advantage through corruption.Lack of Punitive MeasuresThomas Hobbes, the great political philosopher, once said, A man's conscience and

his judgment is the same thing; and as the judgment, so also the conscience, maybe erroneous. This idea that individuals cannot always rely on a working inner moralcompass alone to guide them to virtue is at the heart of the next motivating factorfor participating in corrupt behavior.When the legal agencies do not impose sanctions on parliamentarians and othergovernment officials who have violated their public duties there is a lack of punitivemeasure for corrupt behavior. This is the case, for example when judges are in thepay of the ruling party or there are too few police officers to enforce the law.When there are not punitive measures to assure transparency, monitoring, andaccountability through a working justice system, some people will participate incorrupt behavior simply because they can get away with it. Politicians and otherindividuals require a legal, monitoring system to assure that corruption will not occurin the planning and execution of public sector budgets. Social and internal controlmechanisms are required for civil society and autonomous state auditing agencies.Without them or with only weak enforcement measures, people in power are more 4likely to embezzle money from the national budget, sway votes or participate inother actions that will result in personal gain at the publics expense.Lack of TransparencyTransparency describes when there is free access by citizens to public information.When the rules, procedures, and objectives of the government are not available tothe public, there is not budgetary and administrative oversight to balance the powerof government officials, transparency is lacking and corruption can be bred. Withoutoversight and transparency of budget and rules, national resources may beplundered and power may be abused in favor of the corrupt official only.Further, when there are not public sector mechanisms that channel socialpreferences and specific complaints of the population to the agencies involved inthose complaints, people of power will not serve their purpose of representing thepopulace, but have free reign to do as they please in the public sector.Lack of transparency creates opportunities for public officials to abuse their office forprivate gain. This closely relates to accountability, and weak accountability


4/49

mechanisms tend to facilitate corruption. Where there is a lack of transparency andaccountability corruption will flourish. Once corrupt bureaucrats realize that they cantake advantage of regulations, they will produce more regulations and run the risk ofbecoming less transparent.Poor Incentive Structures

Bad incentives, such as clerks not earning a living wage or not having job securitymight also encourage corrupt behavior such as supplementing income with bribes.Some people who do not have an incentive to perform their official duties, butactually pay for their jobs with the understanding that they will make money throughbribes. A lack of incentive also results when positions of power are granted as aresult of favoritism and nepotism (See unit 1). Making people resist hard work. 5Question: How would you suggestincreasing salaries of governmentofficials in order to avoid a cycle ofcorruption among politicians? What othersolutions are there?

Incentives also come into the picture when salaries are so low that people cannotmeet the basic living standards for foodand housing. As a result, people will oftentake other jobs that cause absenteeism ofpublic officials, and often increase thedemand by government officials for bribesand other paybacks in order to supply thepublic services. In another example,teacher absenteeism, teachers who are underpaid sometimes feel forced tosupplement their income with other work, causing absenteeism. This absenteeismmay not result in bribes, but may instead result in a lost public service for thestudents, thus stalling progress among that student population.Problems with the law: Lawless and Over Regulated GovernmentsCorruption can also be caused when there is excessive control and a sort of monopolyof power. In these circumstances, there again is not a level playing field, anddecisions will always be made at the advantage of the group or person who dominatespolitical control. As a result, ordinary citizen rights are lost and public resources areoften plundered for the personal gain of the public officials. Poverty or scarcity ofgoods may also push people to live outside the law.Finally, corruption occurs when government officials resist government policies andprograms. Introducing policies that allow for greater oversight would help to assurethat power were balanced and no one person would be making all of the politicaldecisions. When politicians resist this change they prevent political and culturalprogress for their country, prohibit civic interests from being met, and allow thepattern of corruption to flourish.Dysfunctional Systems as a Cause for Corruption 6Box 1System-Wide Allowances for Corrupt Behavior:Government may allow system wide corruption to spread by not institutionalizing andenforcing prevention mechanisms. For example:


5/49

Overly complex procedures for obtaining public services allow government to covetthe services to only the well-informed or well-connected elite, and not allowing thesystem to work for the poor. Lack of internal systems to assure relative transparency, monitoring andaccountability in the design and execution of public policies.

Lack of social control mechanisms aimed at preventing grand corruption schemesusually seen when the states policies are captured by vested interests. Lack of employee participation in and knowledge of the public institutionsdecisionmaking criteria. Absence of results based management in public service delivery. An ineffective judicial sector (police, prosecutors, officers, and the judiciary.)Instability in government may also catapult a nation and its leaders towardscorruption. Among them, war, ethnic or religious conflict, economic hardship, andsocial inequalities may instigate corruption. Any circumstance that threatens a nationor its people either through identity or establishment may diminish the goodgovernance practices of a nation. Even in less difficult times, the institutions and

policies of government may undermine how well the government carries out its work.When institutions and policies are weak, individuals tend to take advantage of them.Therefore, poor governments are a product of sick institutions, or institutions thatfunction poorly because of inadequate resources or bad policies and procedures.As stated earlier, good governance refers to the provision of services that areresponsive to citizen needs. When government services are not provided to citizens,either because they were deemed unnecessary, services providers demanded bribesor were lazy, or the services are provided in theory but are not readily available inpractice without a bribe, people will aim to have their needs met illegally orunofficially. Likewise, when financial systems are outdated, they are morecorruptible. 7Unit 2 QuestionsPlease answer each of the following questions. If you are taking this course in a groupyoumay then meet to discuss your answers.1. How would you suggest increasing salaries of government officials in order to avoid acycle of corruption among politicians? What other solutions are there?2. What is the difference between good governance and anticorruption?3. You learned of the major motivating factors for participating in corruption. Which, ifany, have provided impetus for you to engage in either publicly or privately unethicalbehavior?4. In what way do you think the government or national environment determinewhether or not corruption will occur?ConclusionProblems in governance occur when a government is not only corrupt, but also whenit is inefficient, unresponsive, or secretive. Essentially, when a government isineffectual, it is considered to be corrupt. As this unit explained, corruption isfundamentally caused by low wages, poor incentive structures and inefficientsystems. In addition, it is also caused by the desire for an unfair advantage, and theknowledge that one will not be caught or punished for corrupt behavior. Corruption


6/49

is not just about ethics. It is also about how the government is set up and managed.Parliament and parliamentarians improve the way government works so that corruptbehavior is punishable and opportunities for corruption are limited through the laws.In order to fully rectify corruption in a society, it must first be thoroughly diagnosed.Unit three shows methods for diagnosing, measuring, and interpreting data on

corruption. As the units thereafter will explain, this step will help to make focusedand measurable changes and improvements to corruption when those mechanismsare enacted. 8Select BibliographyD. Kaufmann (2005): Myths and Realities of Governance and Corruption.http://www.worldbank.org/wbi/governance/pdf/2-1_Governance_and_Corruption_Kaufmann.pdfStapenhurst, R., Johnston, N., and Pelizzo, R. The Role of Parliament in CurbingCorruption. Washington, DC: The World Bank, 2006.Internet ResourcesTransparency International

www.transparency.orgAmnesty Internationalwww.amnesty.org


7/49

Corruption in South Africa, Results of an Expert Panel Survey

Which circumstances, developments or characteristics influence the level and forms of corruption in a country? Whatexplains the cases that occur? In short, what are the causes of corruption? Unless the causes of corruption are clearlyidentified, it is difficult to prioritise effective anti-corruption strategies, which should address these causes in order toprevent corruption from occurring in future.

Arguably, the choice of analytical framework employed to analyse corruption influences the view on the causes ofcorruption and associated control measures. For example, using public choice theory where corruption is seen to arisefrom interactions between clients whether businesspeople, ordinary citizens, politicians and public officials who areassumed to be narrowly self-seeking in their behaviour economic reforms and downsizing the state are viewed as theprincipal anti-corruption reform measures.

According to Johnston, entrenched corruption features in societies with the following characteristics:

low political competition;low and uneven economic growth;a weak civil society; andthe absence of institutional mechanisms to deal with corruption.19

In contrast, those societies which are relatively free of corruption are premised on respect for civil liberties, accountablegovernment, a wide range of economic opportunities, and structured political competition. These are mainly, but notexclusively, characteristics of developed western states.

Huntington postulated a variety of propositions about the conditions favouring corruption in government. Several of thesefind resonance in the South African context:

Corruption tends to increase in a period of rapid growth and modernisation, because of changing values, newsources of wealth and power, and the expansion of government.

There tends to be less corruption in countries with more social stratification, more class polarisation and morefeudal tendencies. These conditions provide a more articulated system of norms and sanctions, which reducesboth the opportunity for and the attractions of corrupt behaviour.

A countrys ratio of political to economic opportunities affects the nature of corruption. If the former outweigh thelatter, then people enter politics in order to make money, which will lead to a greater extent of corruption.

If foreign business is prevalent, corruption tends to be promoted.

The less developed political parties are, the more prevalent is corruption.20

Causes of corruption in South African society

This section explores experts opinions on the cause of corruption in South African society, in general, and morespecifically in government. In order to elicit a better understanding of the causes of corruption, a number of conditions andpopular assumptions were also probed. These include the perception that government officials are so poorly paid that theyhave no choice but to ask for extra payment; paying bribes to government officials or doing favours for them helps toovercome the red tape of bureaucracy; democratic systems increase the incidence of corruption in a country; andprivatisation increases the potential for corruption.

When asked to identify the main causes of corruption in South Africa, respondents provided a wealth of different answers.These have been grouped into five categories for purposes of analysis.

A decline in morals and ethics was the most commonly cited reason for corruption in South African society, in general,accounting for nearly a third (31%) of responses (figure 10). This was followed by greed and the desire for self-enrichment(25%), and socio-economic conditions such as poverty and unemployment (18%). Institutional reasons such as weak

checks and balances accounted for more than a tenth (14%) of the responses, followed by the apartheid legacy and theprocess of transformation (12%)
http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-24495http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-4495http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-24495http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-4495


8/49

Figure 10: Respondents' perceptions of the causes of corruption in South Africa (n=191)

When asked about the causes of corruption in government, similar reasons were given to those perceived in society (figure11). However, these were prioritised slightly differently by the experts. Weak checks and balances together withmismanagement were the most common reasons given (38%) as the main causes of corruption in government. Greed andself-enrichment were again ranked second, accounting for 28% of responses. The general decline in morals and ethics wasthe next most common cause (17%), followed by the legacy of apartheid (9%) and socio-economic conditions (8%).

Figure 11: Respondents' perceptions of the causes of corruption in government (n=184)

The reasons cited by white experts were more evenly distributed across the various categories than those given by black

experts, who tended to focus on issues relating to the legacy of apartheid (26%), and the abuse of power (39%).

Other relevant research findings

Huberts panel was asked to indicate the importance of 20 social, economic, political, organisational and individual factorswhich are mentioned as causes of corruption in literature on the issue. While most of the 20 factors were considered to beimportant by the majority of experts, more than 80% of the panel were convinced of the importance of the eight causeslisted in table 7.

Table 7: Causes of corruption according to Huberts survey


9/49

Cause Percentage

Norms and values of individual politicians and civilservants

91

Lack of control, supervision, auditing 89

Strong interrelationships between business, politics,state

88

Lack of commitment by leadership (providing a badexample)

84

Misorganisation and mismanagement 84

Values and norms concerning government, stateofficials and organisations

83

Increasing strength of organised crime 82

Public sector culture (values/norms) 82

With a few exceptions, there was significant consensus between the respondents from both the lower and higher incomecountries about the causes of fraud and corruption. "Mismanagement and misorganisation", "public sector culture" and"increasing strength of organised crime" were three factors considered to be important by more than 80% of the expertsfrom both the higher and lower income countries. There were, however, several factors that were more important to lowerincome countries, which are clearly related to developmental problems. These include social inequality, rapid social

change, rapid economic growth, strong interrelationships between politics and administration and low salaries in the publicsector.

Analysis

What are the causes of corruption? This is the first time such a question has been asked in a survey of this kind in SouthAfrica. Experts cited declining morals and ethics, greed, socio-economic conditions, weak checks and balances andpolitical transformation as the main causes for corruption in South African society, whereas corruption in government wasseen to be more concerned with weak internal controls and systems, and mismanagement, followed by greed and adecline in morals and ethics.

These variations suggest a differentiated response to the control of corruption. Measures to address the causes ofcorruption in government therefore have to be aimed more at improving systems and controls rather than influencingindividual or social morality. However, it would do no harm to improve the professional ethics of those working ingovernment.

When it comes to individual moral failings such as greed and a proclivity to self-enrichment within a context of declining

morals and values, where and how should interventions be introduced, especially when measures to improve ethics areseen as the soft side of anti-corruption controls? It would appear that the moral regeneration of South Africa and formerpresident Mandelas call for a reconstruction and development programme of the soul is a priority intimately linked to theeffective fight against corruption.

Clearly, it cannot be assumed that the technicist approach to public service reform is sufficient in preventing corruption andmore fundamental interventions are required from an early age, rather than on the job training, to promote morals andvalues that uphold the values enshrined in the constitution.

Are South Africans an inherently corrupt, self-enriching, greedy and opportunistic bunch? How should these causes ofcorruption be addressed? Experts were also asked to rank a list of 30 anti-corruption strategies in terms or their potentialeffectiveness. It is interesting to compare these results with the underlying causes of corruption identified in South Africa.

Conditions for corruption

Low salaries

A series of common perceptions on the causes of corruption were presented to expert respondents who were askedwhether they agreed or disagreed with them. While differences in opinion were analysed by race, the small groups withinthe sample did not allow for analysis of responses by sector.

The first statement suggested that government officials are so poorly paid that they have no choice but to ask people forextra payments.

Table 8: Respondents perceptions of peoples propensity for corruption as a result of poor salaries, in general and byrace

Response Total Black White


10/49

Percentage

Strongly agree 4 5 5

Agree 10 14 8

Neither agree nor disagree 7 6 8

Disagree 46 41 49

Strongly disagree 32 34 29Do not know 1 0 1

Total 100 100 100

The majority (57%) of those who strongly agreed with this statement were employed in the public sector, while a third(35%) of those who strongly disagreed worked within the public and civil society sectors. The majority of the private sectorexperts either disagreed (35%) or strongly disagreed (39%).

Analysis

Clearly, the majority of experts did not agree that government officials were poorly paid and that this would be a reason toextract bribes from citizens. This is confirmed by their responses to the request to rank the effectiveness of anti-corruptionstrategies. Increasing the salaries of government employees did not rank particularly high, although experts were able todifferentiate between paying the police better salaries, something which was thought to be effective in the fight againstcorruption.

Recent research undertaken by the United Nations Desk for Economic and Social Affairs (UNDESA) on public serviceethics in Africa confirms that, in the Southern African region, South African public officials are paid far above the norm.These salaries ranging between US $4 964 and US $60 273 compete well with private sector remuneration and thepublic sector therefore both attracts and retains professional employees.21

Bribery and bureaucracy

Experts were asked to express an opinion on whether the payment of bribes to government officials, or doing favours forthem, helped them to overcome the red tape of bureaucracy and made it easier to get things done.

Only 52% of respondents disagreed or strongly disagreed with the statement that bribes paid to government officialshelped to overcome the red tape of bureaucracy (table 9). Of the respondents, 39% agreed or strongly agreed that payinga bribe to a government official made it easier to get things done. Among white respondents, there was little differencebetween those who agreed or strongly agreed (45%) and those who disagreed or strongly disagreed (48%). However, asignificant higher percentage of black respondents disagreed or strongly disagreed (58%) than those who agreed orstrongly agreed (33%).

Table 9: Respondents perceptions of whether bribes overcome red tape and make transactions easier, in general and byrace


Percentage


Agree 33 26 40


Disagree 29 35 24

Strongly disagree 23 23 24

Do not know 1 0 0

Total 100 100 100
http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-Public-45509http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-Public-45509http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-Public-45509


11/49

Analysis

The payment of bribes is seen by almost 40% of the respondents to overcome bureaucratic delays. From their perspective,corruption pays. It is very concerning that so many of the experts held this opinion. The question invariably arises:how many have acted on it? Strong private sector agreement with this statement could lead to the belief that commonbusiness practice might include bribing officials in order to speed up processes and make it easier to get things done.

Corruption and democracy

The next statement put to the experts suggested that democratic systems of government increase the prevalence ofcorruption in a country.

The majority of respondents either disagreed (45%) or strongly disagreed (34%) with the statement that democraticsystems of government increase the prevalence of corruption in a country, while only 14% agreed (table 10). While littleracial variation was identified, a marginally higher percentage of white respondents agreed with the statement, while aslightly lower percentage than black respondents disagreed.

Table 10: Respondents perceptions of whether democracy increased the prevalence of corruption, in general and byrace


Percentage

Strongly agree 2 5 0Agree 12 6 15


Disagree 45 53 42


Do not know 3 3 2

Total 100 100 100

Analysis

The pluralist approach assumes that political initiatives centred on the creation of new democratic institutions such aselected legislatures, parliamentary committees and watchdog bodies are central to the success of efforts to controlcorruption. Democratic systems of governance premised on commitments to accountability, openness and transparency

are also thought to create conditions that discourage corruption.

However, Johnston suggests that democratic rights and processes as such do not make a significant contribution toreducing corruption. Indeed, there are many examples of countries where corruption has increased in spite of the existenceof formal democratic institutions, India and Nigeria being prominent among them. While political competition offersopportunities for the new political lite to gain legitimacy by taking action against corruption, it can also enable them tosecure greater access to existing rentseeking opportunities.

Corruption and privatisation

Experts were asked to respond to the statement that by selling government factories and businesses to private citizens(privatisation), the potential for corruption in government increases.

More than half (58%) of the respondents disagreed with the statement that privatisation increases the potential forcorruption (table 11). Almost a third (31%) agreed with this statement. A higher percentage of white respondents were likelyto be ambivalent about the statement than their black counterparts.

Table 11: Respondents perceptions of whether privatisation increases the potential for corruption in government, ingeneral and by race


Percentage


Agree 27 24 29



12/49

Disagree 43 41 44


Do not know 2 3 1

Total 100 100 100


13/49

Analysis

There are persuasive arguments that the privatisation of state-run services and enterprises can curb corruption. This refersparticularly to inefficient parastatals that, because of their monopoly positions, are able to extract huge sums from thepublic coffers, as well as from providing private sector services. By reducing the degree of interaction between the privateand public sectors, privatisation directly reduces the opportunities for corrupt behaviour. Private sector accounting methodsand competitive market pressures are also believed to reduce the opportunities for wrongdoing and make it more difficult tohide such activities.22The expectation is that, by reducing the size of the public sector and the direct involvement of the

state in economic activity, opportunities for rentseeking activities will diminish.

However, these benefits must be weighed against the possible adverse effects of privatisation. In practice, the evidencethat it reduces corruption is far from clear-cut.23Privatisation in the absence of effective regulation has the potential togenerate high levels of economic rent, especially in natural monopolies, and the private appropriation of public assetsthrough illegal means.24Rather than to create a clear distinction between public and private sectors, privatisationprogrammes have often been characterised by the emergence of a series of quasi-governmental regulatory agencies. Thisprocess of agencification linked to the doctrine of new public management has created significant opportunity structuresto peddling influence, as well as to remove many regulatory agencies from direct public accountability.25

Almost a third of the experts agreed that privatisation increases the potential for government corruption, an opinion possiblyinformed by ideological considerations that disagree, in principle, with the privatisation of state assets. As the governmentpresses ahead with its privatisation programme, it would be wise to ensure that effective regulation is in place to avoid thecreation of new opportunities for corruption.

How does corruption occur?

In attempting to probe the actual form of corrupt practices in South Africa, respondents who indicated that they had beenvictims of corruption were asked to describe the situation in which the corruption occurred. Three potential scenarios wereprovided, and respondents selected the most appropriate response.

Of the 51 experts who experienced corruption, the most likely response (43%) was that a public official requested or hintedat payment (figure 12). This is followed by a third of the respondents (33%) who experienced a situation where they, orpeople they knew, were expected to know in advance what the method and amount were. In less than a quarter (24%) ofthe situations, the offer was made spontaneously by the citizen.

Figure 12: How corruption occurs, based on victims' experiences

Analysis
http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-Stapenhurst-31329http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-Stapenhurst-31329http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-22648http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-22648http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-22648http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-7720http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-7720http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-7720http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-30746http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-Stapenhurst-31329http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-22648http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-7720http://www.iss.co.za/Pubs/Monographs/No65/Notes.html#Anchor-30746


14/49

It appears as if the demand side of corruption (the public official requests or hints at payment) is more prevalent than thesupply side (where the offer is made spontaneously by the citizen). This points to the arrogance of corrupt officials who areconfident that they can make demands in a relatively risk-free environment with no checks or controls to influence theirbehaviour. However, it is the routine, transactive, entrenched form of corruption where it is known beforehand how it isdone and how much to pay that is of the greatest concern. This could potentially indicate that corruption has a systemicnature and has become entrenched and pervasive across the public sector, influencing expectations on both sides of howthings work and how they are done.

The key question is how many of those who believed that paying bribes to government officials helps overcome the red

tape have actually acted on this belief. Interestingly, of those experts who either agreed or strongly agreed to the benefitsof paying a bribe, almost two-thirds (61%) had had personal experience, or knew someone who had experienced anincident of corruption. This may imply that those who acknowledge the benefits of corruption, in official spheres at least, arelikely to engage in some form of corruption themselves. The perception clearly exists that bribery produces benefits andexpedites various otherwise arduous processes. This is exacerbated by the fact that bribery is seen as a victimless crime,in that there are two partners. For example, someone may need a passport quickly, but is prepared to pay the customsofficial R300 for expediting the request or bypassing certain rules and regulations. The challenge is thus to counter thisperception. The fact that more than 30% of the expert group had experienced corruption personally, or knew someone elsewho did, is cause for some concern.

The main causes of corruption in

IndiaOn June 10, 2011, inUncategorized, by pksabhlok

The main causes of corruption in India are:

1. Continuation ofconfused Nehruvian Socialism for the last a few decades and hypocrisy of

current Liberalism when large scale leaking subsidies still continue.

2. Weak and ineffective Local governments inspite of Amendments 73 and 74 to Constitution of

India

3. Fixed and purchased vote bank with manipulated Voters lists.

4. Rusted and fargile steel frame ofoutdated colonial model of IAS Bureaucracy.

5. Our fundamental rules in governance, Police, Co-operative and other welfare Societies etc are

still based on 1860 Act as amended but not implemented.

6. Our private schools/colleges obtain signatures for higher UGC scale salary but pay nearly 50%

of the amount. Thus Corrupt teachers/Professors/ management etc are running the

schools/colleges.

7. In I.A.S officers Training Academy (LBSNAA) corruption is prevailing and brought to the notice

of Cabinet Scy, Prime Minister etc.They are all closing their eyes to save their IAS

colleague in LBSNAA.
http://prem.sabhlokcity.com/2011/06/the-main-causes-of-corruption-in-india/http://prem.sabhlokcity.com/2011/06/the-main-causes-of-corruption-in-india/http://prem.sabhlokcity.com/category/uncategorized/http://prem.sabhlokcity.com/category/uncategorized/http://bfn.sabhlokcity.com/http://bfn.sabhlokcity.com/http://sabhlokcity.com/2011/05/my-fathers-compilation-of-views-on-the-ias/http://sabhlokcity.com/2011/05/my-fathers-compilation-of-views-on-the-ias/http://sabhlokcity.com/2011/03/is-a-stench-of-corruption-arising-from-the-academy-that-trains-ias-officers/http://sabhlokcity.com/2011/03/is-a-stench-of-corruption-arising-from-the-academy-that-trains-ias-officers/http://sabhlokcity.com/2011/03/is-a-stench-of-corruption-arising-from-the-academy-that-trains-ias-officers/http://www.iss.co.za/Pubs/Monographs/No65/Chap4.html#Anchor-20480http://prem.sabhlokcity.com/2011/06/the-main-causes-of-corruption-in-india/http://prem.sabhlokcity.com/2011/06/the-main-causes-of-corruption-in-india/http://prem.sabhlokcity.com/category/uncategorized/http://bfn.sabhlokcity.com/http://sabhlokcity.com/2011/05/my-fathers-compilation-of-views-on-the-ias/http://sabhlokcity.com/2011/03/is-a-stench-of-corruption-arising-from-the-academy-that-trains-ias-officers/http://sabhlokcity.com/2011/03/is-a-stench-of-corruption-arising-from-the-academy-that-trains-ias-officers/


15/49

8. The subsidised domestic LPG cylinders are sold to commercial organisation/hotels etc at much

higher rate in the presence of law enforcing agencies, no one stops this for their corrupt material

gain. All the Deputy Commissioners of major districts know about it but are helpless.

9. First the government recovers TDS at much higher percentage and when question of Refund

comes, for years Refund is not given unless some fixed% is given to Income Tax officials. If youcomplain there is more harassment in future to make you run from pillar to post.

10. Our spiritual gururs openly accept donation of Black money. Neither the donor want receipt

nor Gurus are keen to give receipts.

. there is endless list for corrupt practices. i do not know what LOKPAL/LOKAYUKT will

do in such cases.

Solution is bury Nehruvian Socialism, say good bye to colonial model of IAS

Bureacracy, No subsidies, compensation through welfare means and not subsidies,

make local governments strong, effective and vibrant.

CEC of India should be reprimanded if manipulation of Voters lists are found etc.

Deputy Commissioner incharge should be sacked for accpeting manipulation under

political pressure.

RegardsRoot Cause of Corruption in India

Apr 1 2007 | Views 11660 | Comments (2) |Report AbuseTags:corruptionindiapoliticshinduhindusintegritycitizencitizenshipbharatslavescreedcreedsreligionreligionscultureculturestraditiontraditions

Everyone will agree that we are one of the most corrupt nations on Earth. There is corruption inevery dimension of human endeavour. So much so that we are sometimes surprised when wefind some person or circumstance where there is no scope for corruption!We need to adopt a scientific attitude and process to eliminate this malady from our society, merecalls for integrity are useless. We need to study and understand those individuals and systemswhere there is no scope for corruption and replicate/roll-out those models for the rest of thepopulation and institutions.First let us review the qualities of individuals of integrity.1. Self-respect is one of the most important of the common qualities of men/women of integrity.They are content with what their qualification and work can fetch them. And if their present state

does not meet their ambition, they will strive to improve in a legitimate way.2. They love themselves, their families and the mother land.3. They do not exhibit such cheap behaviour as throwing thrash in their neighbour's plot, elbowingothers to beat the queue, jump the traffic signal etc. Instead and they are calm and composed inpublic, follow rules and desire harmony in society.4. While some of them oppose corruption publicly, others are content to be clean themselves andleave the others' behaviour to their own conscience. But the latter is not due thier acceptance of
http://freedomteam.in/http://vajrapani.sulekha.com/blog/post/2007/04/root-cause-of-corruption-in-india/comments.htmhttp://blogs.sulekha.com/tags/http://blogs.sulekha.com/tags/http://blogs.sulekha.com/tags/tag.aspx?tag=corruptionhttp://blogs.sulekha.com/tags/tag.aspx?tag=indiahttp://blogs.sulekha.com/tags/tag.aspx?tag=indiahttp://blogs.sulekha.com/tags/tag.aspx?tag=politicshttp://blogs.sulekha.com/tags/tag.aspx?tag=politicshttp://blogs.sulekha.com/tags/tag.aspx?tag=politicshttp://blogs.sulekha.com/tags/tag.aspx?tag=hinduhttp://blogs.sulekha.com/tags/tag.aspx?tag=hinduhttp://blogs.sulekha.com/tags/tag.aspx?tag=hindushttp://blogs.sulekha.com/tags/tag.aspx?tag=integrityhttp://blogs.sulekha.com/tags/tag.aspx?tag=integrityhttp://blogs.sulekha.com/tags/tag.aspx?tag=citizenhttp://blogs.sulekha.com/tags/tag.aspx?tag=citizenhttp://blogs.sulekha.com/tags/tag.aspx?tag=citizenhttp://blogs.sulekha.com/tags/tag.aspx?tag=citizenshiphttp://blogs.sulekha.com/tags/tag.aspx?tag=citizenshiphttp://blogs.sulekha.com/tags/tag.aspx?tag=bharathttp://blogs.sulekha.com/tags/tag.aspx?tag=slaveshttp://blogs.sulekha.com/tags/tag.aspx?tag=slaveshttp://blogs.sulekha.com/tags/tag.aspx?tag=slaveshttp://blogs.sulekha.com/tags/tag.aspx?tag=creedhttp://blogs.sulekha.com/tags/tag.aspx?tag=creedshttp://blogs.sulekha.com/tags/tag.aspx?tag=creedshttp://blogs.sulekha.com/tags/tag.aspx?tag=religionhttp://blogs.sulekha.com/tags/tag.aspx?tag=religionhttp://blogs.sulekha.com/tags/tag.aspx?tag=religionshttp://blogs.sulekha.com/tags/tag.aspx?tag=culturehttp://blogs.sulekha.com/tags/tag.aspx?tag=culturehttp://blogs.sulekha.com/tags/tag.aspx?tag=cultureshttp://blogs.sulekha.com/tags/tag.aspx?tag=cultureshttp://blogs.sulekha.com/tags/tag.aspx?tag=traditionhttp://blogs.sulekha.com/tags/tag.aspx?tag=traditionhttp://blogs.sulekha.com/tags/tag.aspx?tag=traditionshttp://freedomteam.in/http://vajrapani.sulekha.com/blog/post/2007/04/root-cause-of-corruption-in-india/comments.htmhttp://blogs.sulekha.com/tags/http://blogs.sulekha.com/tags/tag.aspx?tag=corruptionhttp://blogs.sulekha.com/tags/tag.aspx?tag=indiahttp://blogs.sulekha.com/tags/tag.aspx?tag=politicshttp://blogs.sulekha.com/tags/tag.aspx?tag=hinduhttp://blogs.sulekha.com/tags/tag.aspx?tag=hindushttp://blogs.sulekha.com/tags/tag.aspx?tag=integrityhttp://blogs.sulekha.com/tags/tag.aspx?tag=citizenhttp://blogs.sulekha.com/tags/tag.aspx?tag=citizenshiphttp://blogs.sulekha.com/tags/tag.aspx?tag=bharathttp://blogs.sulekha.com/tags/tag.aspx?tag=slaveshttp://blogs.sulekha.com/tags/tag.aspx?tag=creedhttp://blogs.sulekha.com/tags/tag.aspx?tag=creedshttp://blogs.sulekha.com/tags/tag.aspx?tag=religionhttp://blogs.sulekha.com/tags/tag.aspx?tag=religionshttp://blogs.sulekha.com/tags/tag.aspx?tag=culturehttp://blogs.sulekha.com/tags/tag.aspx?tag=cultureshttp://blogs.sulekha.com/tags/tag.aspx?tag=traditionhttp://blogs.sulekha.com/tags/tag.aspx?tag=traditions


16/49

corruption, but because of practical limitations in constantly opposing an overwhelming majority ofpeople.Let us now review the qualities of institutions of integrity.1. Honesty is their policy. It is the cornerstone of their business existence.2. They build and tune their systems to be resilient enough not to fall prey to human weaknessesand inadequacies.3. They rely on innovation and continuous improvement rather than questionable businesspractices.4. They respect the interests of their customers, stake holders and employees. Their policies andprocedures are tuned to imbibe responsibility and accountability in every individual.5. Unscrupulous individuals will find it difficult to survive and grow in such institutions as thesystem demands accountability.Now, though an institution is greater than an individual, it is individuals who form, contitute and

run insitutions. Hence, let us see why our country is failing in producing individuals of integrity.The main reason why our country is failing to produce individuals of integrity is because ofLackof Intellectual Independence. Sitting at the top of our national executive are mere parrots whowill simply speak out what they have learnt by rote. All that they know is to imitate and follow thelegacy of our erstwhile colonial masters. There is a very subtle problem here - all those pre-independence things were first put in place to make us loyal servants of our colonial masters, andprevent us from becoming authors and masters of our own destiny.For example, take our social studies text books, while they heap condemnation on all 'bad'aspects of our culture and tradition, they have absolutely nothing worthy to highlight in a positiveway. As a result, an average Indian is led to believe that our inheritance is evil and we need to"reform" - that is change in a way mostly acceptable for our western audience.

But even while the text books condemn and call to abandon all aspects of our native culture, theyun-conditionally extoll the 'virtues' of foreign cultures and creeds. Our text books scrupulouslyavoid being critical of any aspect of foreign cultures/creeds. This results in an average citizendeveloping the attitude of being inimical to the country's own culture and tradition - that is totowards his own fellow citizens of the native culture and tradition - while they are timidlyrespective of foreigners and other fellow citizens following colonial/foreign cultures/traditions.This behaviour is seen even more in our mainstream media (mainly English). Another simpleexample - especially of common knowledge to frequent fliers - is that most Indians scrupulouslyfollow the Q system outside India, while they will resort their normal 'elbow thy neighbour' themoment they touch-down back home.

To sum it up our current educational system will continue to create good slaves of foreignmasters, but cannot create good masters of our own destiny. Coming to the un-educated, theysimply follow the behaviour of their educated peers.Once we achieve Intellectual Independence, everything else will fall in place. Individuals ofintegrity have their role to play - to write about what is good about them and their motherland.

Vajrapani., all rights reserved.

Finance & Development / March 1998 11


17/49

Corruption: Causes, Consequences, andAgenda for Further ResearchPA O L O M A U R OWhat do we know aboutcorruption, how do we know

it, and what steps do we needto take to improve our understanding of corruptionand enhance governmentseffectiveness in combating it?VER THE LAST few years, theissue of corruptionthe abuse ofpublic office for private gainhasattracted renewed interest, bothamong academics and policymakers. Thereare a number of reasons why this topic hascome under fresh scrutiny. Corruption scandals have toppled governments in both

major industrial countries and developingcountries. In the transition countries, theshift from command economies to free market economies has created massiveopportunities for the appropriation of rents (that is,excessive profits) and has often been accompanied by a change from a well-organizedsystem of corruption to a more chaotic anddeleterious one. With the end of the coldwar, donor countries have placed lessemphasis on political considerations inallocating foreign aid among developingcountries and have paid more attention tocases in which aid funds have been misusedand have not reached the poor. And sloweconomic growth has persisted in manycountries with malfunctioning institutions.This renewed interest has led to a newflurry of empirical research on the causesand consequences of corruption.Economists know quite a bit about thecauses and consequences of corruption. Animportant body of knowledge was acquiredthrough theoretical research done in the1970s by Jagdish Bhagwati, Anne Krueger,and Susan Rose-Ackerman, among others(Mauro, 1996). A key principle is thatcorruption can occur where rents existtypically, as a result of governmentregulationand public officials have discretion in allocating them. The classic exampleof a government restriction resulting inrents and rent-seeking behavior is that of


18/49

an import quota and the associated licensesthat civil servants give to those entrepreneurs willing to pay bribes.More recently, researchers have begun totest some of these long-established theoretical hypotheses using new cross-countrydata. Indices produced by private rating

agencies grade countries on their levels ofcorruption, typically using the replies tostandardized questionnaires by consultantsliving in those countries. The replies aresubjective, but the correlation betweenindices produced by different rating agencies is very high, suggesting that mostobservers more or less agree on how corrupt countries seem to be. The high pricespaid to the rating agencies by their customers (usually multinational companiesand international banks) constitute indirectevidence that the information is valuable.These indices are obviously imperfect

owing to their subjective nature, but canyield useful insights.Causes of corruptionSince the ultimate source of rent-seekingbehavior is the availability of rents, corruption is likely to occur where restrictions andgovernment intervention lead to the presence of such excessive profits. Examplesinclude trade restrictions (such as tariffsand import quotas), favoritist industrialpolicies (such as subsidies and tax deductions), price controls, multiple exchange ratepractices and foreign exchange allocationschemes, and government-controlled provision of credit. Some rents may arise in theabsence of government intervention, as inthe case of natural resources, such as oil,whose supply is limited by nature andwhose extraction cost is far lower than itsmarket price. Since abnormal profits areavailable to those who extract oil, officialswho allocate extraction rights are likely tobe offered bribes. Finally, one would expectthat corruption is more likely to take placewhen civil servants are paid very low wagesand often must resort to collecting bribes inorder to feed their families.While all of the hypotheses describedabove are empirically testable, in the sensethat data are available for that purpose,only a few have actually been tested. Whatempirical studies have been done supportcertain hypotheses: namely, that there isless corruption where there are fewer trade


19/49

restrictions; where governments do notPaolo Mauro,an Italian national, is an Economist in the IMFs European I Department.Oengage in favoritist industrial policies;and perhaps where natural resources are

more abundant; and that there is somewhatless corruption where civil servants arepaid better, compared with similarly qualified workers in the private sector (VanRijckeghem and Weder, 1997).Consequences of corruptionFrom economic theory, one would expectcorruption to reduce economic growth bylowering incentives to invest (for bothdomestic and foreign entrepreneurs). Incases where entrepreneurs are asked forbribes before enterprises can be started, or

corrupt officials later request shares in theproceeds of their investments, corruptionacts as a tax, though one of a particularlypernicious nature, given the need forsecrecy and the uncertainty as to whetherbribe takers will live up to their part of thebargain. Corruption could also be expectedto reduce growth by lowering the quality ofpublic infrastructure and services, decreasing tax revenue, causing talented people toengage in rent-seeking rather than productive activities, and distorting the composition ofgovernment expenditure (discussedbelow). At the same time, there are sometheoretical counterarguments. For example,it has been suggested that governmentemployees who are allowed to exact bribesmight work harder and that corruptionmight help entrepreneurs get aroundbureaucratic impediments.One specific channel through which corruption may harm economic performance isby distorting the composition of government expenditure. Corrupt politicians maybe expected to spend more public resourceson those items on which it is easier to exactlarge bribes and keep them secretforexample, items produced in markets wherethe degree of competition is low and itemswhose value is difficult to monitor. Corruptpoliticians might therefore be more inclinedto spend on fighter aircraft and large-scaleinvestment projects than on textbooks andteachers salaries, even though the latter


20/49

may promote economic growth to a greaterextent than the former.Empirical evidence based on crosscountry comparisons does indeed suggestthat corruption has large, adverse effects onprivate investment and economic growth.

Regression analysis shows that a countrythat improves its standing on the corruptionindex from, say, 6 to 8 (0 being the most corrupt, 10 the least) will experience a 4percentage point increase in its investment rateand a 0.5 percentage point increasein its annual per capita GDP growth rate(Mauro, 1996). These large effects suggestthat policies to curb corruption couldhave significant payoffs. The associationbetween corruption and low economicgrowth remains broadly unchanged when

estimated for a group of countries withextensive red tape. Therefore, there is nosupport for the claim that corruption mightbe beneficial in the presence of a slowbureaucracy. The most important channelthrough which corruption reduces economicgrowth is by lowering private investment,which accounts for at least one-third of corruptions overall negative effects. At thesame time, the remaining two-thirds of theoverall negative effects of corruption on economic growth must be felt through otherchannels, including those mentioned above.While it is difficult to disentangle thoseother channels, there is some evidence thatone of themthe distortion of governmentexpenditureplays a significant role.Based on cross-country comparisons, itseems that corruption alters the composition of government expenditure: specifically,corrupt governments spend less oneducation and perhaps health, and probably more on public investment. Regressionanalysis shows that a country that improves its standing on the corruption indexfrom 6 to 8 will typically raise its spendingon education by 12 of 1 percent of GDP, aconsiderable impact. This result is a matterfor concern, because there is increasingevidence that educational attainment fosters economic growth.Of course, empirical results related to aphenomenon that is, by its very nature, difficult to measure must be treated with ahigh degree of caution. Two issues thatmerit special attention in this context arethose of causality and the possible role of


21/49

other forms of institutional inefficiency.Why do countries judged to be corruptexperience slow economic growth? Is it thatcorruption harms growth or simply thatlow growth leads consultants to give bad

corruption grades to a country? To dealwith this issue, one can take variables (suchas a countrys colonial history or the extentto which its population is divided alongethnolinguistic lines) that happen to becorrelated with corruption but have noeffect on economic growth or governmentspending other than through their impacton the efficiency of institutions, and usethem as instrumental variables in theregression analysis. Through this statistical trick, it is possible to get around problems

relating to the subjectivity of thecorruption indices, and it can be shownthat corruptiontogether with other formsof institutional inefficiencycauses loweconomic growth.Corruption is most prevalent where thereare other forms of institutional inefficiency,such as political instability, bureaucratic redtape, and weak legislative and judicial systems. This raises the question of whether itcan be established that corruption, ratherthan other factors correlated with it, is thecause of low economic growth. Regressionanalysis provides some evidence that if onecontrols for other forms of institutional inefficiency, such as political instability,corruption can still be shown to reduce growth.Nevertheless, it is hard to show conclusivelythat the cause of the problem is corruptionalone, rather than the institutional weaknesses that are closely associated with it.The truth is that probably all of these weaknesses are intrinsically linked, in the sensethat they feed upon each other (for example,red tape makes corruption possible, andcorrupt bureaucrats may increase theextent of red tape so they can extract additional bribes) and that getting rid of corruptionhelps a country overcome otherinstitutional weaknesses, just as reducingother institutional weaknesses helps it curbcorruption.Agenda for further researchWhile there is a well-established body of


22/49

theoretical knowledge, as well as some tentative results on the causes and consequencesof corruption, several morequestions need to be answered to enablegovernments to design effective policiesaimed at curbing corruption.

If the costs of corruption are sohigh, why dont governments get ridof it? A possible answer is that once a corrupt system is in place, and a majority ofpeople operate within that system, individuals have no incentive to try to change it or torefrain from taking part in it, even if everybody would be better off if corruption wereto be eliminated. Consider the followingexamples:You live in a society where everybodysteals. Do you choose to steal? The probability that you will be caught is low, becausethe police are very busy chasing otherthieves, and, even if you do get caught, the

chances of your being punished severely fora crime that is so common are low.Therefore, you too steal. By contrast, if youlive in a society where theft is rare, thechances of your being caught and punishedare high, so you choose not to steal.You are a new junior civil servant in anadministration where everybody, includingyour superiors, is very corrupt. Somebody12 Finance & Development / March 1998offers you a bribe to help him avoid payingtaxes. You decline the offer. A few hourslater, you receive a telephone call from yourboss, who would have liked a cut of yourbribe. Your boss suggests that if you treat afriend nicely (by accepting the bribe), youmay be promoted, while if you dont, youwill be transferred to a remote provincialoffice. You then take the bribe and share itwith your boss and colleagues. If, instead,the administration in which you work isvery honest, you are likely to behave honestly to avoid the risk of being fired.Individuals A and B are members ofthe same government. Suppose, on the onehand, that A is very corrupt and has established a private bribe-collection systemfor her own gain. The need to pay substantial bribes reduces entrepreneurs incentives toinvest and imposes asignificant burden on economicgrowth. Citizens realize that economic growth is being harmed bythe corrupt government, thoughthey may not know exactly who is


23/49

soliciting bribes. Therefore, theydecide not to reelect the government. This shortens Bs horizon, makinghim more inclined to extract a large proportion of current output and to disregard anyensuing adverse effects on future output. Inother words, B will seek to obtain a large

slice of the cake today since he knows thatthe government that he participates in willsoon be ousted. On the other hand, following a similar line of reasoning, if A does notcollect bribes, then B will also refrain fromdoing so.The last example may provide an explanation not only for the persistence ofcorruption but also for the empirical observation that, on average, countries that aremore corrupt tend to be more politicallyunstable. It also suggests that both corruption and political instability may resultfrom the failure of members of the samegovernment or ruling elite to coordinate

their actions. In that sense, corruption andpolitical instability may be two sides of thesame coin. This example may fit the casesof countries that are bedeviled by frequentcoups whereby corrupt regimes succeedone another. At the same time, it does notexplain a number of other relevant cases,such as those of dictators who haveremained in power for many years byallowing their supporters to collect largebribes, or those of governments formedby groups of individuals who have beenable to agree on bribe levels that arehigh, but not so high as to cause them tobe ousted.All of the above examples show that oncecorruption has become ingrained, it is verydifficult to get rid of. As a result, corruptiontends to persist, together with its adverseconsequences. This leads to an importantpolicy conclusion, which is consistent withinternational experience over the past fewdecades. Attempts to eliminate corruptiontend to succeed when reforms are undertaken in a very sudden and forceful mannerand are supported at the highest levels ofgovernment. However, an equally relevantquestion is what characteristics make countries more likely to fall into a high-corruption,low-growth trap.Corruption breeds poverty, butdoes poverty breed corruption? One


24/49

striking empirical finding is that poorercountries are usually considered to be morecorrupt. This result must be treated withcaution, since it may well be driven by theobservers perceptions. However, if one

assumes for a moment that this findingreflects a genuine correlation, it may beuseful to explore its sources. We have seenthat there is evidence that corruption lowerseconomic growth, thereby breeding povertyover time. At the same time, poverty itselfmight cause corruption, perhaps becausepoor countries cannot devote sufficientresources to setting up and enforcing aneffective legal framework, or because peoplein need are more likely to abandon their

moral principles. Researchers have begun toanalyze the link between civil servantswages and the extent of corruption. It hasbeen suggested that reasonable wages are anecessary condition for avoiding corruption, though not a sufficient one.Which forms of corruption areworse? Available indices of corruption aregeneral and do not distinguish betweenhigh-level corruption (such as kickbackspaid to a defense minister in exchange forhis countrys purchase of expensive jetfighter aircraft) and low-level corruption(such as petty bribes paid to a junior civilservant for expediting the issuance of adrivers license). Nor do they distinguishbetween well-organized corruption andchaotic corruption. (When corruption iswell organized, the required amount andappropriate recipient of a bribe are wellknown, and payment guarantees that thedesired favor will be obtained.) Therefore,we still do not know which kinds of corruption are more deleterious and should betackled first. Country-specific studies andanecdotal evidence suggest that high-leveland low-level corruption tend to coexist andreinforce each other. Thus, this distinctionmay not be relevant. On the other hand, thedistinction between well-organized corruption and chaotic corruption may be morerelevant, since a fairly convincing theoretical case can be made that the latter hasworse effects than the former.


25/49

Under a well-organized system of corruption, entrepreneurs know whom theyneed to bribe and how much to offer them,and are confident that they will obtain thenecessary permits for their firms. It hasalso been argued that well-organized corruption is less harmful because,

under such a system, a corruptbureaucrat will take a clearlydefined share of a firms profits,which gives him an interest in thesuccess of the firm. In contrast,under chaotic corruption, entrepreneurs may need to bribe severalofficials, with no guarantee either that theywill not face further demands for bribes orthat the permits they seek will actually bedelivered. In addition, if multiple agentsrequest bribes from the same entrepreneur

without coordinating bribe levels amongthemselves, they are likely to make excessive demands, with the result thatentrepreneurial activity comes to a halt. Whilechaotic corruption seems a priori to bemore deleterious than well-organized corruption, there is currently little empiricaldata available to test this hypothesis.What is being done, and what elsecould be done? Many countries and institutions have paid increasing attention to theproblem of corruption, and the debate onpossible policy options is still ongoing. Indeciding how to allocate aid funds, somedonor countries have begun to give moreimportance to recipient countries actions tocurb corruption. Member countries of theOrganization for Economic Cooperationand Development have acted to criminalizethe bribery of foreign public officials.International institutions, which havealways played an important role in reducing the scope for corruption, are now givingmore prominence to the issue. For example,the IMF has always encouraged countriesto liberalize their economies (for example,by eliminating trade restrictions), terminateoff-budget operations, and ensure budgettransparency. The guidelines on governance, which were approved by the IMFsFinance & Development / March 1998 13Corruption and politicalinstability may be two sidesof the same coin.Executive Board in August 1997, formalizethe IMF staffs involvement in such tasks.


26/49

An example of the remainingchallenges. One of the most difficult policy issues is how to prevent corruptionfrom distorting government expenditure.This important issue goes to the heart ofdonors concerns about the possible misuse

of aid funds. Donors find it difficult toensure that aid funds are spent wisely,because resources are fungible. For example, a donor may give aid funds to enablethe recipient country to build a school,which the recipient may indeed use for thatpurpose; however, the availability of aidfunds to build the school makes it possiblefor the recipient to use the resulting savingsto buy sophisticated weapons, whosepurchase may provide more scope for illegally diverting funds into individualspockets than school construction could.

How should this problem be addressed?Clearly, donor countries should pay attention to the overall composition of governmentspending and not focus narrowly onhow their own funds have been spent, butmany donors may not have sufficientresources to do this. One possible approachthat has been suggested is to have an international institution monitor the overallcomposition of government expenditure, asa service to both the recipient countrys citizens and the donor community. Thisapproach would not, however, be easy toimplement. Recipient countries would probably resist attempts by the rest of the worldto play a role in determining the composition of their public spending. In addition, asa practical matter, it may be difficult toensure that spending items are not simplyrelabeled, with no real improvement in thecomposition of government expenditure.How should policy effectiveness beassessed over the next decade? Wehave a reasonable theoretical understandingof the causes and consequences of corruption, and have begun to get a sense of theextent of these relationships through empirical research. A consensus is emerging thatcorruption is a serious problem, and severalbodies in the international arena havebegun to take policy measures to curb it. Atthe policy level, although we may still be atthe stage of learning by doing, action isbeing taken. It is important to ensure thatten years from now, we can look back ontodays focus on corruption and observethat some concrete results were attained in


27/49

this domain. To that end, those bodies thatare taking action against corruption oughtto establish criteria to evaluate their policies. Each entity would need to devise itsown evaluation criteria, and it should dothat now, so that the effectiveness of its policies can be assessed accurately and fairly

over the next decade.The need to define concrete resultsmight appear to be a tall order in an areawhere quantification is difficult. A placeto begin, however, could be the wellestablished body of knowledge on thecauses of corruption. For example, effortsto curb corruption could be assessed onthe basis of how effective they were inbringing about the implementation of policies known to reduce corruption, such asthe elimination of government restrictionsthat create rents.

14 Finance & Development / March 1998Suggestions for further reading:Paolo Mauro, 1996, The Effects of Corruption on Growth, Investment, and GovernmentExpenditure, IMF Working Paper 96/98(Washington: International Monetary Fund).Vito Tanzi and Hamid Davoodi, 1997, Corruption, Public Investment, and Growth,IMFWorking Paper 97/139 (Washington: International Monetary Fund).Caroline Van Rijckeghem and BeatriceWeder, 1997, Corruption and the Rate ofTemptation: Do Low Wages in the Civil ServiceCause Corruption? IMF Working Paper 97/73(Washington: International Monetary Fund).F&DWo r l d B a n kP u b l i c a t i o n sFor US customers, contact The World Bank, P.O. Box 7247-8619, Philadelphia, PA19170-8619.Phone: (703) 661-1580, Fax: (703) 661-1501. Shipping and handling: US$5.00. Airmaildelivery outsidethe US is US$13.00 for one item plus US$6.00 for each additional item. Payment by US$check drawn ona US bank payable to the World Bank or by VISA, MasterCard, or American Express.Customers outsidethe US, please contact your World Bank distributor.Wo r l d B a n kP u b l i c a t i o n sV i s i t o u r W e b s i t e : h t t p : / / w w w . w o r l d b a n k . o r gWorld Bank Spurs Fight Against AIDSThe Daily TelegraphAIDS Surge is Forecast for China, India, and Eastern Europe


28/49

New York TimesThese are just two of the headlines that appeared worldwide upon release of theWorld Banks largest report to date on the growing global AIDS crisis. Thereport, Confronting AIDS: Public Priorities in a Global Epidemic, addressesthis devastating disease from the perspective of government policymakers in

developing countriespolicymakers outside the health sectorwho shape andfinance national efforts to combat the epidemic.Confronting AIDS addresses an overarching question: Given the limited public resourcesin developing countries, which measures for confronting the epidemic should be publicpriorities? The report is the product of 18months of researchwith extensive support from UNAIDS and the EuropeanCommissionand contains a wealthof information and statistics that you cannot afford to ignore. Confronting AIDS can nowbe yours for only $30.00plus shipping and handling by ordering directly from the World Bank. Please see belowfor ordering information.

Cures for Corruption

2

21 October 2010

by Bettina Fachinger

Corruption is difficult to measure. Transparency Internation therefore established a Corruption

Perceptions Index (CPI) that looks at the perception of corruption in 150 countries (Source:

Shutterstock)
http://knowledge.allianz.com/demographics/current_affairs/?635/transparency-international-corruption-interview-caspar-von-hauenschild#commentshttp://knowledge.allianz.com/demographics/current_affairs/?635/transparency-international-corruption-interview-caspar-von-hauenschild#comments


29/49

Corruption threatens public life and corporate culture. Caspar von

Hauenschild of the anti-corruption campaign group Transparency

International explains the consequences for society.

Why was Transparency International founded?The founders Peter Eigen and Michael Wiehen, both former directors of the World

Bank, saw so many public funds simply disappearing. As a result, instead of fighting

poverty some governments simply increased their countries debts and dependence.

Transparency International tries to raise awareness of this vicious cycle.

How does Transparency International define corruption?

Transparency Internationals official definition of corruption is the misuse of power

for private gains. Any employee of a company, any officer in a public institution, or

any politician is a potential offender or victim.

Private gains can either be cash or any other kind of monetary benefit. Small gifts

like a pen with the company logo or a normal invitation to a business lunch do not

count.

However, if your decisions are influenced by an invitation to a fancy hotel for the

weekend or expensive opera tickets you are using your position for your personal

advantage and this is corruption.

How does corruption damage the reputation of companies?

There are three major risks for companies. First, corruption leads to distorted

competition. The service or product linked to the highest bribe gains market share.

Second, a corrupt company risks being blacklisted. It gets extremely hard for listed

companies to offer their services because no one really wants to make a deal with

companies suspected of corruption.

Third, corruption undermines a companys promotion of a fair and sustainable

corporate culture and nullifies any publicized code of conduct. This is the most severe

damage because the employees solidarity and the companys credibility are

destroyed.

What does corruption mean for wider society?


30/49

Corruption is paralyzing the infrastructure of social welfare systems, education, and

public life. Democracy, or any other kind of ideology, is not sufficient to base

decisions on anymore. Its all about the size of your wallet now.

Causes, Consequences and Cures of Corruption in

India

Posted Date: 28-Feb-2011 Category:General

Author:wasi arman Member Level: Silver

Rating: Points: 45 (Rs 40)

Corruption is a cause of serious concern for the people of India. Since, it is

adversely affecting all aspects of their life- social, spiritual, political,

economical,educational,moral. It is spreading like tumour in all systems and

administrations. Hence, it is a responsibility on every citizen of India to

make our country free of corruption. This article will throw light on various

causes, effects and cures of corruption in India.

If every citizen of a country will become honest, then that country will surely grow by leaps

and bounds. Honesty leads to growth, development and progress in all aspects of life and

society. The opposite of honesty is corruption.

Corruption is an act done by taking undue advantage of one's position, power or authority to

gain certain rewards and favours.Corruption opposes development and growth. It is very

harmful and deterimental for all aspects of society and life. It corrodes their beauty, values,

strength and resources.

In India, the epidemic of corruption is spreading rapidly in every fields and

departments.Contractors and builders are constructing weak and low standard roads, bridges

and houses. Students are engaged in mass copying.Teachers and examining body are indulge

in leaking out question papers. Doctors prescribe unnecessary medicines and pathology

examinations for commissions. Traders are engaged in overcharging, adulteration and
http://www.indiastudychannel.com/resources/Category3.aspxhttp://www.indiastudychannel.com/resources/Category3.aspxhttp://www.indiastudychannel.com/member/wasikhan.aspxhttp://www.indiastudychannel.com/member/wasikhan.aspxhttp://www.indiastudychannel.com/general/MembershipLevels.aspxhttp://www.indiastudychannel.com/general/ContentRating.aspx?EntityType=1&EntityId=137016http://www.indiastudychannel.com/resources/Category3.aspxhttp://www.indiastudychannel.com/member/wasikhan.aspxhttp://www.indiastudychannel.com/general/MembershipLevels.aspxhttp://www.indiastudychannel.com/general/ContentRating.aspx?EntityType=1&EntityId=137016


31/49

underweighing. Government officials take bribe for doing or sanctioning any work or contracts.

Scams in banks, financial institutions, sports, defence department, religious places,

government projects are the order of the day. Hence, it has become biggest threat to the

social and economical development of India. There is termendous loss of national wealth due

to various scams. In order to cure society from this deadly social pathology.We should know itscauses, consequences and cures.

Causes of corruption in India

1) Lack of effective management and organisation: Due to mismanagement and

misorganisation, there is a weak control on various departments and their working. This leads

to lack of coordination and control among departments and levels of organisation. This

uncontrolled and unsupervised administration gives rise to corruption on large scale. Besides,

appointment of inefficient and incapable managers and executives on various levels of

hierarchy also leads to mismanagement and misorganisation. The only cause of this wrong

appointment is corruption. Hence, corruption breeds corruption.

2) Lack of economical stability: Economical crisis and price hike are major causes of

corruption. Economical crisis leads to unemployment and change in standard of living. It

develops a feeling of insecurity in the minds of affected people. Most of the people do not have

patience and courage to face this situation. In order to regain their employment and to

maintain standard of living and status,this affected people engage themselves in illegal and

immoral activities. They do not want to work hard again for achieving the same position and

post. They use various illegal short cuts for achieving them.

3)Lack of effective leadership: Good leaders can only lead people towards growth,

development and progress. They play significant role in eradication of social evils. In India,

there is tremendous shortage of good leaders. Leaders convey message of citizens to the

administration and government.They lead the people against corruption and social evils. A

country cannot survive without honest and sincere leaders. There is urgent need of leaders like

Mahatma Gandhiji. We need more Anna Hazares and Medha patkars.

4) Lack of support: There are few good leaders in India. They strive hard to eradicate

corruption from the society. But due to lack of support and cooperation from people, the voice

and efforts of these great leaders are often suppressed. People of India are more concerned

with their life than the development and protection of their country against social evils. Many

citizens have accepted corruption as a part of their life. They think, it is useless and waste of

time, to support leaders against corruption.


32/49

5) Lack of values: Home and educational institution play a significant role in character

building of citizens. Moral values are only taught in most of these institutions. But, they are

not properly inculcated in individual. This is the basic cause of corruption. Many parents and

teachers do not practise what they preach. Hence,their preaching does not bring out desiredresults. Children imitate parents. If parents are corrupt,it is more likely that children will also

become corrupt.

6) Lack of love for country: Due to rapid modernisation and globalisation, people are

becoming more and more selfish. They are only concerned with self enrichment and wealth

accumulation. The only objective of many Indian is to become rich as soon as possible. They

consider themselves as patriotic just by celebrating independence and republic day. They do

not know the actual meaning of patriotism. They are not concerned with development of

nation and rights of others. Due to this attitude, they easily get involved in corruption and

immoral activities. During strike and protests, many politically affiliated citizens damage and

destroy public property.

7) Lack of proper system: In India, corruption exists in all levels and areas of system. Very

few honest people survive in this corrupt system. Those who raise their voice against

corruption are killed or forced to resign. This accelerates the growth of corruption. Most of the

people involved in Indian system have take corruption as part and parcel of their duties. They

don't have hatred or ill feeling towards corruption. They think that without it, we cannot

survive and sustain in this system. Besides, systems are interrelated and interdependent. As a

result, corruption spreads like tumour in all the systems.

8) Lack of satisfaction: Greed results from non-satisfaction. People are not satisfied with

their current status, position and wealth. They want to become millionaire in a short span of

time. Growth and richness is not bad. But it is sad to see that the Indian are adopting illegal

and immoral ways to achieve them. Many Indians are engaged in unhealthy competitions of

wealth accumulation(with relatives, colleagues and neighbours).

9) Lack of autonomy: Establishment and expansion of private and business sector depend on

approval of politician. Many politician misuse their authority and power. They have only one

criterion for approval "Pay us otherwise you will not get paid". Entrepreneurs consider briberyas tax like other official taxes. Bribery has become necessary for the establishment of

organisation. Companies and contractors secure contracts and government projects due to

bribe. Good quotations and work of company does not considered to be criteria for securing

contracts.

10) Lack of good control and vigilance: In India, some agencies are working day and night


33/49

to stop corruption. But some officials of these agencies get tempted towards illegal

commissions and leave corrupt people without any penalty and punishment. Corruption breeds

corruption. To keep a check on crores of people, more agencies and more honest officials are

required. Hence, there is a tremendous shortage of these agencies and officials in India. This

results in lack of control and vigilance on illegal activities.

11) Lack of good remuneration: In private sector, employer decides salary and employment

benefits. He has complete freedom and there is no pressure on him from government. Due to

this fact, many employers pay less for more work. They exploit employees of their companies.

Even the working conditions in most of the establishments are worse.Employee does not have

any social security and retirement benefits. Employees get frustrated and adopt illegal means

to make their earnings better and future secure.

12) Lack of employment: Many unemployed educated youth fall prey to corruption. They are

willing to pay huge amount for jobs. Many employer take undue advantage of this situation.

They take bribe and give appointment letters. The appointed employee uses all means (legal

and illegal) to recover his lost money as early as possible. Hence,Corruption breeds corruption.

When these employees achieve power and authority. They take bribe from candidates for jobs.

These tradition of corruption continues from generation to generation without any check and

control.

13) Lack of seats and educational institutions: In order to fulfil dreams and ambitions of

their children, parents pay huge donation to secure admission for their children. Hence, the

basis of admission is not merit but money. Management use maximum utilisation of quota

granted to them. Every year there is a increase in donation amount. Affluent students who

secured less percentage in examinations, easily gets admissions by paying huge donations.

Poor students who secured good percentage struggle day and night to get admissions. Many a

time their efforts go in vain due to lack of seats and more number of applicants.

Consequences of Corruption

1) Loss of National wealth: This is the greatest loss for the people of India. Since

independence, India is showing tremendous growth in corruption (Jeep deal to 2 G spectrumscams). India lost billions and billions dollars of money in various scams. Instead of becoming

independent affluent nation, India is dependent on international loans, grants and favours due

to this tremendous of

what are the causes of corruption

Documents