A Note on Corruption and Development

1. A Note on Corruption and Development ECON 3510, Carleton University June 12, 2014 Ritter Source: Class Notes

2. The Problem of Corruption • Definition: What is corruption?

3. The Problem of Corruption • Definition: • Appropriation of public – or private – resources for private profit or use through the use of official power, influence, or access. • Abuse of public – or private – trust, position or access for private gain;

4. Transparency International’s Definition: Corruption is the abuse of entrusted power for private gain. It hurts everyone who depends on the integrity of people in a position of authority.

6. Explanation of Corruption Perceptions Index • A composite index, a combination of surveys and assessments of corruption, collected by a variety of reputable institutions. • Corruption: illegal activities, deliberately hidden. Detected via scandals, investigations or prosecutions. • No meaningful way to assess absolute levels of corruption on the basis of hard empirical data. • Bribes reported, the number of prosecutions brought or court cases directly linked to corruption show how effective prosecutors, the courts or the media are in investigating and exposing corruption. • Capturing perceptions of corruption of those in a position to offer assessments of public sector corruption is the most reliable method of comparing relative corruption levels across countries.

7. 2. Varieties of Corruption

8. 2. Varieties of Corruption • Theft of public property, goods or services; • Illicit payments to suppliers or supporters for political gain; • Use of public property for personal purposes; • Influencing design or application of rules and regulations and permissions for personal gain

9. 2. Varieties of Corruption, cont’d • Twisting or influencing of public policy for personal gain by bribery • Discriminatory provision of public services (to family, home town or ethnic group or political supporters) • Nepotism: hiring from family or friends

10. 3. Consequences of Corruption • Unfairness; • Impact on income distribution (Corruption as a regressive tax on the poor); • Sacrifice or general well-being for personal interests; • Parasitical impact on much economic activity; • Slow-down of investment; • Slow-down and deformation of economic growth; • Deformation of public policy; • Impairs ability of government to function in all areas due to erosion of “trust”.

11. Source: Private Sector Development Blog.

12. Corruption as a Regressive Tax: The Case of Ecuador

13. 4. Solutions to Corruption?

14. 4. Solutions to Corruption • Make public expenditures and procurement transparent • Eliminate unnecessary regulations and rules and make others simpler, more transparent; • Reduce immunity of members of the executive, legislative and judicial branches from prosecution for wrong-doing; • Promote civil service professionalism with • adequate pay scales; • meritocratic promotion policies;

15. 4. Solutions to Corruption? continued • Free media for shining lights in dark corners; • Open Democracy, for scrutiny, criticism and rejection of corrupt leaders • An independent judiciary; • Separate financing of political parties from general government expenditures; • Eternal vigilance