• University Module Series: Anti-Corruption

• Module 1: What Is Corruption and Why Should We Care?

 

 

  This module is a resource for lecturers  

 

Effects of corruption

 

The effects of corruption are wide-ranging. Some of these effects are fairly obvious, while others require explanation. They include:

Undermining the Sustainable Development Goals

Corruption hampers the attainment of the United Nations Sustainable Development Goals (SDGs). The SDGs are comprehensive and their susceptibility to be undermined by corruption is unsurprising: it is entirely conceivable that "a better and more sustainable future for all" often runs counter to the interests of a few and can be derailed through many forms of corruption. Under conditions of diminished State capacity, nations fail to eradicate poverty, address hunger, secure good health care and high quality education for their citizens, guarantee gender equality and other human rights, reduce inequality, and so on. Of particular relevance is Goal 16 of the SDGs (or SDG 16), which is titled "Peace, Justice and Strong Institutions" and aims to "Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels". Given the strong causal link between corruption and institutions that are ineffective, unaccountable and exclusive, three targets of SDG 16 - namely 16.4, 16.5 and 16.6 - specifically call for reducing all forms of corruption, strengthening the recovery and return of stolen assets, and developing transparent institutions. At the same time, corruption limits the realization of all SDGs in many respects, as the vast sums that are lost to corruption could have been used to improve living standards by increasing access to housing, health, education and water. For example, the African Union estimates that 25% of Africa's gross domestic product (GDP) is lost to corruption (UNODC, 2015). Aidt (2010) examines the relationship between corruption and sustainable development and finds that there is a negative correlation between corruption and growth, and that corruption can put a country on an unsustainable path in which its capital base is eroded. In addition, the relationship between corruption and sustainable development has repeatedly been emphasized by resolutions adopted by the Conference of the States Parties to UNCAC. It thus requires the global community to see corruption as an obstacle to the realization of the SDGs and to step up anti-corruption efforts if we truly desire to achieve the SDGs. The appendix includes an SDG table that briefly explains how corruption relates to each of the 17 SDGs. For each SDG, the table also indicates which Modules of the E4J University Module Series on Anti-Corruption address the relationship between corruption and the specific SDG.

Economic loss and inefficiency

Although obtaining exact figures on the economic costs of corruption is difficult, a 2016 report from the International Monetary Fund (IMF) estimated the cost of bribery alone to be between $1.5 to $2 trillion per year. This represents a total economic loss of approximately 2% of global GDP. And yet it does not take into account the economic cost of all other forms of corruption. Regarding fraud, money-laundering and tax evasion, for example, the thousands of leaked documents known as the Mossack Fonseca Papers (commonly referred to as the Panama Papers) exposed the vast economic implications of offshore entities for many nations and for economic inequality in general. Finally, beyond deadweight economic loss, there is economic inefficiency to consider. When jobs (or contracts) are given to people (or companies) who offer bribes or share a personal connection, this occurs to the detriment of competition. The result is that more qualified candidates and firms are turned down. The more widespread such practices are, the more inefficient the economy becomes. Corruption in developing countries may cause underdevelopment. This can occur when international economic and humanitarian initiatives are derailed as funds disbursed from loans and aid are embezzled or handed out to inferior contractors who have won their bids through corrupt means (kickbacks, bribery, nepotism, etc.). Furthermore, investment in physical capital and human capital is reduced as resources are diverted from their most beneficial use.

Poverty and inequality

Corruption is generally not the weapon of the weak. In Nigeria, an (in)famous bribery case, involving the international oil company Shell, deprived Nigerian people of over $1.1 billion as the money went to corrupt officials instead of to the national budget (Global Witness, 2017). Meanwhile, according to the World Bank (2019), more than 50% of the population of the oil-rich country live in extreme poverty. This example shows that as political and economic systems are enlisted in the service of corrupt actors, wealth is redistributed to the least needy sources. Mechanisms such as political representation and economic efficiency are both compromised by self-dealing and secret exchanges. Under conditions of corruption, funding for education, health care, poverty relief, and elections and political parties' operating expenses can become a source of personal enrichment for party officials, bureaucrats and contractors. Social programmes and the redistributive potential of political systems suffer accordingly. A key result of all the instances named above is a state of unequal opportunity in which advantages arise only for those within a corrupt network.

Personal loss, intimidation and inconvenience

When people experience corruption, it is rarely a positive experience. A bribe must be paid to receive medical attention, obtain a building permit, pick up a package, or enjoy phone services. A judge rules against a party, not based on the facts of the case, but because the opponent paid a bribe, knows a power broker, or comes from the same racial or ethnic background. A person is beaten, detained or subject to a higher fine because he or she refuses to pay a bribe solicited by a police officer. Retirement funds are lost to fraudsters or tied up in a money-laundering scheme. While the victims of corruption suffer personal loss, intimidation and inconvenience, those who perpetrate corrupt acts and schemes tend to experience personal gain, a sense of superiority and greater convenience - pending enforcement of the law, that is.

Public and private sector dysfunctionality

The cumulative effect of individual corrupt acts is dysfunctionality. Whether offered by the public or private sectors, the quality of goods and services decrease, and the process of obtaining them becomes more expensive, time consuming and unfair. If bribes can successfully be offered to police, doctors, and civil servants, then those who are most successful at extracting these funds get ahead to the detriment of more honest colleagues and competitors who may perform better on merit. Moreover, corporations lose the incentive to offer better services and products if they can undermine competitors through obtaining political favours. State-owned enterprises and industries are structured to enrich government officials instead of pursuing innovation and efficiencies. This can lead to the loss of intrinsic motivation within organizations. Workers and managers are demoralized. People begin to doubt the value of hard work and innovation.

Failures in infrastructure

When a bridge collapsed in Genoa in August 2018, killing at least 39 people, there were many possible causes to consider (NZHerald, 2018). Corruption was not the most obvious one, but subsequent investigations have found that a Mafia-controlled construction company appears to have used "weakened cement" in the building process. It is widely known that the construction industry is a valuable source of profits and a channel for money-laundering operations by the Mafia (additional information on organized crime can be found in the E4J University Module Series on Organized Crime). Oversight and competition are both undermined in industries and firms plagued by organized corruption. Relatedly, a 2017 report by Mexicans Against Corruption and Impunity blames corruption for the collapse of over 40 buildings during the September 2017 earthquake in Mexico City. Land-use and permit laws appear to have been bypassed, ostensibly through bribery, cronyism and influence trading, leading to the presence of fundamentally unsafe buildings around the capital.        

Rigged economic and political systems

What is described as dysfunctional above is actually functional and profitable for corrupt actors. Whether falling under the label of political cronyism, crony capitalism, political party cartels, oligarchy, plutocracy and even kleptocracy, widespread patterns of private and public corruption construct social systems that are rigged in the private interest. Citizens with strong ethical principles (and citizens who lack significant funds, connections, favours to dispense, "hard power" over others such as guns or private enforcers) lose representation, influence and power.

Impunity and partial justice

When corruption pervades the justice system, people can no longer count on prosecutors and judges to do their jobs. The powerful may escape justice. And citizens, especially those with few resources or few powerful allies, may be unfairly accused of crimes, deprived of due process, and wrongly imprisoned. Resources on preventing corruption and strengthening integrity in the judiciary are available on the website of the UNODC Global Judicial Integrity Network.

Rising illiberal populism

A 2017 TI report and several scholarly publications make the point that increasing authoritarianism is partly fuelled by corruption (see, e.g., this blog post from 2017 by Balisacan as well as the resources referenced in this TI paper). In a nutshell, corruption increases inequality, decreases popular accountability and political responsiveness, and thus produces rising frustration and hardship among citizens, who are then more likely to accept (or even demand) hard-handed and illiberal tactics. Those tactics shift the blame for economic insecurity and political decline onto immigrants or other minority groups, and onto economic and political elites, who must, the theory goes, be dealt with swiftly and decisively. The rule of law and liberal values of tolerance and human dignity then become obstacles to needed change. For a more general discussion of values, see Module 2 of the E4J University Module Series on Integrity and Ethics.

Organized crime and terrorism

Nefarious elements in society thrive as proceeds can be laundered, funding disguised, and judicial officials and politicians corrupted through bribes (including gifts, favours and other benefits). Levels of violence, illegal drugs, prostitution, sexual slavery, kidnapping and intimidation rise accordingly. The causal arrow goes in both directions. Not only does organized crime cause corruption, but opportunities for corruption left open by a weak, negligent or incapable State can also lead to organized crime. For a further discussion about the corruption-organized crime nexus, see Module 11 of the E4J University Module Series on Anti-Corruption and Module 4 of the E4J University Module Series on Organized Crime.

Diminished state capacity

Even if citizens were to adamantly demand that the problems listed above be addressed, corruption undermines the power of politics. For example, to the extent that bribery, trading in influence and state capture are widespread, political systems become incapable of addressing social problems whose resolution would threaten vested interests. Naturally, this is never acknowledged as such from within - state incapacity may manifest in a great many distracting and misleading ways, such as wedge issues, political party restructuring, the emergence of scandals and overwhelming outside issues that detract from structural problems, and so on. Under conditions of state capture, political arbitrage can be expected to occur in a highly strategic fashion. Issues will be played off against each other in order to frustrate systemic reforms. Moreover, as Della Porta and Vannucci (2005) argue, corruption compromises the ethos of public service and changes political culture so as to render meaningful, public-spirited reforms virtually unthinkable.

Increasing polarization and unrest

When corruption, in particular state capture, becomes the norm, this can lead to polarization among citizens: those in support of corrupt regimes (because of kickbacks and handouts) versus those opposed to them. In the presence of diametrically opposed groups in society, compromise and reasoned discussion diminish. Policy is judged not on the basis of ideology or a project's inherent merits, but on who the policy proponents are and what benefits competing networks can reap.

Climate change and damage to biodiversity

Corruption derails anti-climate change funding and initiatives, defeats forest conservation and sustainable forest management programmes, and fuels wildlife and fishery crimes (for more information, see the E4J University Module Series on Wildlife, Forest and Fisheries Crime). These and other adverse effects of corruption on climate change and the environment are underscored in a TI report from 2011 and additional TI publications. On a broader level, the book This Changes Everything by Naomi Klein (2014) details how state capture by monied interests has derailed legislative efforts to address climate change in the United States. Her analysis applies to many countries around the world, given the power of the fossil fuels and automotive industries over governments - elected and unelected - across the globe. The perilous impact of corruption on the fisheries sector is discussed in detail in the publication Rotten Fish (UNODC, 2019), while the report Authorized to Steal (CIEL, 2019) reveals how corruption enables criminal networks to illegally harvest timber in Peru.

Human rights violations

The observation that corrupt rulers tend to view civil liberties as obstacles to the consolidation of power can be traced back to many historical sources, including the collection of eighteenth century essays on corruption and tyranny known as Cato's Letters. Most recently of all, perhaps, the United Nations Office of the High Commission for Human Rights (OHCHR) has noted significant connections between corruption and human rights violations. Not only do those who report and oppose corruption end up on the receiving end of assassinations and human rights violations of many kinds, but also corruption itself decreases State capacity to address violations of civil and political rights and to make the necessary provisions to guarantee such rights, including socioeconomic rights, which often require complex initiatives on the part of governments. OHCHR calls corruption "a structural obstacle to the enjoyment of human rights" and has detailed many intersections between these two areas. For a further discussion and academic references on the corruption-human rights nexus, see Module 7 of the E4J University Module Series on Anti-Corruption.

Armed conflict and atrocity crimes

The diminished State capacity and development, brought about by corruption, can lead to insecurity and even armed conflict (see, e.g., World Bank, 2011; World Bank, 2017). Indeed, corruption has been recognized as a destabilizing factor and ultimately a "driver of conflict" (USIP, 2010, p. 7). Although the causal link between corruption and atrocity crimes (including genocide, war crimes and crimes against humanity) may be hard to prove, transitional justice mechanisms have identified corruption as a root cause of conflict and atrocity. See, for example the Sierra Leone Truth and Reconciliation Commission Report (2004, chap. 2, para. 13) and the Liberian Truth and Reconciliation Commission Consolidated Final Report (2009, vol. II, pp. 16-17). In post-Arab Spring Tunisia, corruption was recognized as a root cause of the conflict even before the transitional justice mechanism operated. Thus, Tunisia's Law on Transitional Justice from 2013 (see English translation here) and the Truth and Dignity Commission (Instance vérité et dignité or IVD) that was created by the law were intended to establish accountability for the country's legacy of rampant corruption and human rights violations and to help reform the institutions that engaged in such crimes. Another relevant example is a 2018 report from the Open Society Justice Initiative, which offers evidence linking corruption to crimes against humanity in Mexico. For a further discussion and academic references about the corruption-conflict nexus, see Module 11 of the E4J University Module Series on Anti-Corruption.

Public frustration and cynicism

People lose trust in leaders, in social systems (public institutions) and sometimes even in society and ethics itself when they sense that corruption is widespread and corrupt actors are not being held accountable. When political non-accountability increases, such perceptions persist for protracted periods and political participation diminishes. Moreover, public frustration and the sense that corruption is widespread can in turn pave the way for citizens themselves to take part in corrupt transactions, as discussed in a blog post on the Taxi Driver Paradox. In other words, social norms could encourage corrupt behaviour as people tend to think that "if everybody is doing it, I might as well do it too." (Köbis, 2018). Failure to meet public expectations for zero-tolerance of corruption may have deleterious consequences for the legitimacy of State institutions and the very utility of formal norms that citizens and firms are expected to follow, possibly resulting in higher public tolerance of un-civic and free-riding behaviour.

The effects of corruption mentioned above can be categorized along the following lines: economic, political, moral or psychological, humanitarian, ecological, security-related, and so on. To help us gain a better understanding of corruption, the following section discusses some of the deeper meanings of corruption.

 

Next:  Deeper meanings of corruption

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