Recently there has been a spate of commentary in the blogosphere that revives a set of tired old canards about corruption and development — the related claims (1) that the focus on corruption and governance in the development discourse is misplaced, because there isn’t a lot of evidence that corruption matters much for development, poverty reduction, etc.; and (2) that anticorruption is a fixation of wealthy, mostly Western countries, because it enables people in those countries congratulate themselves about their moral virtue and to look down on habits and practices in the poor, benighted South. Recent examples include Chris Blattman’s posts on his blog (here, here, and here), Michael Dowdle’s contributions to the Law & Development blog (here and here), and Jason Hickel’s post on Al Jazeera English, though there are others as well.
Sigh. Do we really need to go through this again? OK, look: Yes, there are still lots of unanswered questions about corruption’s causes and consequences, and its significance for various aspects of economic development. And yes, some anticorruption zealots have sometimes over-hyped the role of corruption relative to other factors. But the overwhelming weight of the evidence supports the claim that corruption is a big problem with significant adverse consequences for a range of development outcomes. And the evidence is also quite clear that the focus on corruption as a significant obstacle to development comes as much or more from poor people in poor countries as it does from wealthy Western/Northern elites.
A blog post is not the best format for delving into a very large academic literature on the adverse impacts of corruption. And so the posts to which I’m responding might be forgiven for generally failing to provide much evidence in support of their claims that corruption is relatively unimportant for development, and largely a Western obsession. But, let me at least take a stab at trying to move the conversation beyond unsubstantiated declarations to some assessment of the actual evidence, starting with the impact of corruption on development.
First things first: As everyone acknowledges, there’s a very strong correlation, at the country level, between corruption (measured in various ways) and per capita income. But I actually think that’s the weakest evidence of corruption’s adverse impacts, both because of problems with the data and because of the concern with reverse or spurious causation. The same goes for the relationship between corruption and economic growth, where the correlation in the quantitative data is less robust. That said, it’s worth noting some clever recent studies have found new ways to address the problems with identifying the direction of causality, and have for the most part found that corruption indeed has adverse effects on growth (see, for example, here and here).
But let’s put that aside and focus on the impact of corruption on other factors we think might be important for development:
- Most experts think that private investment (both foreign and domestic) is important for growth. There’s plenty of evidence that corruption has a strong negative effect on investment, operating like a particularly inefficient tax that reduces the amount and efficient allocation of private investment — though recent research has also suggested that the impact of corruption on investment is much worse in some regions than in others: Check out papers here, here, here, here, here, here, and here.
- What about education? Most of us think education is important for development and poverty reduction, as well as an intrinsically valuable development objective, correct? Corruption in the education sector is a huge problem, and has a substantial adverse effect on education outcomes. See papers here, here, here, here, here, and here.
- And then there’s health – another intrinsic development goal, as well as a contributor to poverty reduction and other desired development outcomes. Again, corruption in the health sector is rampant, and leads to substantial adverse effects on actual health outcomes — though in the very poorest, least healthy countries, simple income improvements may matter more than governance improvements. See studies here, here, here, here, here, and here.
- Think public investment in things like infrastructure and other public goods is a crucial for development? Most experts do. And corruption leads to significant inefficiencies in such investment: see here, here, here, and here.
- And what about the security of property rights — one of the factors that Blattman says dwarfs corruption in its significance for development? Turns out that public corruption undermines the security of property rights — partly because corruption drives firms and entrepreneurs into the unofficial economy (see here and here).
I could go on. But really, the argument that corruption is bad for development – including, by the way, in wealthy countries like the United States and Italy – is really pretty straightforward. If you believe that government interventions (things like provision of public goods and social services, protection of basic rights, preservation of functioning markets, etc.) are important for development, and you believe that there widespread corruption in many countries has substantially impeded effective government performance of these functions, then, voila, we have the case for corruption mattering (a lot) to development.
Of course, we should always be open to the possibility that our assumptions are wrong. All of the studies I linked to above are open to criticism, and the results are much more nuanced than I can convey in a blog post. And there are good studies out there (which I alluded to earlier) showing that the link between (perceived) corruption and economic growth may be more complex, and not as robust, as it is sometimes portrayed (see here, here, and here). Still, I think at this point, given just how much research so many serious people have been doing on this topic for the last 25+ years, it’s just irresponsible to throw out casual statements to the effect that it’s “just not true” (Hickel’s words) that corruption is a major obstacle to poverty reduction and development, unless you’re willing to back that up by engaging seriously with the hundreds of papers and reports that have tried to assess various aspects of this issue.
Oh, and what about this line about corruption being an obsession of Western/Northern countries? Sorry, but that doesn’t square with the evidence either. First off, it’s not the case that Western governments and multilateral institutions like the World Bank originally led the anticorruption charge. For years at the World Bank, until President Wolfensohn signaled a change of policy in the late-1990s (under pressure from scholars and civil society activists), corruption – the “C-word” – was something people just didn’t like to talk about. And for decades academic and civil society critics lambasted Western governments and IFIs for neglecting issues related to governance (including corruption), in their rush to fund big infrastructure projects, privatize, etc. Now, after all that pressure and criticism have finally had an impact — now that Western governments and IFIs have finally, in the last two decades, started to take governance seriously — we hear that this focus on government integrity is merely an “Anglo-American fetish” (Blattman) that “allows us in the West to celebrate our own special dedication to moral principles” (Dowdle).
As for citizens (especially poor citizens) in developing countries, if we want to know what they think about corruption, we could ask them–as indeed we have (see, for example, here, here, here, here, here, here, and here). And they consistently rank corruption as among their most significant concerns. Or if you don’t feel like looking at survey data, you can look at recent and non-so-recent events that demonstrate just how much citizens in developing countries care about fighting corruption in their own governments – from Tiananmen Square to Tahir Square. You might also consider the bravery and dedication of any number of developing country officials, activists, and organizations. (I suspect that people like Ana Hazare and John Githongo would be surprised to learn, from erudite American and European bloggers, that the fight against corruption is not really that important to developing countries, and that the anticorruption movement is just a manifestation of Westerners’ desire to feel better about themselves.)
Speaking of which, what should we make of this claim that the focus on corruption in developing countries is a way for rich Westerners to feel smug and superior (Dowdle’s claim), and to ignore the various ways that the North/West has contributed to the impoverishment of the Global South (Hickel’s claim)? Well, I’m not so sure I feel comfortable with evidence-free armchair psychoanalysis of a very large number of dedicated professionals and activists who have devoted themselves to anticorruption – but from personal observation, the people I’ve met at places like Transparency International, Global Witness, U4, UNDP, and the World Bank — as well as my colleagues in the academy who focus on research on corruption and development — don’t generally seem like apologists for the rich nations of the world. Quite the opposite, in fact. And by the way, these tend to be the same people who, in recent years, have been calling more attention to the role of Western countries in abetting, even promoting, corruption in poor countries – focusing on issues like asset recovery, the failure of rich countries to stop their firms from bribing foreign officials, the problem of tax havens, the need for greater transparency in the extractive sector, etc.
But as long as folks having this conversation feel free to engage in armchair psychoanalysis of others’ motives, I’ll throw out my own hypothesis about why so many academics in the blogosphere are drawn to the anticorruption-is-a-Western-obsession-that-doesn’t-matter-much-for-development canard: academics (and I speak as a member of the tribe) enjoy feeling like iconoclasts willing to speak uncomfortable truths to power. And in the development field, a certain type of academic particularly enjoys attacking anything that the major institutions (World Bank, U.S. government, OECD, etc.) seem to be for. That’s not a bad thing in and of itself – a contrarian cast of mind is often conducive to questioning received wisdom and pointing out contradictions, self-serving justifications, and the like. But in this case, I think it’s lazy and counterproductive.
There are important debates about anticorruption that we should have. Let’s have them, using the best available theory and evidence. Bring it on.
GAB | The Global Anticorruption Blog 
Great points brought out Matthew. Corruption distorts development but there is a double standard on the corruption issue. Having spent the last 17 years fighting corruption in developing countries and recently working on western corruption in Afghanistan and here at home in Canada, it is clear that developed countries are just as reluctant to address corruption in their own jurisdictions as are the most corrupt nations. Nobody likes to be labelled as corrupt but it is ironic that countries that fund anti-corruption in developing countries refuse to support civil society in their own countries to look at domestic corruption. This is true across the developed world. So it is not a western obsession but there is certainly a hypocrisy especially in the area of corruption in natural resource extraction which is done by largely western firms.
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Good to see a site like this.
If you want a driving license in this country you have to pay a bribe for it – above the normal fee for sitting the driving test. In other words if you can’t drive you can get a license if you pay that bribe. There is an expression – that you can learn to drive later. Lot’s of accidents and deaths happen as a result. If you have an unworthy road vehicle then you can keep it on the road without fixing the problem by paying a bribe. Accidents and death happen as a result. You can list many more examples of corruption in what is really the transport sector of a country and economy and the adverse economic effects. But all very difficult to measure and prove. Death by corruption is a slogan not very welcome in a peculiar Anglo and American development mind. No one has submitted them to an anthropological examination and survey.
I actually believe that the problem with the Anglo and American development mind of that slant is they don’t want to say corruption is a moral problem and the root problem of lack of development by corruption is moral problem. I also wonder if that is why someone from a legal background would view corruption differently from someone from an economic background. Law is moral.
The love of money is the root of all evil, Apostle Paul. It is not bad governance. It is about the money.
Great article Matthew. I think it’s important to note that there are (at least) two big questions in the corruption and development sphere. You answered the first beautifully: the majority of empirical evidence points to the fact corruption is bad for development. The second question more vexing, namely should we use the limited resources to fight corruption instead of the myriad of other ills? I wonder whether academic literature shed light on this question as conclusively.
Meng,
Very good question. I agree completely: With limited development resources, we need to make hard choices about what to prioritize. Indeed, I think that some of the people I criticize in my post, like Chris Blattman, have this consideration very much in mind. Of course, the seriousness of the problem is one factor to consider when we decide how to allocate scarce resources, but it’s only one factor — other considerations, like the efficacy of devoting additional resources to a given problem, and the opportunity costs, are also relevant.
I’m not sure whether it makes sense to frame the question about resource allocation at too high a level of generality. We don’t have to choose how much we want to invest in “fighting corruption”; rather, we need to do a careful assessment of particular projects or initiatives.
In that vein, there have indeed been a few limited cost-benefit studies of particular anticorruption interventions (though there’s not nearly enough of this kind of work). For example. a study of education audits by Ferraz, Finan & Moreira (Journal of Public Economics 2012) found that anticorruption audits in Brazil were highly cost-effective, compared with other sorts of interventions designed to improve education outcomes. Reinkikka & Svensson (Journal of Public Economics 2011) similarly found that a public anticorruption campaign was a cost-effective way to improve education outcomes in Uganda. Olken (Journal of Political Economy, 2007) studied the impact of audits on public infrastructure projects in Indonesia, and his admittedly rough social welfare calculations indicated that the social welfare benefits of the audits far outweighed the costs.
That said, there are plenty of other examples where it seems that the costs of well-intentioned anticorruption measures outweighed their benefits. Anechiarico & Jacob’s 1996 book, “The Pursuit of Absolute Integrity: How Corruption Control Makes Government Ineffective” makes this case with respect to anticorruption measures in the US (New York in particular, if memory serves).
So, you’re entirely correct that even if it’s true that corruption is a big problem for development, that’s the beginning, not the end, of the conversation about what to do about it.
I would argue that the question of how many resources should be spent on anti-corruption measures depends to a large extent on the level of corruption in a developing country.
In a country where corruption is all-pervasive (e.g. Afghanistan), a large proportion of the aid money never reaches the projects it was intended for.
In such a case I would opine that it would make sense to give priority to measures fighting corruption over other developmental projects, as such development projects will likely not be successful if the corruption is left untouched.
The second question more vexing, if used in a general way can be used to allow any form of corruption. This would include prosecution of bribe givers in the Western world, i.e., the business men with brown envelopes. Business does a lot of good sometimes. So why not allow a bribe to facilitate that good. Aid and development have to be put on the same legal footing as the business community. Far more good would come from addressing the problem. Not the least would be is that it would not be a major issue at elections. It is the major issue in the South African press. They want it fixed.
Thanks to Matthew for alerting me to this post, which in part responds to something I wrote on the subject. Matthew also suggests that I should note that I have written a clarification / response, which can be found at http://lawdevelopment.blogspot.co.uk/2014/05/the-political-economy-of-anti.html
Michael,
Thanks for the thoughtful and enlightening reply. It deserves a longer response than I can give it here, but perhaps I will post a response once I have the chance to think through the interesting issues you raise in the new post.
Until then, I encourage all readers to click on the link Michael supplied above.
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Great article, Professor Stephenson. While I think you have made a great case for the impact of corruption on development from a macro-level, I think the question is a little more difficult at the micro-level. In cultures embedded in corruption, corruption isn’t necessarily a wrongful act; it’s a way of life. A police man with a family of 4 and a handful of cousins cannot provide for his family, which depends on him, without requesting bribes in his job. Without the extra money gained from the bribes, he cannot bribe the head of the school to get his kid an education, or the doctor to make sure he takes proper care of his wife. It’s a vicious cycle. While this doesn’t undermine the macro-level link between development and corruption you very effectively make, I think it’s worth pointing out that there is some tension between the aggregate and the individual level.
Too true. But both sides have to be fixed: macro and micro.
The collusion between a policeman and his extended family in depriving a person in a less powerful position than them in society in society needs to be emphasised as corruption, cruelty and not acceptable. I suppose this tends to the point made: endemic corruption. If you take the police in a population of 10,000,000. Say they are 100,000 with extended family of 20 that makes 2,000,000 benefitting from their corruption and depriving the 8,000,000. So it becomes a significant minority benefitting. It is the same as tribes when they say it is our turn to eat. Essentially, often a minority, depriving others in what is rightfully theirs. A vicious cycle not easily broken.
One country I am told does it this way. The police ask for bribes at road blocks. But they are not putting that in their pocket and walking home at night with smiles on their faces. No, they return to the post at the end of shift. There is the officer-in-charge. They have been instructed by him to bring him, every month, a certain amount from that road block. Anything extra they can keep for themselves. Does he kick some money upstairs to his commander? It is foot soldier, team leader, capo, made man, .. The mob in uniform.
Great post. I agree that corruption is a problem for development. As someone who spent years in South Asia, I can also say it’s certainly not a Western fetish – if anything, I think many in the developing world blame too many of their problems on corruption (a common, and I think somewhat implausible, claim one hears frequently in South Asia is: “if only our leaders were not corrupt, we would quickly become as wealthy as the West” – ignoring, or glossing over, other challenges the country is facing). I do think though that more attention needs to be given to the sometimes very harmful effects produced by anti-corruption interventions by the West and domestic constituencies. For example, at the risk of self-promotion, I co-authored this piece, which argues that anti-corruption efforts, at least in South Asia, have a history of inadvertently promoting military coups in countries with a history of military intervention in civilian politics. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2029409 This is not an argument that corruption is not a problem (it clearly is), but rather that seemingly positive, or at least innocuous, anti-corruption tools, like pressing for more transparency, naming and shaming, ranking countries in a corruption index, etc. can, and arguably historically have, made the situation worse, not better, in some specific contexts, in part because anti-corruption efforts were treated as something that could be separated from the larger politics of a country.
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=6&cad=rja&uact=8&ved=0CFYQFjAF&url=http%3A%2F%2Ftribune.com.pk%2Fstory%2F623863%2Ffights-off-oppositions-criticism-over-development-funds-lashes-out-at-anp%2F&ei=NghyU-HWAqjX0QXM7YHgCg&usg=AFQjCNE6G15KhcAbwrSMHFvqHf5_l2Y9rw&bvm=bv.66330100,d.d2k
Sorry I don’t know why these links sometimes give funny characters.
But I do think that the article shows how to the fore the issue of corruption is and that it is not Western solely. The fact that the money missing seems to be development money just adds to the point being made in the post.
Excellent article. Thank you so much for this! there is nothing worse than frustration which leads to reversing arguments. This is what seems to happen. To approach corruption, corruption needs to be understood. It is neither cost intensive nor too difficult compared to the global agenda on climate change etc., but still such a big taboo despite all the efforts and blaming and shaming campaigns. Corruption is a business act, not more not less. And why should any negative effecting business act be a western obsession? Just look at our own corruption problems hidden behind lobbyism and conflicts of interest. Coming from the field of development cooperation I can confirm, that there are people in non western countries like Indonesia who do not want to live with corruption and its effects. But in some cases you easily get the impression they need to convince “us” from western countries. Why else so many sectorial approaches financed which huge amounts of money not even mention the topic in its strategies?
so thank you very much!
It’s very important. for me but I’d like to now “why the corruption is bad for people? “
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