There is no question that corruption is a social problem that plagues many developing countries. But to what extent does it affect a country’s economic performance?
Economics professors Tina Das and Casey DiRienzo have looked at this international issue extensively in their scholarship. They have found that corruption has a negative impact on the image of a country, which hinders foreign investment because developed nations are forced to follow any corrupt practices if they want to do business with these developing countries.
“It’s not just one place where (corruption) has a negative impact,” DiRienzo says. “It spreads throughout and once it’s part of the culture of a country, the effect is widespread on a variety of economic outcomes.”
When they look at corruption at the country level, DiRienzo says, they look at kickbacks, bribes, collusion, nepotism and abuse of public office for private gains. Using different measurements, they have looked at the role of corruption in political management, tourism competitiveness, innovation, development, terrorism and globalization. They have also explored if corruption has any positive effects, particularly in highly restrictive or closed societies.
“In a society where you have to jump through so much red tape to get anything done, if you’re able to pay a bribe, some argue that in those special cases corruption can grease the wheels,” she says.
While that may be the reason why corruption is so prevalent in repressed nations, Das argues that the negative outcomes outweigh any positive effects corruption may have. She points to some of their recent research that suggests more corruption is associated with greater terrorist risk and less stability. Corruption has also been proven to weaken a country’s economic, financial, political and legal infrastructure, which creates an environment of distrust that leads to less innovation and entrepreneurship. If a person is going to produce or invent something but doesn’t have any faith in the country’s intellectual property laws or has to pay a bribe to secure a patent, Das explains, chances are, that person is not going to be motivated to start the process.
She says that while the World Bank and other international organizations are working on policies to reduce corrupt practices, freedom of information is the one thing she and DiRienzo have consistently found to effectively fight corruption. That’s exactly what is happening in the Middle East and northern Africa, DiRienzo says, where people are progressively accessing information from in and outside their country and sharing it with others through the Internet.
“As soon as you open a country up to more information, the more freedom and the more trade it has, the more it adapts to international standards and the more politically free it becomes,” Das says. “That kind of openness, both in economic terms and social terms, is what most of our policy prescriptions are in order to reduce corruption.”