BUSINESS

The Destructive Effect of Corruption on Economic

Corruption, bribery, and bureaucracy create a “Brake effect”. For both global and national economic progress. This problem is not unique to underdeveloped or politically unstable countries. Corruption also exists in the world’s most developed democracies. It has become one of the most famous and widespread signs of the 21st century. It causes economic destruction.

This is one of the main problems of our time. Because the annual losses of the world economy from bribes are about $ 1.5-2.0 trillion, or 2% of world GDP.

Causes of corruption

The source of corruption is excessive state interference in the economy, bureaucratic traditions, social history, etc. The need to determine the preconditions for acts of corruption is because corruption as a social phenomenon is a product of socio-historical processes. And social relations with established patterns and trends. That is why identifying the causes of corruption will prevent this phenomenon. Getting more knowledgeable about this issue and reading resources about corruption comes with the completion of how much crime affects all sectors of society. And areas of activity. And of course, you look for some book or essay to read about it.

The general causes of corruption can be divided into the following groups:

  • economic (use of civil servants’ abilities in the field of financial management);
  • legal (first of all, it is an inefficient system of anti-corruption means. And imperfect legislation in the field of anti-corruption);
  • organizational and managerial (the ability to make decisions by officials at their discretion. Mass replacement of positions of civil servants through the use of personal ties);
  • socio-psychological (low civic consciousness. Mentality that is deformed by the awareness of the possibility of solving any issue. Without undue effort and loss of time, etc.)

The impact of corruption on economic growth

American professor Daniel Tristan, in his research, found a pattern that the smallest level of corruption is in democracies with a free press, where the economy is open, there is developed trade, and a large proportion of women in government. In contrast, countries that depend on fuel exports, and raw materials, which have a complex regulatory and legislative system, whose economy is characterized by “inflationary instability,” have a very high level of corruption.

The impact of corruption on the economy also depends on the country’s legal and institutional framework, governance quality, and political regime. Because if there is no political stability and an excellent legal basis, then there is a favorable environment for corrupt practices that lead to constant crises. All this, in turn, does not allow for reforms in various spheres of life and leads to a deterioration in the population’s quality of life.

Thus, in corrupt countries, the average income is one-third of citizens’ income. In countries with low levels of corruption, the literacy rate is about 25% higher. And the infant mortality rate is three times lower. These data suggest that corruption poses a serious threat to the country’s socio-economic situation. And systematically affects the level of economic development.

Threat to the stability and security of society

The economy is a dynamic mechanism that moves from one state to another. Over time, under the influence of certain factors. So, for a qualitative transformation, it is necessary to cut the impact of negative aspects. Including corruption, on the country’s economic health. Economic growth is a stable increase in the productive power of the economy. Over a long period, or simply an increase in the state’s economic power through an increase in GDP. That is, a growing economy produces more and more goods and services. This process is accompanied by strengthening the competitive advantages. Of the national economy on the world stage. Corruption threatens the development of the state. The stability and security of society. And the population’s economic well-being contributes to undermining the democratic institutions. And values ​​in society.

Omit harm of corruption

According to source scholars, corruption affects the economy most negatively. Many both theoretical and empirical studies confirm this. Thus, corruption:

  • Reduces total investment and, so, reduces the rate of economic growth. This reduction in investment is due to inflated production costs. And the uncertainty that corruption creates. The decline in development is a direct consequence of the decline in investment inflows;
  • reduces spending on education and health care due to the ease of budget manipulation in these areas;
  • increase the share of public investment due to the ease with which officials enjoy public investment projects;
  • deterioration of the country’s infrastructure and public investment projects;
  • Reduces tax revenues due to corruption of tax administrations and customs. As a result, the quality of public functions is declining due to a lack of budget revenues;
  • Reduces foreign direct investment, as corruption has the same corruption effect as a tax. The higher the level of corruption, the lower the level of FDI inflows.

Conclusion

Corruption is one of the main threats to economic growth. And the socio-economic development of countries. Which negatively affects the quality of life of the entire population. It should be noted that corruption is a transnational phenomenon. It has clear economic consequences and hinders economic development. So activities to avoid corruption at the national level have become more popular than ever.

Michael Caine

Michael Caine is the Owner of Amir Articles and also the founder of ANO Digital (Most Powerful Online Content Creator Company), from the USA, studied MBA in 2012, love to play games and write content in different categories.