from The Stateman's editorial

With the advent of globalisation, the problem of corruption has acquired transnational dimensions and is posing serious challenges for developing countries suffering from weak institutions and lack of resources. Some writers have argued that corruption and bribery are necessary lubricants for a cumbersome system of administration.It enables entrepreneurs to bypass irksome and stultifying regulations and helps the process of development. Samuel P Huntington has bluntly stated that, in terms of economic growth, the only thing worse than a rigid, over-centralised, dishonest bureaucracy is a rigid, over-centralised, honest bureaucracy. It has also been argued that corruption can have a desirable distributive impact as it shifts income and wealth from richer individuals and companies to poorer ones. These arguments, however, do not stand the glare of serious scrutiny. Speed money often in practice slows down the wheels of administration.Corruption, even when it is petty and routine, cannot be a means of stimulating economic growth and improving living standards. It causes illegal transfer of state revenue to richer individuals who are in a position to pay bribes to the detriment of those who are not. Available empirical evidence shows positive relationship between the extent of bribery and the amount of time that enterprise managers spend with the officials. The World Economic Forum Global Competitiveness Survey for 1997 surveyed 59 countries and obtained responses from 3000 firms showing that enterprises reporting greater incidence of bribery and tend to spend a greater share of management time with bureaucrats and public officials regarding licences, permits and taxes. Corruption jeopardises development in several ways. First, it distorts public spending. Distortion arises by deflecting allotted resources from their original purpose. Public resources are deflected in corrupt regimes because allocation goes where corrupt officials and politicians gain most. Contracts are awarded in a nepotic fashion rather than on the basis of merit. Poor people become the primary victims of corruption as they are denied services because the resources are directed elsewhere. Second, corruption undermines efficiency. Public sector efficiency suffers because corruption imposes informal practices over proper views and procedures of the government. It also adds direct and indirect costs to the execution of the programmes.A 1996 survey showed that within Ukraine firm owners who pay large sums of bribes had to spend one-third more time with officials than firm owners who pay less bribes. Third, corruption also saps economic growth. In a path-breaking paper, economist Paulo Maro showed that highly corrupt nations have a smaller share of their gross domestic products going into investment.Corruption raises the cost of business and deters would-be investors. The World Bank Report of 1997 points out that bribes are not only a disincentive to further investments because of the immediate costs but also because they entangle the business in a “web of time consuming and economically unproductive relations”. Fifth, corrupt regimes are intrinsically arbitrary and they introduce risks of uncertainty that many investors are simply not willing to take. This also automatically raises the transaction cost of investment. As a result, key economic objectives like job creation, development of small and medium enterprises suffer.TechnologyIn worst case scenarios the very choice of a project is determined by corruption. Some examples of this kind of corruption are purchase of technology, which is totally unsuited to the needs of a country or the choice of a capital-intensive project because it is more lucrative in terms of corruption than a labour-intensive one that would have been more beneficial to the development of a country. Thus real development priorities of a country are thrown to the winds in pursuit of corruption as it helps decision-makers to amass large fortunes.It may be mentioned in this connection that Africa is littered with deserted motorways, which are now being eroded by savannahs or empty factories that had fallen into ruin only a few years after they were opened. These “follies of development” can be found in many other developing countries and not just in Africa alone