Is Corruption Always Bad?

Corrupt Money

Corruption is generally vilified as an unmitigated evil. It disenfranchises the poor, weakens public services, reduces investment, and holds back whole societies. And yet, in some instances, corruption can actually be very useful, lubricating business in a way that promotes growth, creates jobs, helps smooth the introduction of needed reforms, and reduces poverty.

What explains this paradox?

The problem is the English language. “Corruption” is a broad term that encompasses many diverse activities, only some of which are completely negative. In English, however, these are all grouped together in a way that does not allow for differentiation—forcing every activity into one rubric.

In many countries, corruption actually is not viewed negatively but is seen as a positive force and reflects a value system that prioritizes loyalty to family and clan over that to an impersonal institution. In such places, it may be so important to maintaining stability and reinforcing the glue that holds together a state that eliminating it—which would be impossible in any case—would have dire consequences. As one writer on Pakistan commented, “Western language about ‘corruption’ in Pakistan suggests that it can and should be cut out of the political system; but in so far as the political system runs on patronage and kinship, and corruption is intertwined with patronage and kinship, to cut it out would mean gutting Pakistan’s society like a fish.”

Corruption itself comes in many forms—and has a wide range of influences on economic activity—only some of which are as evil as the whole bunch is made out to be.

In China, for instance, although corruption is deeply rooted and widespread, it does not necessarily determine the allocation of key resources in most cases. While it serves to reduce efficiency, increase costs, and can produce egregious results at times, given the low overall level of development in the country, it does not have a large effect on growth (though this will change as the country grows richer). On the contrary, it may actually act as a lubricant to circumvent stifling regulations and smooth the establishment of the trust necessary for businesspeople to have enough confidence in officials to want to invest at times.

The same situation has existed in various forms across much of East Asia—including in Korea, Indonesia, and Thailand—at similar stages in their development. Cambodia, which ranked 154th out of 178 countries worldwide on Transparency International’s 2010 Corruption Perceptions Index, has seen rapid growth for two decades.

In contrast, in the Philippines, Central Asia, and most of Africa, Latin America, and the Middle East, corruption is much more predatory, with interest in personal gain or in getting access to resources to buy the loyalty of various supporters triumphing any legitimate activity.

Languages with a richer set of vocabulary to describe corruption are better equipped to explain its various permutations. For example, the Italian spintarella (meaning “a little push”), Greek fakelaki (“a little envelope”), French pot-de-vin (“a glass of wine”), Chinese chaqian (“tea-money”), Portuguese gaseoso (“soft drink”), Spanish mordida (“a bite”), Egyptian ashaan ad-dukhaan ( “something for your cigarettes”), and Syrian finjaan ‘ahwa (“a cup of coffee”) all suggest payments that are quite small and not too serious violations. In contrast, the Slovak pod stolom (“under the table”), the Korean noemul (“giving goods in secret”), and Japanese kuroi kiri (“black mist”) all suggest something much more sinister. Of course everything is relative—what appears relatively innocuous to one person may be quite sinister to another!

Some scholars consider the differing levels of public trust (i.e., the level of trust between strangers) the determining factor behind which type of corruption a country has. Others deem the deciding factor the degree to which a political elite can operate with a long-term horizon and can centralize economic rents.

Countries would be far better off without corruption (and associated practices such as rent-seeking and neopatrimonialism) in the long term. But they should not always be seen as the primary barrier to progress at early stages of development. Instead, other problems—such as weak social cohesion or the lack of security for investments—are probably at work. Corruption is typically a symptom of a deeper malaise, not the cause of that malaise. A better understanding of the phenomenon as it exists in a specific country is essential for that country to judge whether efforts to tackle corruption should be high on its reform agenda. In some places and at some times, it may not be nearly as important as other reforms.