How Corruption Decreases Prosperity

Economies that are afflicted by a high level of corruption — which involves the misuse of power, whether in the form of money or authority, in order to achieve certain goals in illegal, dishonest or unfair ways — are not capable of prospering as fully as those with a low level of corruption. Corrupted economies are just not able to function properly because corruption prevents the natural laws of the economy from functioning freely. As a result, corruption in a nation’s political and economic operations causes its entire society to suffer. According to the World Bank, the average income in countries with a high level of corruption is about a third of that of countries with a low level of corruption. Also, the infant mortality rate in such countries is about 3 times higher and the literacy rate is 25% lower. No country has been able to completely eliminate corruption, but studies show that the level of corruption in countries with emerging market economies is much higher than it is in developed countries.untitled

Corruption in its many forms (bribery, nepotism, fraud, embezzlement) adversely impacts the economies and societies of affected nations. Corruption is a global phenomenon found in all countries – but evidence shows it harms poor people more than others, stifles economic growth and diverts desperately needed funds from education, healthcare and other public services. An estimated one trillion US dollars are used through bribes every year according to the World Bank. Corruption is not just a problem in government. The private sector suffers too, where corruption erodes corporate identity, undermines confidence between business partners and can destroy the reputation of once-trusted companies. The contribution of the private sector in fighting corruption is essential. Corruption is one of the disincentives for foreign investment. Investors who seek a transparent and fair, competitive business environment will avoid investing in countries where there is a high level of corruption. Studies show that there is a direct link between the level of corruption in a country and measurements of the competitiveness of its business environment. A working paper of the International Monetary Fund (IMF) published in 2010 shows that corruption has an adverse impact on the quality of education and healthcare that are provided in countries with emerging economies.1

Corruption increases the cost of healthcare and education services through illegal and unofficial payments that are made in countries where bribery and connections play an important role in the recruitment and promotion of teachers. As a result, the quality of education decreases. Also, corruption in the designation of healthcare providers and recruitment of personnel, as well as the procurement of medical supplies and equipment, in emerging economies results in inadequate healthcare treatment and a substandard, or restricted, medical supply, and thus lowers the overall quality of healthcare in these countries. Most countries with emerging economies suffer from a high level of corruption that slows their overall development. The entire society is affected as a result of the inefficient allocation of resources, the presence of a shadow economy, and low-quality education and healthcare. Corruption thus makes these societies worse off and lowers the living standards of most of their populations.

Writer: Laraib Shah