Corruption is a disturbing phenomenon confronting many economies across the globe, and more importantly Africa due to its deadly effect on the livelihood of citizens. In fact, corruption can lead to the misallocation of scarce economic resources, thereby depriving the citizens of meaningful development. Corruption can also affect the quality and efficacy of development projects on the continent. According to Gray and Kaufman (1998), Corruption is widespread in developing and transition countries – not because their people are different from people elsewhere, but because conditions are ripe for it.
The question people often ask is whether it is possible to have corruption-free economy. As much as I agree that the fight against corruption is a difficult one, I equally believe that with the right attitude, commitment and strong political leadership – coupled with the right structures and systems, corruption could be reduced significantly. Indeed, there is the propensity that low-incomes can create fertile ground for bureaucrats to collect bribes; especially if quality of the institution is poor. With very low-income, bribes may be a means to survive.
This implies that strong institutions are required in developing economies to curtail the perceived widespread corruption. This view supports Kaufman et al. (2006) findings when he stated that there is widespread consensus that good institutions and governance are needed in order to achieve economic development. The essence of this article is to explore the correlation between corruption and economic development, and recommend possible solutions to curtailing this canker.
What is corruption?
Kaufmann et al. (2006) define corruption as the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as ‘capture’ of the state by elites and private interests. According to Jain (2001), corruption refers to acts in which the power of public office is used for personal gain in a manner that contravenes the rules of the game. Svensson (2005) stipulated that “Corruption is an outcome, a reflection of country’s legal, economic, cultural and political institutions”. Even though corruption in some aspects can be seen as a cultural and individual moral problem, Rose-Ackerman (1999) is of the view that corruption should rather be seen as a symptom of fundamental economic, political and institutional causes.
Coolidge and Rose-Ackerman (2000) stipulate that there is a difference between rent-seeking and corruption. Although it’s used interchangeably, there is a difference. While corruption involves the use of public office for private gains, rent-seeking originates from the economic concept of rents – which means profits in addition to all relevant costs. According to Coolidge and Rose-Ackerman (2000), corruption entails some kind of secret agreement that may mutually benefit the agents involved.
Per the above definitions of corruption, it is evidently clear that corruption mainly arises in interactions between the public and the private. Interestingly, corruption can arise between private firms as well as between non-governmental organisations.
Forms of Corruption
There are many forms of corruption, but this writer will focus on the following. Corruption can take the form of:
- Extortion, which is to cause harm or to threaten a person in order to obtain something that may be money, services, actions or other kinds of goods.
- Illegal appropriation of property or money entrusted to someone but owned by others. That is, embezzlement.
- Corruption can arise when a political official uses public funds for private gain. Nepotism is another form of corruption. It is a practice whereby relatives are favoured when giving jobs and benefits to employees.
- Corruption can also take place when local public office-holders grant favours, jobs and contracts in return for political support. Such systems tend to disregard formal rules, and instead give significance to personal channels.
From the above forms of corruption, it will be expedient to categorise them under the following headings. This will make it more vivid to follow, and equally to provide empirical bases for the discussion.
- Bureaucratic corruption
Andvig et al. (2001) defined bureaucratic corruption as corruption in the public administration. According to him, this type of corruption is often considered low level, and can be encountered daily by citizens and firms in contact with public servants, police, Customs etc. This form of corruption emanates from the fact that one might be required to pay a bribe, a facilitation payment, in order to procure the provision of services.
- Procurement corruption
Procurement is basically about the acquisitions of goods and services by public institutions in a country, and concerns contracts between the government and private firms in many different areas such as health, education, construction etc. In fact, Søreide (2002) states that corruption in public procurement arrangements makes the officials, and the politicians in charge of purchasing goods or services, choose the ‘best briber’ instead of choosing the best price-quality combination. Søreide (2002) further stipulated that in addition to the misallocation of resources, the consequences usually arise as inflated prices or lower quality of the goods or services offered.
- Political corruption
According to Andvig et al. (2001), Political corruption is largely considered to be high level, and more critical than bureaucratic corruption. Political corruption normally happens when politicians at the highest level of political authority are corrupt. Amundsen (2006) stated that political corruption can be for private and group enrichment, and for power preservation purposes. Political corruption often derives from political stabilization which entails redistribution of incomes, and that, such corruption can take the form of state capture, changes of the law (Khan, 2006).
Corruption and development
Svensson (2005) stipulated that Countries faced with high perceived corruption levels have significantly lower levels of human capital stock, and that GDP per capita and human capital are both closely linked to perceived corruption. The difference between developing economies and the advanced economies is that, the motivation for earning income is particularly strong in developing economies due to poverty and low salaries.
It’s worth noting that, risks such as unemployment, low incomes, etc. are high, and mostly, people lack risk-spreading mechanisms such as insurance and a well-developed labour market. As a result, there exist opportunities for people to engage in corruption. Corruption usually increase demand for more bureaucratic control, which may in fact increase opportunities for corrupt activities. Gray and Kaufman (1998) expressed the view that, in developing economies, the discretion of many public officials is broad, and this causes systemic weakness, which is exaggerated by poorly defined, ever-changing rules and regulation, thereby serving as fertile grounds for corrupt practices.
In fact, empirical study has shown that there is a negative impact of corruption on development. According to Lambsdorff (2003) and (Tanzi and Davoodi (2000), there is a strong correlation between GDP per capita and corruption. Pellegrini and Gerlagh (2004) find that perceptions of corruption have a negative effect on growth. Mo (2001) stated that perceptions of corruption have a significant adverse impact on growth; equally, Leite and Weidemann (1999) in their study demonstrate a significant negative effect of perceptions of corruption on growth. Mauro (1997) stipulated those perceptions of corruption are likely to reduce growth at a 10 percent significance level.
Ghana’s fight against corruption
When Nana Addo Dankwa Akufo-Addo was then the opposition leader of the New Patriotic Party, he vehemently spoke against the perceived act of corruption in the country and promised to deal with the canker when given the opportunity to lead this great nation. Upon assumption, he set up the Office of the Special Prosecutor. Martin Amidu was appointed and subsequently sworn into office on Friday, February 23, 2018, by President Akufo-Addo.
The President was applauded for the determination to fight corruption, more importantly, the appointment of Martin Amidu. In fact, Mr. Amidu was seen by many as the man capable of fighting corruption. Interestingly, he announced his resignation as a special prosecutor on the November 16, 2020, largely on grounds of alleged political interference.
Recently, the President nominated a private legal practitioner, Kissi Agyabeng. His nomination brought about mixed reaction among the citizens; so many people argued that he is too young to occupy that critical office. It is my considered view that, age is not a determining factor, rather, the ability of the executives, more importantly, the Office of the President to allow that office to perform its function without interference. Mr. President, you have rightly started the process of fighting corruption, by establishing the legal framework and the Office of the Special Prosecutor.
The next level should be the keen commitment and determination to fight corruption. This can be done by ensuring that the new Special Prosecutor is provided with all the resources to work with. The Special Prosecutor should put his feet firmly on the grounds so as to discharge his responsibilities professionally. Your Excellency, let this legacy, that is, the fight against corruption go down into history, that “once upon the time Nana Addo Dankwa Akufo-Addo was the President of Ghana, and that he eliminated the act of corruption in the country”. I can’t wait to write that story in your honour.
Effects of corruption on development
From the literature, it is evidently clear that corruption can have a devastating impact on the development of a nation, and therefore, there is the need to rally all effort to prevent or minimize its flow in an economy. The possible negative effects of corruption are:
- High transaction cost: corruption may lead to higher transaction costs. This occurs in the form of over valuing the cost of projects. It normally happens in the construction sector, mostly, government-related projects. The eventual effect is that, the qualities of projects are compromised, and that, the government will need to borrow more money to finance the construction of the same projects which quality couldn’t stand the test of time, thereby leading to high debt stock and hence sacrificing critical developmental needs of the citizens. Olken (2006), indeed, stipulated that corruption has very strong effects in the infrastructure sector.
- High level of inequality: corruption creates opportunities for increased inequality among the citizens. Inequality in the form of income levels, quality of life etc. and may have the propensity of increasing social vices in an economy. It could possibly widen the poverty gaps in an economy and subsequently, could undermine the stability of democratic structures of a country. Shleifner and Vishney (1993) stated that corruption is harmful and could derail the quality of life of citizens in an economy.
- Low capital accumulation: as a result of corruption and bribery, liquidity which is supposed to be in the hands of households and businesses as well as governments is repatriated to advanced economies, mostly, by corrupt politicians. This invariably affects capital accumulation necessary to support business development and entrepreneurship, thereby affecting the ability of an economy to create job opportunities, and hence leading to high unemployment rate and low revenue mobilization.
The 2019 Corruption Perception Index (CPI) which was released on January 23, 2020 scoring and ranking 180 countries by their perceived levels of corruption. Per the report, Ghana scored 41 out of a possible clean score of 100. The 41 score shows that Ghana’s score remained the same compared to its CPI 2018 score. In fact, we can improve upon our performance by ensuring that the Office of the Special Prosecutor is well-resourced with the necessary human capital and logistics. Let’s win the fight against corruption and create a better Ghana beyond aid.
>>>the writer is a Development Economist and Chartered Business Consultant. Daniel is the Chief Economist at the Policy Initiative for Economic Development. He also the Director of Research and Analysis, B&FT. He can be reached on email: [email protected] Tel; 0244 476376/ 0201939350