By Namit Arora
Public corruption is often defined as the misuse of public office for private gain. It tends to thrive when discretionary power is vested in officials amid a weak architecture of deterrence. A persistent feature of all societies, public corruption is today considered a problem of the developing world. Examples include politicians, bureaucrats, and other officials taking bribes to influence outcomes in business licensing, awarding contracts, registering property, citing traffic violations, disbursing education funds, and so on.
The stakes rise dramatically with neoliberal reforms, when the state begins to transfer public assets to private firms—such as land, mines, and airwaves—usually under weak regulatory, supervisory, and legal frameworks. For instance, the big Bofors scandal of pre-reforms India of the 1980s involved $25 M, whereas the 2G telecom scam last year may have cost the exchequer $39 B. It is said that as developing countries turn into developed nations, bribery turns into another means of influence: lobbying.
It is widely believed that public corruption hurts macroeconomic growth. However, research on the impact of corruption on growth is not conclusive. China, among the most corrupt countries, has one of the highest growth rates. Perhaps China's GDP would have grown even faster without corruption, but that's a conjecture; theoretical explanations for China cut both ways. Some researchers now favor the view that the impact of corruption on macroeconomic growth depends on the nature of the regime and the kind of corruption there is. Some kinds can align in favor of growth, others against. Corruption of course has wider implications beyond growth. Various studies have shown its adverse impact in the microeconomic realm. Higher corruption reduces entrepreneurial activity, allocates talent less efficiently, and worsens services integral to human development. Finally, public corruption also eats away at social institutions, undermines the rule of law, erodes social trust, and can jeopardize public safety and hurt the environment.