- Corruption is corrosive to economic growth, distorts market prices and leads to poor decisions
- British common law tradition appears to be more resistant to corruption than European civil law
- Corruption in developed countries like ours is motivated by status envy and outright greed
By Tim Dean
What springs to mind when you think of corruption?
Possibly a bundle of bills being palmed to a guard at a border crossing? Or, a bureaucrat doling out favours in return for kickbacks? Perhaps a tin-pot leader pointing out the value of their patronage to a foreign business delegation?
Many of us probably conjure images of developing countries with struggling economies, authoritarian governance and top-heavy bureaucracies, where graft is the unwritten rule of daily life. But corruption isn’t restricted to the developing world. As recent headlines have shown, Australia and New Zealand are not immune to the greased palm.
How can that be? Don’t we consider ourselves to live in a culture with high ethical standards? Do the headlines suggest otherwise?
Corruption has many faces, from the bribery of officials, to nepotism and bought patronage, to direct or indirect coercion, through to rent-seeking by business. Some corruption occurs outside of the law, some actually corrupts the law itself to favour those with the power to influence it.
What all forms of corruption have in common is that they are corrosive to economic growth. Corruption not only unfairly favours those who happen to have the means to engage in graft, but it places an arbitrary cost on many social and economic transactions. It distorts market prices and leads to sub-optimal decision making. It also encourages the “overgrazing” of the commons, introducing further inefficiencies.
So it’s no surprise there is a crystal clear correlation between countries with high levels of corruption and those with low economic growth.
The price of honesty
So why would anyone engage in corrupt behaviour?
For people in poor countries it sometimes isn’t a choice. Consider if you lived in a country where you couldn’t guarantee that hard work alone would yield enough income to provide for your family. Opportunities are so rare and resources so scarce that you need every edge you can get. In this case, bribing an official to land a job, or accepting a bribe yourself, or siphoning money to friends and family, might be the only way to keep your head above water, or stay ahead of your competition.
In a country where corruption is rife, keeping honest simply puts you at a competitive disadvantage. Refuse to hand over that bribe, or refuse to receive one, and you’re suddenly on the back foot, and that can have potentially mortal consequences. In these cases, it is not only rational to play the corruption game, it might even be prudent. Let’s call this “defensive corruption”.
Yet the cost of such defensive corruption is high for the entire society. It triggers a vicious cycle where corruption leads to stifled economic growth, and stifled economic growth leads to more corruption. It takes a monumental collective effort to break the cycle and shift to a low corruption/high economic growth culture.
But this not what causes corruption in Australia and New Zealand. We simply don’t live in countries where defensive corruption is necessary. Both Australia and New Zealand have buoyant economies where hard work pays off and have strong safety nets that soften the landing if we fall.
Further, we don’t have cultures of corruption in which playing by the rules is a risky strategy. Australia and New Zealand are among the least corrupt cultures in the world. According to Transparency International, New Zealand is tied at number one, along with Denmark, and Australia sits at number nine, tied with Canada. And we have several mechanisms working in our favour to keep things that way.
Even once we remove the incentive for good people to engage in corruption, there will still be greedy people who will use every lever at their disposal, irrespective of the cost it imposes on those around them or on society in general.
Excepting the anomaly that is Scandinavia, corruption tends to be lowest in nations with a British pedigree and a Protestant background, like ours.
There are a few intriguing theories as to why this might be. One suggests that, like the Romans, the British exported their particular brand of governance when they established colonies across the globe.
In fact, the British common law tradition appears to be more resistant to corruption than the more popular civil law tradition found on continental Europe and elsewhere around the world. This is perhaps because civil law traditionally concentrated power in the sovereign, who used the law as an instrument to entrench their interests. In contrast, common law emerged from property owners and parliament resisting the intrusion of the monarchy. To this day, common law takes a modicum of power from lawmakers and gives it to the judiciary, and places an emphasis on the principles and procedures of justice rather than simply the letter of the law.
The link with Protestantism seems to have less to do with spiritual beliefs and more to do with a rejection of top-heavy authoritarian rule. By advancing a more individualistic and less conformist ethic, it devolves more power to the people and weakens the control of elites. Both of these factors appear to have diminished the ability of elites to abuse their station.
Even so, corruption persists in the antipodes. If it’s not defensive corruption caused by weak economy and permissive culture, then what is driving it?
In a way, corruption in rich countries is even more insidious than corruption in poor countries. Where corruption in the developing world may often be motivated by necessity, of a sort, it seems most corruption in developed countries like ours is motivated by the more pernicious forces of status envy and outright greed. I call this “offensive corruption.”
In a way, it’s just human nature. Until such time as we can guarantee a universally magnanimous spirit, there will always be those who are not content with a life of comfort, or even one of abundance, but will chase wealth, power and status for their own sake. Even once we remove the incentive for good people to engage in corruption, there will still be greedy people who will use every lever at their disposal, irrespective of the cost it imposes on those around them or on society in general.
Yet we should not let that reflect on the rest of us.
The thing about corruption in the developing world is you rarely hear about its true extent, and seldom see it punished. The very fact we’re hearing so much about corruption here is actually a triumph. The system works. And every case of corruption that is tried serves to reinforce the perception that corruption is unacceptable.
That most of us would break out in a sweat if asked to hand over a bribe means our culture has already entrenched honesty.
If anything, the only modern form of corruption that has yet to be explicitly flagged as such is political donations, particularly by organisations and businesses. A gift carries no expectation of reciprocity; a bribe does. If a political donation is offered with an expectation of greater influence and favour — and they would hardly be endorsed by shareholders if they weren’t a good “investment” — then it is effectively a bribe. This is perhaps the most bald form of rent-seeking that still carries an auspice of acceptability.
While it’s unlikely we’ll ever truly eliminate corruption, as long as we’re hearing about it in the headlines, then we can rest assured that we have it on the back foot.
Tim Dean is a philosopher, editor and science writer.
This article was first published in the September 2014 issue of Acuity magazine.