The Etiology of Corruption

Taking a closer look at the etiology of corruption, the first statement needs to be that the concept of “cause” is problematic in the social sciences partly because it is aligned with the belief in “determinism, as opposed to free will in human behaviour.”³⁴ Nevertheless, this point of view is overlooked by researchers on corruption. Strictly speaking, the available evidence allows us to speak of correlates rather than causes of corruption. The reader should note this caveat in considering etiological factors of corruption. The willingness to engage in corruption is influenced by the perceived activities of peers and other individuals; that is, corruption is contagious/conditional (Dong, Dulleck, and Torgler 2012). Thus, an individual’s willingness to be corrupt depends on his/her perception of how corrupt others are. Also, the higher the levels of perceived corruption, the more citizens see it as justified (p. 610). Interestingly, Dimitrova-Grajzl, Grajzl, and Guse (2012) found that perceived corruption affects demand for regulation via a negative interaction effect with trust. Several authors have argued that corruption is an endemic way of life in some countries, where there has traditionally been a culture of mistrust and suspicion, thus rendering transactions with family members more appealing (Heywood 1996; Little and Posada-Carbo 1996). Brooks et al. (2013, 47) claimed that such close patronage leads to “acceptability of illicit behaviour,” and nepotism, favoritism, and the corrupt are less likely to be scrutinized.

Similarly, in countries where there is ethnic tension, mistrust is expected to exist and corruption is expected to be high. Evidence cited by Rothstein (2013, 1011) shows that countries, regions, and cities with more trusting people (e.g., in Nordic countries) are likely to have less corruption.

The government in a given country can be said to encourage corruption by providing goods and services, while also producing a plethora of sometimes contradictory rules and regulations and allowing its officials a great deal of discretion (Ali and Isse 2003, 462). More specifically, several factors that are instrumental for corruption are related to the extent of government intervention in the economy (Dimitrova-Grajzl, Grajzl, and Guse 2012, 292) and more generally to variables that are determined by government policy, such as the level of import tariffs or the salaries of public servants. According to Mauro’s (1996, 6) IMF paper, the causes of corruption in government rents include the following: trade restrictions, government subsidies (including tax expenditures), price controls, and low wages in the civil service relative to the private sector wages or per capita GDP.

Considering factors that contribute directly to corruption, some researchers have argued that corruption is generally connected with the activities of the state and especially with the monopoly and discretionary power of the state. Interestingly, Brooks et al. (2013, 48) considered the size of the public sector as contributing to corruption because in “big governments there are more officials to bribe,” whereas Goel and Nelson (1998) argued the opposite because public servants in “small” governments may be more frequently subjected to bribes due to their scarcity. Some have even gone as far as to suggest that if the state were abolished, corruption would be eradicated. This is an overly simplistic solution because Scandinavian countries (Denmark, Finland, Sweden, and the Netherlands, which are some of the least corrupt in the world) have large public sectors (Tanzi 1998, 565—566). In other words, it is the way the state operates that is important. Tanzi has drawn attention to particular aspects of governmental activities that create a fertile ground for corruption (pp. 566—571): regulation and authorization; taxation; spending decisions (e.g., investment projects, procurement spending, and extra-budgetary accounts); provision for goods and services at below market prices; public officials with wide discretion in other important decisions; and the financing of parties. There are conflicting views about whether more corruption would occur in countries with a centralized government (Abed and Davoodi 2000) or a decentralized one (Tanzi 1998). For Tanzi, with decentralized governments, people are more prone to corruption because smaller segments within the government provide greater opportunities for corruption to flourish. Corruption is believed to be more prevalent in countries with a dominant religion characterized by an inherent hierarchical respect for authority

such as Catholicism, Eastern Orthodoxy, Hinduism, or Islam (Brooks et al. 2013, 52).

In a democracy in which freedom of the press exists, there is likely to be more exposure of corrupt activity (Brunetti and Weder 2003). Less corruption would be expected in a country where there is a plurality of political parties that challenge voters’ ability to monitor politicians and/or an effective opposition with robust legislature, thus acting as precursor to reducing corruption (Montinola and Jackson 2002). Geographical location has also been suggested as another corruption-relevant factor; more specifically, high levels of corruption will be found in countries located “greater distances from traditionally large exporting countries” (Brooks et al. 2013, 48) or in countries that border others with a high tolerance for corruption (van Schendel and Abraham 2005). Herzfeld and Weiss (2003) also found that a richness of natural resources, such as ore, gas, and oil, are conducive for corruption.

Focusing on factors that contribute to corruption indirectly (see Tanzi 1998, 571—576), one cannot ignore quality of bureaucracy; level of public sector wages; penalty systems; institutional controls, such as anticorruption commissions; transparency of rules, laws, and processes; and finally, examples by the leadership, such as when the president of a country is known for being corrupt and serves as a model and a justification for others (Tanzi 1998). Corruption is less prevalent if economic policies “stimulate long-term growth and prosperity” (Brooks et al. 2013, 59), there are “better educated and democratised civilians” (Brooks et al. 2013, 59), and there is a greater influential presence of females in the workforce or in powerfulpolitical positions (Swamy et al. 2001)— see also the discussion of gender differences later in this chapter. Paldam (2001) found that less corruption exists where the state and religion are separate, with each having their own sphere of influence. This situation permits each to challenge and expose corrupt activities of the other (Brooks et al. 2013, 52).

Conflicting findings have been reported about the relationship between income inequality and corruption, with some authors³⁵ arguing for a positive relationship, while others³⁶ point to a negative relationship. Ali and Isse (2003, 461) found that corruption is significantly correlated with foreign aid and government size, but it is negatively correlated to a statistically significant degree with judicial efficiency, educational level, and economic freedom. A crosscountry comparison by Lederman, Loayza, and Soares (2005) showed that lower prevalence of corruption is associated with democracy, parliamentary systems, political stability, and freedom of the press. Interestingly, Nur-tegin and Czap (2012) reported that the level of corruption is lower in unstable democracies than in stable dictatorships (p. 51). Using a cross section of up to 94 democracies, Kunicova and Rose-Ackerman (2005) found that proportional representation systems, especially together with presidentialism, are associated with higher levels of corrupt political rent seeking. Similarly, Lambsdorff (2003) found that parliamentary as opposed to presidential democracies are associated with lower levels of corruption. La Porta et al. (1999) found that a country’s legal system determines the effectiveness in tackling corruption and asserted that in a common law system greater opportunities exist for redress by citizens against any corrupt activities conducted by people in power because case law is developed by judges and provides for flexibility. This is in contrast to the civil law system, which is developed by the state and is open to influence from political, economic, agendas and lobbyists. Brooks et al. (2013, 55) have argued that “the surge in organised crime activity” can accelerate the growth of corruption since corrupt activities like bribery of public officials are features of organized crime groups (Slapper and Tombs 1999). In investigating the relationship between certain features of a country (e.g., income inequality and political system) and the level of corruption, the challenge for researchers is to account for intervening variables that mediate an apparent relationship.

Dong and Torgler (2012) reported that provinces in China with greater anticorruption efforts, higher educational attainment, historic influence from Anglo-American church universities, greater openness, more access to media, higher relative wages of government employees, and a greater representation of women in the legislature were found to be less corrupt. However, heterogeneity, regulation, and resource abundance were found to breed substantial corruption, while fiscal decentralization significantly reduced corruption. Finally, a positive relationship existed between corruption and economic development in China, which was primarily attributed to the transition to a market economy. An interesting question here is whether corruption reduces economic growth or vice versa. A negative relationship between corruption and development was reported by Blackburn and Forgues-Puccio (2007). Brown and Shackman (2007) found that democratic accountability and the rule of law reduce corruption in both the short term and the long term (p. 319), while economic growth increases corruption in the short term but reduces it in the long term. Blackburn and Forgues-Puccio’s (2010) study reported that (1) corruption is always bad for economic development, but its effect is worse if the economy is open rather than closed; (2) the incidence of corruption may itself be affected by both the development and openness of the economy; (3) financial liberalization is good for development when governance is good, but may be bad for development when governance is bad; and (4) corruption and poverty may coexist as permanent, rather than just transitory features of an economy.

To illustrate, having examined 61 countries, Kimbro (2002) concluded that countries that have “better laws, more effective judiciary, good financial reporting standards, and a higher concentration of accountants are found to be less corrupt” (p. 325). Being able to match countries for comparison of a sufficient number of relevant characteristics remains a challenge for corruption researchers. This challenge has largely been met by Johnson et al. (2014) who used data on corruption convictions and economic growth during 1975— 2007 across the United States. They found “no evidence that corruption is ever good for growth” (p. 66) and also that corruption causes less harm in states with more regulation.

Regarding gender differences in corruption, researchers have found systematic differences in behavioral characteristics across gender, indicating that men are more individually oriented (selfish) than women. Women have been found to be more likely to exhibit “helping behavior,” vote based on social issues, score more highly on integrity tests, take stronger stances on ethical behavior, and behave more generously when faced with economic decisions. Several studies in different contexts and using a variety of research methods have found females to be more law abiding (Wood and Glass 1995), socially responsible (Freeman and Bartholomew (1991), ethical (Harris and Weaver 1994), trustworthy, and public spirited than men (Dollar, Fisman, and Gatti 2001), suggesting that women should be particularly effective in promoting honest government. It has thus been found that the greater the representation of women in parliament, the lower the level of corruption in a large cross section of countries (Dollar, Fisman, and Gatti 2001; Swamy et al. 2001). Swamy et al. also found lower corruption in countries where women hold higher positions in the government service and compose a larger proportion of the workforce. As will be discussed in Chapter 3, however, some authors (e.g., Goetz 2007) have argued that the belief that women are less corrupt than men is a myth that has underpinned efforts to feminize traffic police in Lima, Peru, or to appoint mainly women as treasurers in local government in Uganda (Goetz 2007, 89) based on the belief that women have higher moral integrity than men (see Chapter 3).

Unfortunately, no studies have been conducted on profiling corruption offenders. One would expect that the profile would differ from that of a fraudster and would include politicians. The need to include politicians is illustrated by a 2014 article in the Daily Telegraph (New South Wales [NSW], Australia) by Godfrey, which exposed the NSW legislature as the most corrupt parliament in Australian history; in a period of11 months, 15 politicians resigned due to corruption investigations.³⁷ On the other side of the globe, in the United States, Judicial Watch published a list of the most wanted corrupt politicians in 2014 as done in previous years.³⁸ Generally speaking, of course, it is difficult to investigate, prosecute, and convict corrupt politicians in most countries. The experience in Greece is a good example. The Greek

General Inspector of Public Administration noted that despite his efforts “to do something about the high-profile” corruption offenders, he runs into “a wall of exculpatory measures.”³⁹