nnadozie chapter 14 corruption and development

7/28/2019 Nnadozie Chapter 14 Corruption and Development

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Chapter 14 Corruption and Development

by John MbakuSummary: 1.Introduction, 2. Defining Corruption,3. Causes

,4. Public Choice Perspective, 5. One party Systems &Corruption, 6. Statism & Corruption, 7. The Economic Impact

of Corruption , 8.Traditional means of fighting corruption,9.New ways of fighting corruption-Institutions & Public ChoiceApproach, 10. Self-Enforcing Constitution, 11.Challenges to

Constitutionalism in Africa,

12. Summary and Conclusion


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1.Introduction

Corruption is the use of public resources for private gain.

Corruption is an opportunist behavior aimed at producingbenefits for individual or group at the expense of society

Corruption can be measured by corruption Index(CPI),which ranks countries based on how investors, politicaland risk analysts, and the public perceive levels ofcorruption.

The Index ranges from zero (high corruption), to 10 (highly clean-minimum corruption)

The CPI is based on 1999 data is shown in table 14.1


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1. Introduction

Based on CPI data, Denmark (CPI=10)andFinland (9.8) are the least corrupt or top twocleanest states. Nigeria (CPI=1.6) & Cameroon(CPI=1.5) are the most corrupt states.

Of the 10 most corrupt economies 4 are in Africa(Cameroon, Nigeria, Tanzania, Kenya)

Others- such as Botswana, Mauritius, Namibia,and South Africa are have relatively lesscorruption & making progress


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1.Introduction, contd.

Corruption Debates- Two Views

View 1- It may encourage inefficiency and

discourage wealth creation and growth..

View 2: It may grease wheels of

bureaucracy, and make governmentmore responsive to the needs of investors

and society.


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1.Introduction, contd.

1.But, studies show corruption has negativeeffects on economic development bycontributing to less effective governance andretarding wealth creation, reversing democraticgains made since the end of the cold war,making economies less able to sustain viableand effective economic systems.

2. Cost of public service is high to provide moreincome to civil servants- contributes to hightransaction costs


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1.Introduction, contd

3. Increases the burden of the public sector oncitizens. 4. It demoralizes, and leads to politicalopportunism such as rent seeking thatcontribute to inefficiency.

5. Leads to inability of a government to sustainprofessionals and administrators,

6. Encourages the underutilization of skilled andeducated labor cost or the brain drain..,

7. Distorts international trade and investment, 8. discourages investment and leads to capital

flight,

9. May stunt innovation and introduction of new

technologies.


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1.Introduction, contd. How to deal

with Corruption - General Approaches Examining the incentives and rules that regulate socio-

political interaction of society and change thoseincentives if they are flawed.

Promote good governance that is accountable,transparent, honest, participatory, guarantees economicfreedom, rights of individuals to freely exchange andcontract, based on well secured property rights by law.

Move forward with constitutional reforms withconstitutional limits on government officials to preventabuse of power, guarantee economic freedoms, and tocontrols negative incentives. A clear delineation ofpolitical/public activities from private economic activitiesis necessary.


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2. Defining & Explaining Corruption

1. Two elements: Poor Performance of a publicduty and deviations from the rules that regulatecivil servants. A public servant can be corrupt ifthe his performance sacrifices the principal(citizens) for his own benefit.

Corruption in Africa is understood in practical

terms such as: theft of public resources bycivil servants, embezzlement, illegalextraction of public resources, nepotism,favoritism, bribery, etc


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2. Defining & Explaining Corruption

cont. Corruption is an extra-legal institution used by individuals

or groups to influence the bureaucracy for self-servingreasons.

In Nigeria and Cameroon, minority ethnic groups aredenied for effective participation in governance.

Anglophones are excluded from economic and politicalparticipation in Cameroon.

In Nigeria, ethnic minorities in the Delta Region arebattling the federal government over natural resourcesand oil. Nigeria, state institutions are used by individualsand groups as tools of plundering local wealth. Rebels

have began to kidnap oil company executives. Nigeriais the 5th oil ex orter to the USA


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2 Defining & Explaining Corruption

cont. The Second Determinant of Corruption is inefficiency &

incompetence of the civil service.

Citizens and businesses have no effective way of

monitoring opportunistic way civil servants.

In Zaire, 1979, the World Bank determined about 92% ofstate employees were not able to meet their subsistenceneeds with their legal salaries. So, they have to take

bribes.

Income inequality is another factor. Some teachers andprofessors are not paid on time in Nigeria, Cameroonand few other countries. So, they are compelled to

engage in corruption


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3. Causes of Corruption

1. Most Corrupt State- Example-Nigeria isa leader where institutions are used byindividuals as tools of plundering citizens.

2. Incompetence and inefficiency of civilservice.

3. Poverty and severe inequality inincome.

4. Cultural Norms.


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2. Defining and Explaining

Corruption cont.- Cultural Factors

Existence of flawed Cultural Norms is anotherfactor.

Corruption may be the cost that countries pay to

modernize?.

Loyalty to a group or tribe is more important thanindividual rights or accountability.

A successful civil servant is expected to sharethe benefits of his office with members of hisgroup, extended family, or tribe.


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3. Causes of Corruption in

Africa 1. Corrupt governments- Example-

Nigeria- where institutions are used byindividuals as tools of plunder citizens.

2. Incompetence and inefficiency of civilservice.

3. Poverty and severe inequality inincome.

4. Cultural Norms.


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4. The Public Choice Perspective in

understanding Corruption Corruption is seen as a post-constitutional opportunism

aimed at producing benefits for individual or group at theexpense of society.

Once the constitution is adapted there is an incentive

by individuals and groups to capture the statesredistributive or transfer power.

The process through which individuals and or groupsexpend resources to affect distributional outcome iscalled Rent Seeking

Effective control of corruption must based oninstitutional reforms including constitutions toconstrain the ability of the state to intervene inprivate transactions.


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5. One-Party Political System and

Corruption-Centralization of Power

The first generation of African leaders took

actions that tried to create a unitary and strong

central governments to contain tribalism, by

centralizing power and create on partystates.

The effect was to create personalistic rule, and

other effects such as suffocation of civil society,

external debt, economic decay and

dependency, military opportunism such as

coups, etc..


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5. One-Party Political System &

Corruption- cont.

Later political competition failed to have asignificant impact on corruption since therewas no institutional reforms that

adequately checks the exercise of agovernment agency to minimize corruption.

There is a critical need to establish lawsand institutions that place constraint ongovernment to avoid opportunistic

behavior of bureaucrats.


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6. Statism and Corruption in Africa

Market Centered Approach inherited from the colonialera did not work since democratic institutions weremissing.

Corruption Africa is opportunistic behavior related to thescope and extent of government regulation of privateeconomic activity.

It can only be eliminated through democratic bottomup inclusive approach of designing institutions thatsustain participation, accountability andtransparency and economic freedom.


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7. The Impact of Corruption On

African Economies

There are two views: The damaging effectand the grease view.

The grease effect is not supported by theevidence. Corruption continues to helpruling elites to maintain monopoly political

power.

Civil Society is still suffering from years ofabuse by the state.


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7.The Impact of Corruption On

African Economies

In some countries the multilateral

organizations such as the IMF and the

World Bank have become de-facto policy

makers.

Only few countries such as South Africa,

Botswana, and Mauritius have emerging

viable civil societies that can sustain viable

democratic institutions.


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7.Ways of Minimizing Corruption

On African Economies

An important role of institutional reforms is

to produce well designed laws and

institutions that minimize the number of

individuals and groups that are placed atcompetitive disadvantage.

Also, Building democratic institutions to

constrain the abuse of public authority and

state officials.


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8. Traditional Corrupting Cleanup

Strategies

Traditional ways of controlling corruptionincludes: societal, legal, market, and political

Traditional: civil society norms, vigilance,

education. Legal: Control through laws, courts, police,

media..

Market Strategies: reduce state control of

markets- change incentives against corruptbehavior..

Political: Government decentralization, raiseopportunities for citizen participation and

liberalization.


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8.Traditional Corruption Control

Strategies What are short-comings these strategies?

1. lack of effective professionalism of the counteractingagencies- such as judiciary, press

2. Lack of independent press that exposes corruption

3. Professionals state public servants and officials arenot independent of government: They are the sameemployees

4. What should be done Design institutions (rules )that constrains state and officials, and moreeffective counteracting institutions such asindependent judiciary and free press


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9. Rules, Institutions and Public-choice

Approach to Corruption Control

Rules determine incentives faced by participantsboth in economic and political markets.

Corruption is a problem of constitutionalmaintenance or defect, which needs reform.

Opportunism is defined as behavior of

individuals and organizations at the expenseof other citizens such as free riding, adverseselection, moral hazard, and corruption,


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9.The Public Choice Approach to

Corruption

This is a need to guarantee economicfreedom or the rights of individuals toengage in exchange and contract, for

economic growth to occur.

Economic freedoms need to be

guaranteed by constitution that preventpoliticians from abrogating them inlegislation, in response to interest groups.


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10. Producing Self-Enforcing

Constitution

This must include devolution of central or

federal government power to local units.

It should allow free mobility of Resourcesamong local, state, regional units.

A highly decentralized federalist structures are

one way of minimizing opportunism, includingcorruption, Since government may be more

responsive to the smaller local unitary

governments.


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11. Challenges to Constitutionalism

in Africa

Democratic constitution making provides the

development of democratic institutions that

prevent individuals to engage in corruption, and

other forms of opportunism.

The fall of dictatorships in several African states

provides hope for grassroots organizations to

overcome opposition from entrenched groups

and engage the people in democratic decision

making.


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12. Summary and Conclusion

If the existing institutions encourage corruption, the onlyeffective way is to change the rules and the flawedincentives.

An attempt to manipulate outcome such as by policing,

and regulating may fail.

Corruption cleanup requires institutional reform thatchanges incentive structure to secure desired socialoutcomes.

For example, problems of agro-ecological degradationand exploitation of environmental and natural resourcescan be minimize by establishing a well defined and

secured property rights and land rights.


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Read Chapter 9-Agriculture for Thursday

Study Guide for Test 3 will be handed out

on Thursday (3/9) for the test on March 16

Review questions will be over Nnadozie

Chapter PP handouts and over Chapter 9

of Todaro & Smith on Agriculture.


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Econ 388 T2-Answers

Part I (35 points)

1A, 2D, 3D, 4A, 5A, 6C, 7A, 8D, 9B,

10B, 11D, 12A, 13B, 14D, 15B, 16C,17B, 18D, 19D, 20D, 21B, 22A, 23A,

24B, 25C, 26C, 27C, 28A, 29B, 30A,

31D, 32B, 33D, 34D, 35DPart II: 3 short essay questions (15)


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Econ 388 T2 Curve

43-50 A

40

nnadozie chapter 14 corruption and development

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