Corruption is an unavoidable side-effect that a society necessarily suffers from when it practises a no-holds-barred free market economy along with electoral democracy. Civilised societies do succeed, to some extent, in keeping the side-effects to a minimum by using social controls like a truly independent judiciary, a strong parliament and a genuinely fearless media. However, even these social controls are seen to have been eroded over a period of time due to expanding inequality that follows the resulting accelerated growth which has ended up with a handful of only 8 or so people amassing wealth as much as owned by half the world population. And in developing countries such social controls do not exist at all.
Indeed, the burgeoning corruption that has almost taken over the capitalist economy practised mostly by those that continue to refuse to forget the lessons that they had learnt in the Chicago School of economic thought, despite the collapse of capitalistic economy in the 2007-08 financial crisis, is pushing the world economy into an unmanageable chaos.
Corruption takes many forms. It is often thought of as a problem that mostly affects developing countries. But while the harm it does is magnified in poorer nations, corruption does not concern itself with national boundaries - it can be unearthed anywhere.
Corruption is a global problem. It costs both money and lives. International collaboration is the only way to defeat it.
According to Sean Fleming,(Corruption costs developing countries $1.26 trillion every year, published on 9, Dec. 2019 in Agenda Weekly, newsletter of World Economic Forum) at the 50th World Economic Forum Annual Meeting in Davos next month, Founder and Executive Chairman Klaus Schwab will launch the Forum's Davos Manifesto.
It will state the need to adopt a new economic model, "stakeholder capitalism" which does not look all that reassuring, though. And at the heart of this approach seemingly is a call to fight corruption.
"That fight is central to the World Economic Forum's work for many years, and in 2004 it established the Partnering Against Corruption Initiative (PACI)."
Marking International Anti-Corruption Day 2019, the author has listed the following seven shocking and damaging recent examples of corruption around the world, as identified by Transparency International.
1. Across the EMEA region (that's Europe, the Middle East, and Africa) and India almost half of all workers think bribery and corruption are acceptable if there is an economic downturn.
2. Corruption, bribery, theft and tax evasion, and other illicit financial flows cost developing countries $1.26 trillion per year. That's roughly the combined size of the economies of Switzerland, South Africa and Belgium, and enough money to lift the 1.4 billion people who get by on less than $1.25 a day above the poverty threshold and keep them there for at least six years.
3. The Transparency International Corruption Perceptions Index scores 178 countries on their degree of corruption - 10 is the cleanest possible, and 0 indicates endemic corruption. In 2010, around three-quarters of all 178 scored lower than five.
4. As much as $132 billion is lost to corruption every year throughout the European Union's member states, according to the EU Commissioner for Home Affairs.
5. Bangladesh is one of the world's poorer countries. Around one-third of the population say they have been the victims of corruption, and an astonishing 84% of those households who had interacted with different public and private service institutions have been victims of corruption.
6. In war-torn Afghanistan, of the $8 billion donated in recent years, as much as $1 billion has been lost to corruption. Integrity Watch Afghanistan estimates bribe payments - for everything from enrolling in elementary school to getting a permit - exceed $1 billion a year.
7. In one Russian province, if you want to become a police officer you will probably have to pay around $3,000. To get a place in medical school, you will need to part with around $10,000. One consequence of this, according to the International Crisis Group, has been that some people have grown so disaffected that they have become drawn to Islamic extremism.
According to Caroline Paunov, Senior Economist, Directorate for Science, Technology and Industry of the OECD (How corruption hurts innovation-published on 10 Feb. 2016 in Agenda Weekly Newsletter of WEF) using firm data for 48 developing and emerging countries, he investigated what corruption means for firms' innovation efforts and found evidence of the following three facts:
1. Corruption reduces opportunities for smaller firms to engage in innovation.
Corruption has negative impacts on firms' ownership of quality certificates. In particular, corruption contributes to excluding smaller firms, which often show with greater agility to introduce novel ideas, from innovation.
The fact that corruption is a barrier to firms' innovation performance is a strong motivation to fight corruption. The stronger impacts of corruption on smaller firms provide additional reason for policy action. Offering opportunities for smaller firms matters to improve welfare and economic performance in developing and emerging economies. These economies show striking performance gaps with "islands of excellence" of highly innovative firms in a sea of firms of weak innovation capacities.
2. Creating objective criteria to award public services avoids negative impacts from corruption:
Conversely, corruption does not affect firms' ownership of patents. The criteria to award patents are often more objective compared to those for quality certificates. In consequence, it is more difficult for corruption-prone officials to obtain bribes for patents.
These results point to the importance of creating, where possible, objective criteria based on which firms receive innovation-related government services, including permits, subsidies and grants. Such criteria restrain corruption-prone officials' opportunities to ask for bribes. Firms that refuse to pay bribes can demonstrate easily that they are entitled to receive government services. Diversifying the delivery of public services can also help as monopolies in the delivery of specific public services weakens opportunities for corrupt officials to seek bribes.
3. Public institutions that support more reliable business environments foster innovation:
Public institutions, including the legal system, competition agencies and other regulatory bodies, can improve conditions for innovation if they create more reliable business environments. Success in creating trust in business levels expands the likelihood of firm quality certificate ownership on top of the gains from reducing corruption. The reason is that in these environments firms collaborate more, exchange more knowledge and set up more efficient decentralized management arrangement. These factors enhance innovation.
Meanwhile, technology is being increasingly used by the advanced countries to fight corruption as it is changing and challenging governments around the world. With data analytics and artificial intelligence, new technologies present governments with tremendous opportunities to improve public services, get better value-for-money, and curb corruption.
According to Carlos Santiso, Director for Digital Innovation in Government, Development Bank of Latin America ( Here's how tech can help governments fight corruption--published on 09 Dec 2019 in WEF's Agenda Weekly Newsletter) governments need to become fit-for-purpose in the digital era.
"Faced with the rising expectations of digital natives, they realize that business-as-usual is over. In Chile, for example, the current social malaise reflects frustrated aspirations of the new, yet vulnerable middle-class.
"Bureaucracies are developing a greater appetite for new ways of thinking and doing. Progressive governments are pushing public agencies to be more tech-savvy and data-thirsty, willing to take risks and learning to adapt faster. In the past, governments tended to contract-out tech expertise to big-techs. They are now building-up their capacities to understand emerging technologies better and diversifying technology providers to avoid being locked into using certain vendors. They are creating central agencies to rationalize how they buy and deploy new technologies. Britain created its Government Digital Services in 2011 and has saved £3.56bn between 2012 and 2015. The United States and Sweden are the latest to follow course.
"The public sector is indeed the greatest purchaser of technology, spending over US$400 billion annually on technology. With the acceleration of governments' digital transformation, the amount isset to increase to reach US$1 trillion by 2025. There is a big market for tech companies willing to service the changing needs of governments in the digital era.
"Countries are aggressively competing against one another to attract digital talent and tech start-ups. In Europe, there is a fierce battle to succeed Britain as the leading digital innovator after Brexit. In September, French President Emmanuel Macron drummed up €5bn from venture capitalists and asset managers to invest in tech start-ups over the next three years. "Our desire is to make France the leading ecosystem in Europe," said Cédric O, France's minister for the digital economy when visiting London last September to promote France's start-up scene.
"In this race to catch-up with the future, govtech start-ups can help build smarter governments and more agile governance. Govtech start-ups can disrupt the way governments deliver value and empower citizens. They can help the public sector absorb digital disruptions and data insights to increase efficiency and transparency in the delivery of public services. These start-ups are driven by financial returns, but they are also seeking public value and social impact."
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