Corruption

Current debates on defining corruption

A significant problem in attempts to combat corruption is that analysts cannot fully agree on what it is. At one end of the spectrum is the broad interpretation that corruption, like beauty, lies in the eyes of the beholder. At the other end is the legalistic approach, according to which an act or omission is corrupt only if explicitly identified as such in legislation.

The definitional confusion can be demonstrated using two significant examples. First, there is no definition of corruption in what the United Nations itself describes as the only legally binding universal anti-corruption instrument, the United Nations Convention Against Corruption (UNCAC). This is largely because those who produced UNCAC could not agree on a definition. Second, the world's leading anti-corruption INGO (international non-governmental organization), Transparency International (TI), has for most of this century used two definitions—but now fudges the issue. For its best-known product, the annual Corruption Perceptions Index (CPI), it used until 2012 what is still the most commonly cited definition, the abuse of public office for private gain. This definition is similar or even identical to that used by many other agencies, such as the World Bank. But in all other contexts, TI defines corruption as the abuse of entrusted power for private gain. The principal difference between these two is that the first requires an officer of the state to be involved, whereas the second, also favoured by Interpol, is broader, and allows for the miscreant behaviour of, for instance, senior executives of private corporations and even corruption purely within the private sector (B2B, or business-to-business). In 2012, TI stopped defining corruption for its CPI (though in the words of the 2013 CPI, it measures the perceived levels of public sector corruption), thus reflecting the general confusion.

Unfortunately, even TI's first—narrow—definition is subject to diverse interpretations. Is the abuse of public office limited to essentially economic improprieties—sometimes described as modern corruption—such as embezzlement or accepting bribes? Or does it include what are sometimes called social improprieties—or traditional corruption—such as appointing members of one's family (nepotism) or friends and colleagues (cronyism) to public office when they are not the best-qualified person for the post? Do political parties, especially those not represented in the legislature, hold public office—and, if not, can they be accused of corruption in this narrow sense?

Another problem with the term public office has become more pronounced in recent decades as neo-liberalism has spread across the globe. Neo-liberalism is an ideology that advocates a reduction in the role of the state and an enhanced role for the market. One of its key features is that it blurs public and private. Many states now outsource tasks they once performed themselves, but which the public still considers to be the state's responsibility. For instance, prisons were once run almost exclusively by the state, whereas an increasing number nowadays are run by private companies under contract to the state. If a prison warder employed by a private company accepts bribes to smuggle drugs into prisons for use by inmates, is s/he being corrupt according to the narrow definition? Is such a person occupying a private or a public office? Our view is that if citizens consider a given office as ultimately the state's responsibility, then someone abusing that office for personal or group advantage is corrupt.

The term private gain is also far from straightforward. There is universal agreement that a state functionary who accepts bribes for personal enrichment is being corrupt. But what about office-holders of political parties who accept questionable donations for their organization, but who appear to derive no immediate personal benefit? This is a less clear-cut example than the first, and is subject to different opinions.

It should by now be clear that there are often perfectly good reasons for differences both in defining corruption generally, and in deciding whether a particular act or failure to act (omission) constitutes corruption. We can now explore the reasons for such differences.

Reasons for different conceptions of corruption

One reason for different interpretations of corruption is culture. Here, culture can be defined as the dominant beliefs, attitudes, and behaviour in a given society, which might relate to its principal religion, and whether or not the country was a colony or a colonial power. In short, culture is heavily influenced by tradition and history.

An example of a cultural interpretation of differing approaches to corruption is that what was earlier described as economic or modern corruption has been called Western corruption, whereas social or traditional corruption has been labelled Asiatic. Like so many labels in social science, there are problems with these two, and they can be very misleading. For instance, some argue that patronage and clientelism are typical of Asian societies, where they are—allegedly—not seen as forms of corruption. There are at least two major problems with this claim.

First, dominant views on whether or not patronage and clientelism constitute corruption vary across Asia; they are not the same in Singapore as in Cambodia, for example. Views on these vary in the West too. Whereas most Anglophone and Nordic specialists on corruption maintain that clientelism constitutes a form of corruption, most Italian specialists reject this. In fact, opinion surveys in various countries reveal that even the notion of dominant views of what constitutes corruption is often misleading. In the late 1990s and early 2000s, the World Bank conducted diagnostic surveys in various countries. These included imaginary scenarios, and respondents were asked whether or not they considered them to be examples of corruption; in many cases, it emerged that respondents' views were deeply divided. So the assumption that Russians or the British have a common understanding of corruption is challenged by survey results. Moreover, it should not be assumed that just because government spokespersons from Country X claim this is not corruption, it is simply part of our culture, most citizens agree with this. Again, surveys reveal that many citizens do consider a given activity corrupt, and do not condone it; but they feel helpless to challenge their elites, who maintain that it is part of their culture purely in order to justify their own questionable behaviour. The second—even more persuasive—counter-argument is that there is plenty of traditional corruption in the West, and no shortage of modern corruption in Asia.

We can now consider an example of what is often seen as a cultural difference between four countries in terms of their attitudes towards personal ties. The four terms examined are the Russian concept of blat, the Chinese concept of guanxi, the originally American (though increasingly globalized) concept of networking, and the British—primarily English—concept of the old school tie.

The Russian term has been changing its meaning in recent years, but in Soviet times referred to informal agreements between people to help each other through non-monetary exchange; it is thus close to the concept of bartering, and was a coping mechanism in a system in which there were widespread shortages of both durable and non-durable consumer goods. Thus, a farmer might have agreed with an electrician to supply the latter with eggs and chickens for two years in return for having his old farmhouse re-wired. But whereas bartering is merely a form of exchange between people, blat involves the development of personal relations, notably trust and a sense of reciprocity, between those engaged in it.

The Chinese concept of guanxi also refers to relationships that develop between individuals or groups, and that involve potentially long-term mutual obligations—reciprocity. I might develop either a friendship or a professional relationship with a Chinese person, whom I help in some way. That person then feels obliged to return the favour at some point in the future, perhaps many years later. But he or she will not forget that I am owed a favour.

The increasingly popular notion of networking involves the creation of informal ties intended to bring benefit to those involved. If I cultivate someone I meet at a business convention or an academic conference with the ultimate aim of taking advantage of that contact, I am attempting to influence that person on the basis of a (possibly weakly developed) relationship, rather than purely in terms of my qualifications. Hence, while this is probably the least criticized of the four types of informal relationship analysed here, it can still be seen as a form of corruption if a very broad definition of that term is adopted.

Whereas many would reject the notion that networking has anything in common with corruption, the British concept of the old school tie is widely criticized. People who may not even have met nevertheless privilege each other on the basis of having attended an elite group of schools in the UK. Thus, A, B, and C all attended leading public (i.e. the most elitist private) schools. C is seeking employment, and is known to B, who encourages A—who has never met C—to offer C a position, even though C is not the best qualified person for that position. Of the four types of informal relationships considered here, the old school tie is the most exclusionary; if I did not attend one of the elite schools as a child, there is no way I can ever break into the insider group. This is an important distinction between the first three types of relationship and this one, which is the most open to classification as a form of corruption.

The main point to note about these four versions of informal ties is that, while each is distinct and culturally specific, there are also commonalities between them. All four involve the creation of insiders and outsiders, with privileges for the insiders. All four are seen by some members of society as corrupt, though a far higher proportion of Britons would consider the old school tie as improper than Chinese would criticize guanxi or Americans would question networking. In short, cultural differences exist, but are often exaggerated.

Of course, if the narrow version of corruption is adopted, none of these would constitute corruption unless the relationship involved an officer of the state. But adopting the broad version leaves the door wide open to describe all sorts of relationships between people—even friendships—as corrupt; this is one of the principal reasons why the preference in this study is for the narrower approach to defining corruption.

In addition to cultural factors, another problem arises because different jurisdictions work to different definitions of corruption. While this may partly be explained by and linked to cultural differences, there are other reasons. The main one is that the legislative situation varies. This can be because legislators have been advised by different specialists. In more open and democratic societies, legislation may be the result of compromise between different groups both within and beyond parliament—and the particular permutation of diverse interests is unique to each society. This explanation is less likely to apply in authoritarian systems. But such systems are typically more corrupt than more democratic ones, and ruling elites often choose either to have no explicit anti-corruption legislation—and hence no legal definition—or else deliberately vague laws; they want to preserve their privileged positions, and prefer not to introduce laws that could be used to undermine these.

Finally, analysts sometimes choose narrow definitions of corruption for methodological reasons. Thus, a leading German scholar opted to define corruption principally as bribery for one of his analyses, since it was more straightforward to conceptualize it in this way than to include more disputed aspects such as social corruption.

Classifications of corruption

Before elaborating the dominant approach to corruption used in this book, it is worth considering some of the ways in which analysts have classified different types of corruption.

In line with the point that the views of most citizens might differ from those of the elites, the scholar often seen as the grandfather of comparative corruption studies, Arnold Heidenheimer, drew a useful distinction between what he called black, white, and gray (using US spelling) corruption. Based on his awareness that elites and ordinary citizens sometimes perceive phenomena in different ways, Heidenheimer defined black corruption as activities that most members of both the elites and the masses condemn and want to see punished, whereas white corruption refers to activities that, while still formally perceived as corruption, are more or less tolerated by both groups, who do not want to see perpetrators penalized. Gray corruption refers to activities about which elites and the general public have differing views, or about which there are significant differences of opinion, including ambivalence, even within each of these two main groups.

Another tripartite distinction drawn by Heidenheimer is between public office-centred, market-centred, and public interest-centred approaches to corruption. The first focuses on corruption as behaviour that deviates from that expected of a public official, and that is explained in terms of the official's desire for improper personal benefit. Market-centred approaches interpret corruption in terms of public officials treating their positions as a source of private income or business. What they can offer and what they can charge (e.g. how much they can demand as a bribe) depends on the supply of and demand for the good or service they are offering—in short, on the market situation. Finally, the public interest-centred approach focuses on the harm done to the public because of the improper self-serving behaviour of public officials.

A third distinction often drawn is between grass-eating and meat-eating corruption. These terms were coined in the Knapp Commission's early-1970s report on corruption in the New York Police Department. The former refers to officials who will accept a bribe if offered one, whereas the latter refers to more predatory corruption, in which officials actually solicit bribes; the former is also sometimes called reactive corruption, and the latter proactive. A related approach is to distinguish between extortive and transactive corruption. In the former, the bribe-taker exerts pressure on someone to give a bribe, which basically equates to meat-eating. In the latter, the two agents (bribe- or favour-taker and bribe- or favour-giver) are more equal; both are basically willing partners, who negotiate a deal.

A distinction found in many official anti-corruption documents might initially appear to refer to the same phenomena as grass-eating and meat-eating corruption, since passive looks like an alternative way of describing the former, and active as another term for the latter. But this is not how the terms are used. The first typically describes the act of offering a bribe, whereas the second refers to acceptance of a bribe. This usage is problematic, since the connotations of the terms active and passive in such an application suggest that the recipient of the bribe—an official—is less responsible for the improper act than the so-called donor. Thus, a police officer who suggests to a motorist that a bribe would ensure the non-issuance of a speeding fine would, in this classification, be described as passively corrupt, whereas the motorist would be actively corrupt. While the use of these terms is arguably more acceptable if applied, for instance, to a corporation that exerts pressure on a previously uncorrupt procurement officer to accept a bribe, it is highly misleading in cases where an officer of the state extorts money from a citizen or business. Moreover, if it is accepted that officers of the state should be setting an example to ordinary citizens and even the business sector, it becomes clear why this terminology is confusing.

A fifth distinction is between petty (or low level) and grand (high level or elite) corruption. The former applies to the kinds of corruption the ordinary citizen is likely to encounter in their everyday lives—while driving, or applying for a permit to extend their house, for example. Grand corruption, as its name suggests, refers to corruption at the elite level, such as politicians adopting legislation that favours a group that has bribed them, or a minister giving the go-ahead for a major development against the recommendations of her advisers and even the regulations—again in return for a bribe. If the broad definition of corruption (i.e. including self-interested misconduct solely within the private sector) is included, much corruption would be at the level of the corporation and thus closer to grand corruption.

Along somewhat similar lines, the World Bank has since 2000 distinguished between administrative (or bureaucratic) corruption and state capture. The latter has been described by Joel Hellman and Daniel Kaufmann, both at the time working for the World Bank, as a form of grand corruption; in 2000, together with Geraint Jones (also of the World Bank), they defined state capture as:

firms shaping and affecting formulation of the rules of the game through private payments to public officials and politicians (emphasis added)

Since the original coining of the term, its usage has been broadened by other analysts to include, for instance, improper efforts by organized crime to influence legislation. Hellman, Jones, and Kaufmann defined administrative corruption as:

petty forms of bribery in connection with the implementation of laws, rules, and regulations

Many analysts have since broadened the usage of this term too, so that any improper actions or omissions relating to the implementation of rules can be described as administrative corruption.

As with the terms active and passive corruption, a drawback of the term state capture is that it can be interpreted to imply that those offering bribes are more culpable than those accepting them. The World Bank officials who originally promoted the concepts stress that this is not their intention; they are particularly concerned with the officers of the state who accept the bribes. But the potential for misunderstanding would have been reduced had a term that focused attention on the corrupt officials—such as selling the state instead of state capture—been adopted.

A more complex typology than the World Bank's has been produced by Rasma Karklins. Focusing mainly on the post-communist transition states (here meaning in transition from one kind of authoritarianism to either democracy or another kind of authoritarianism) of Central and Eastern Europe (CEE), she divides corrupt acts into three basic types, each of which is further sub-divided—low-level administrative corruption; self-serving asset-stripping by officials; and state capture by corrupt networks. Types one and three are basically the same as the World Bank's. But Karklins' second one is an important addition, and can be found in many transition countries in recent years. Thus, analysts of the post-communist states often refer to nomenklatura privatization. This was a process common in many CEE countries during the 1990s, in which the former elites from the Communist era—the nomenklatura—were able to take ethically questionable advantage in various ways (e.g. kickbacks from purchasers; direct purchase themselves at knock-down prices) of the sell-off of previously state-owned enterprises.

Related concepts

Many phenomena overlap with, or are similar to, corruption. Since corruption itself is a disputed concept and can be interpreted in both narrow and broad ways, it follows that some will distinguish between closely related concepts, whereas others will want to see them as variants of corruption. Bearing this in mind, the following distinctions introduce readers to the main terms often seen as related to corruption.

An alternative to definitions

For most situations, the narrow definition used by the World Bank and so many other organizations and specialists is adequate, if not totally unproblematic. But when a more nuanced or detailed approach is required, we can use five criteria to identify an action or omission (e.g. deliberately turning a blind eye in return for some reward) as corrupt or not; all five must be met for the action or omission to constitute corruption.

This set of criteria conforms to our own preference for the narrow definition of corruption. But it can easily be modified—by substituting a position of entrusted power for public office, for instance—to suit those who prefer the broad definition. In the remainder, while the emphasis is on official (narrow) corruption, examples from the corporate world and even sport will also be cited.

It has been shown that there is no universal agreement on what constitutes corruption, and why this is so. Nevertheless, there is widespread agreement on the narrow definition—private abuse of public office—as a starting point, even if the terms private abuse and public office are subject to interpretation. Applying the five criteria test will in most cases satisfactorily answer the question of whether or not a particular action or omission constitutes corruption, and will be used for the remainder here. Beyond that test, individuals must decide for themselves on the basis of the so-called elephant test—it is difficult to describe, but I know it when I see it—whether or not a particular case constitutes corruption.

Criteria for identifying corruption

• the action or omission must involve an individual or a group occupying public office, whether elected or appointed
• the public office must involve a degree of authority relating to decision-making powers, law enforcement, or defence of the state
• the officials must commit the act or omit to do what they should at least partly because of personal interests or the interests of an organization to which they belong (e.g. a political party) or both, and these interests must ultimately run counter to those of the state and society
• the officials act or omit to act partly or wholly in a clandestine manner, and are aware that their behaviour is or might be considered illegal or illicit. If uncertain about the level of impropriety, the officials opt not to check this—not to subject their actions to the so-called sunlight test (i.e. permitting open scrutiny of their actions)—because they wish to maximize their own interests
• the action or omission must be perceived by a significant proportion of the population and/or the state as corrupt. This final criterion helps to overcome the problem of cultural difference in interpreting corruption

Society

There are so many ways in which corruption can negatively impact on society that selectivity is required here. One is on the working and living conditions of ordinary people. In a speech delivered in Washington DC in May 2013, the Executive Director of the Ugandan Anti-Corruption Coalition argued that if the vast sum corruptly diverted from government pension funds in a scandal that broke in her country in 2012 had been properly invested, it could have resulted in a well-needed salary boost of 50 per cent for more than 30,000 primary school teachers or 46,000 police constables, or it could have provided almost 18 million doses of anti-malaria therapy.

For many developing and transition states, one of the most serious problems of corruption is that it can result in reduced aid, as potential donors or lenders either terminate or refuse to provide funds to countries in which elites appear to be diverting most of these resources for personal gain. Unfortunately, it is usually the poorest members of society who suffer most from this.

Corruption tends to create a greater sense of them and us in society, both vertically and horizontally. The gap between elites and the public is often wider than necessary because corrupt officials are perceived to be creaming off a country's wealth at the expense of ordinary citizens (i.e. a vertical divide). At the same time, corruption can increase divisions between citizens themselves (horizontal divide), as those unwilling or unable to pay bribes to obtain what they need become resentful of those who can and do.

A related fact is that corruption can increase inequality. While many citizens will tolerate reasonably high levels of inequality if this appears to be based on merit, they will resent it if based more on personal connections and bribery to obtain prestigious jobs and promotions. The problem is exacerbated if growing inequality is accompanied by higher levels of poverty, which is often the case. In a seminal analysis published by the IMF in 1998, the authors analyse data from more than thirty countries over an 18-year period and demonstrate convincingly that increased levels of corruption increase both income inequality (as reflected in the Gini coefficient) and poverty levels. Since poverty is linked to poorer health, both physical and mental, corruption can impact directly on people's well-being.

If corruption means increased distrust of the state and its officers, there can be a widespread return to the family and increased attachment to kinship. A potentially negative effect of this is that enhanced identification with kith and kin can result in reduced social capital and growing estrangement between groups in society, which can lead to ethnic conflict.

High levels of corruption and the consequent low levels of trust in the state can increase the sense of insecurity in society. For example, if citizens do not trust their law enforcement officers because of the latters' corruption, they will be less willing to report crimes to the authorities and to cooperate with those authorities; this typically leads to higher crime rates, and hence a greater sense of insecurity among the general public.

Officials themselves can feel more insecure because of corruption. If the political elite decides to clamp down heavily on corruption, even honest officials may be concerned that actions not currently seen as corrupt may in the future be classified as such, with the concomitant penalties; this can lead them to hesitate in fulfilling their normal and proper duties, or even to refuse altogether to perform them. In an ideal rule-of-law state, in which no legislation is ever retrospective, this problem would not arise; but few states nowadays, even in the West, adhere strictly to the notion of no retroactive laws.

In many post-communist countries, the early transition phase was rendered more difficult because these states had for decades had no true capitalist class, and hence no group with legitimate funds to invest in the new marketized and privatized economy. In such a situation, corruption can help to create a new wealthy bourgeoisie; but this is based on illicit income, which undermines popular support for this new class and its ideas.

According to some analysts, the joint (with cybercrime) fastest growing branch of organized crime in recent years is human trafficking. The scale of such trafficking is significantly higher than it would otherwise be because of the collusion of corrupt officials in this modern form of slavery. One of the main African countries from which many women are trafficked into Europe for prostitution purposes is Nigeria: Osita Agbu has provided a detailed analysis of the role of corrupt officials in this.

In addition to the role of corruption in human trafficking, corrupt officials can be complicit in arms trafficking, which can increase homicide rates and aid terrorists. Two Bangladeshi government ministers were sentenced to death in 2014 for their involvement in weapons trafficking.

Corruption can endanger lives. This assumes various forms, one of which relates to flooding. Among the many advantages trees have is that they can bind soil; but in some countries, corrupt officials have on occasions turned a blind eye to the logging of trees along riverbanks in return for bribes. This has sometimes resulted in riverbanks collapsing following heavy rains, with the destruction of thousands of properties built at the water's edge, and many lives lost in the floods.

Another all too common way in which corruption can endanger lives relates to the construction industry. Building and safety inspectors who ignore malpractice in this industry, including the use of sub-standard materials, in return for bribes have been prosecuted for injuries and even deaths arising from improper construction work. A particularly serious example, in which thirty-five people were killed, was of a building collapse in the Egyptian city of Alexandria in 2007, which led to allegations of widespread corruption among local officials. Clearly the Egyptian authorities need to do far more, with further examples from this and other cities occurring more recently; at least twenty-four people were killed in January 2013 when their apartment block in Alexandria collapsed—again resulting in serious allegations of corruption, including from the Minister of Housing. In terms of the number of people killed, even worse was the collapse of a department store in Seoul (South Korea) in 1995 that resulted in 502 deaths; the collapse was eventually attributed partly to the corruption of two city building inspectors, who were found guilty of accepting bribes during the building's construction phase.

China is another country that has experienced such problems. In 2009, the Chinese authorities acknowledged that more than 5,000 schoolchildren had died in the previous year's earthquake in Sichuan, following complaints that many of the deaths had been caused by the collapse of school buildings that were sub-standard as a result of corruption. Following the collapse in 2009 of a 13-storey building under construction in Shanghai that killed a building worker, the editor of state-run newspaper China Daily complained about the often corrupt nexus between Chinese property developers and local government officials who depend on property taxes and land sales for a significant proportion of their income.

The focus so far has been on the negative impact of corruption in the narrow sense (i.e. that involves state officials). But in the 21st century, the general public has become far more aware of the potentially devastating effects of corruption in its broad sense. As one Western corporation after another—Enron (USA), Worldcom (USA), Parmalat (Italy), Siemens (Germany), AWB (Australia), to name just a few—has been shown to have been engaging in misconduct, including bribery and kickbacks to secure overseas contracts, so the public's trust in the corporate sector has plummeted. Many maintain that the 2008 Global Financial Crisis was partly the result of corporate misconduct, and have cited this as the source of major economic problems that have had such a deleterious social impact, including on employment and pension schemes.

The reporting of corruption can also have a negative effect on the public, since it can increase a general sense of disappointment, even despair. Finding the optimal amount and type of reporting is difficult, however; to cite a truism, bad news is good news for the media, and few can restrain themselves from reporting as many scandals as they can, whether or not allegations have been thoroughly investigated. Irresponsible reporting of corruption can make people suspicious of the watchdog role of the media, which has negative implications for the development of civil society.

Environment

Arguably the greatest long-term issue facing humanity is the environment. Unfortunately, corruption generally compounds the already existing problems in this area. According to the United Nations Office on Drugs and Crime (UNODC), environment-related corruption includes:

Such practices (as) embezzlement during the implementation of environmental programmes, grand corruption in the issuance of permits and licenses for natural resources exploitation, and petty bribery of law enforcers.

The UNODC has also identified sectors most at risk: they include forestry, oil exploitation, the trafficking of endangered species, and hazardous waste management.

Many of the world's largest producers and exporters of timber, including Brazil, Indonesia, and Russia, have experienced substantial environmental damage because of illegal logging facilitated by corrupt officials. There are claims that more than half the timber produced in the world in recent years is the result of such logging, much of it involving bribery and corruption.

As for endangered species—in 2011, the head of the Freeland NGO that seeks to combat wildlife trafficking argued vis-à-vis South-East Asia that the number one problem his organization was running into with its anti-trafficking programme was corruption, especially high-level corruption. Corruption can contribute to the extinction of various species of wildlife.

Corruption and the Economy

The most researched and reported aspect of the impact of corruption is the economic. In an oft-cited analysis published in the mid-1990s, economist Paolo Mauro argued against those who had in the 1960s claimed that corruption—for instance, in the form of facilitation payments or speed money to state bureaucrats to accelerate the issuance of permits—could actually increase economic growth rates. On the basis of a considerable amount of data, he compared growth rates with subjective assessments of the level of corruption in various countries, and concluded that corruption discouraged investment, which in turn decreased growth rates. While some have challenged this argument, the majority view is that Mauro was basically correct. For instance, in an article published in 2000, Shang-Jin Wei argued that foreign direct investment (FDI) is lower in countries with higher rates of corruption, as potential investors are deterred by it.

Perceptions of high levels of corruption in a given country can render it either difficult or impossible for that country to be admitted to international clubs—notably the EU—that it is hoping to join precisely because it sees substantial potential economic benefits in such membership. Even once in such supra-national groupings, perceived high levels of corruption can have serious economic repercussions: Bulgaria, Romania, and Czechia are three relatively new members of the EU (the first two since 2007, the third since 2004) that have suffered major funding cuts from the EU since joining precisely because of the latter's concerns about their corruption levels. In addition, both Bulgaria and Romania were blocked in their attempts to join the Schengen zone (an area comprising twenty-six European countries, between which there are no border controls) because some West European EU member-states—notably Germany and the Netherlands—were concerned that these South-East European countries had excessively porous frontiers with their non-EU neighbours, largely because of high levels of corruption among border guards and customs officers.

A serious economic problem the EU itself has experienced has been partly blamed on corruption. A 2012 TI report entitled Money, Politics, Power—Corruption Risks in Europe identified corruption in several EU states (with Greece being seen as a major culprit) as a significant factor in the emergence of the Eurozone crisis that erupted in 2010.

Corruption leads to decreased revenue to the state, as corrupt officials exempt citizens and firms from fines, taxes, etc. in return for bribes. In the EU's first ever anti-corruption report, published in February 2014, it was claimed that corruption costs EU states collectively some 120 billion Euros a year. This was a rather similar amount to the sum (US$150 billion) the African Union estimated in 2002 was lost each year to corruption among its fifty-three member states—though the EU figure, while substantial, did not account for approximately one quarter of the total GDP of the region as the sub-Saharan African one did.

Several states, mostly transition ones, have in recent years introduced flat-rate income and corporate tax systems, often precisely to reduce the risk of lost state revenue. The rationale is that progressive tax systems involve more discretionary decision-making by tax officials, and hence provide more corruption opportunities, than flat-rate systems; both individuals and companies can declare lower income in progressive tax systems than they actually receive, so as to be taxed in a lower tax bracket (i.e. a form of tax evasion). Unfortunately, flat-rate systems are not watertight either, since individuals and firms can still collude with corrupt officials to report less taxable income than they should, thus depriving the state of legitimate revenue.

Corruption can result in reduced economic competition, as corrupt officials favour firms that pay them bribes—for example, to give them unfair preferential treatment in acquiring factories that a state is privatizing, or to secure contracts from the state. Reduced competition typically leads to higher prices and costs, as well as less choice, all of which are detrimental to both consumers and the state itself.

A factor with potentially serious negative economic ramifications for the development and well-being of a country is that social corruption (nepotism, cronyism, etc.) can discourage honest, well-qualified people, who become frustrated at not securing good positions or being promoted. Some simply stop working hard and using their initiative, while others emigrate to a less corrupt and more meritocratic country. Corruption can thus encourage a brain drain, depriving society of the people best suited to run the country and its economy. This phenomenon, sometimes called human capital flight, has been a particularly acute problem for countries such as Iran.

But conventional capital flight is also a corruption-related problem. Shortly after becoming President of Russia for the first time, in July 2000, Vladimir Putin convened a meeting of many of Russia's wealthiest individuals, the so-called oligarchs, at which he informed them that he would not scrutinize the origins of their fortunes as long as they abided by four rules; one was that they repatriate the considerable sums they had sent overseas. While it is a moot point whether or not most oligarchs should be labelled corrupt, the meeting is noteworthy for clearly revealing the senior leadership's concern about capital flight. This has been a problem for many other states in recent years, and corrupt officials at all levels, including the highest, are a major source of the problem.

It is not only the public and the state that can suffer economically from corruption. Corporations that bribe officials to secure contracts are sometimes exposed, with serious negative consequences. In 2013, the Independent Commission Against Corruption (ICAC) in the Australian state of New South Wales (NSW) deemed certain mining licences in the Hunter Valley to have been corruptly acquired. In light of this, the NSW government announced in January 2014 that the licences were being revoked.

Political and legal system

Corruption can negatively affect political systems (e.g. democracies or autocracies) and regimes (the team running the system) in numerous ways. For example, it can unfairly increase the power and influence of individual legislators willing to privilege whoever is prepared to pay them bribes or enhance their prospects in future elections. The latter is seen around the world in the form of pork-barrelling, whereby legislators inappropriately allocate or promise funds to particular constituencies so as to increase voter support.

However, this point about inappropriate favouritism leads us to a particularly grey area in corruption studies, the issue of lobbying. In countries such as the USA, lobbying is legal and formally organized. But some see lobbying as a form of corruption, and have argued that it is essentially a functional equivalent in wealthy states of the more clearly corrupt attempts to influence politicians in poorer countries (see the reference to state capture in a previous section). But in deciding whether or not lobbying constitutes a form of corruption, it is necessary to examine the precise nature of specific cases; generalization can be misleading.

Many organizations lobby for causes that most people would consider perfectly legitimate, such as the World Wildlife Fund or other charity organizations, and such lobbying should be distinguished from that relating to more obviously vested interests. Moreover, if the funding of lobbying is of officially registered agencies rather than for paying bribes, and if—and this is an important caveat—the financial details of such agencies are fully transparent, then it would be inappropriate to label this corruption. Lobbying by some types of organization might seem unfair, giving those with sufficient resources better opportunities than are available to the average person to attempt to influence political decision-makers, but it is only another aspect of the political inequality that exists in even the most democratic systems. It is thus as much a problem for theorists of democracy as for analysts of corruption.

Another tricky issue for both theorists and practitioners of democracy is how best to fund political parties—in particular, whether or not this can be done in a corruption-proof way. In 1999, Germany witnessed the emergence of the so-called Kohlgate scandal, in which honorary chair of the Christian Democratic Union (CDU) Helmut Kohl was accused of being involved in the corrupt acceptance and distribution of illicit funds for his party during his term as Chancellor (prime minister) of Germany (1982–98). The CDU was eventually found guilty of corruption, and the President of the lower house of parliament sought to fine the party a total of just under 50 million marks (approximately 25 million Euros). Although this penalty was eventually quashed, German party financing rules were substantially amended—rendered more transparent and less dependent on business contributions—as a direct result of the Kohlgate affair. The particular significance of this case was less the fact that a leading Western politician had been accused of corruption—France's Jacques Chirac and Italy's Silvio Berlusconi have also faced charges of corruption in recent years—but that it happened in a country reputed to have one of the best party financing systems in the world.

Corruption can undermine electoral competition, increasing inequalities between political parties, and reducing party competitiveness. Electoral fraud and impropriety assumes many forms; two of the most common are ballot-rigging and vote-buying. There have been innumerable alleged and proven cases of both in most parts of the world in recent years. But, as with so many forms of corruption, neither is either a new phenomenon or unique to developing and transition states: an early example of vote-buying is the 1768 spendthrift election in Northamptonshire (UK)

Citizen despair can increase the attractiveness to voters of extremist politicians, whether of the left or the right, who promise to eradicate corruption. Empirical research indicates that such extremists generally prove to be ineffectual at reducing corruption if elected; but there is a widespread belief in some countries that they have a magic bullet.

Accusations of corruption by one party or politician can attract counter-accusations. This can result in increased dissatisfaction among voters, with various undesirable outcomes. One is that citizens become cynical, and therefore alienated from the political system, albeit in a passive way. Another is that they become incensed, leading to active mass unrest that delegitimizes and destabilizes the system and can lead to the overthrow of the regime, or even the system itself. In his 2012 analysis of corruption, Frank Vogl focuses on the so-called Arab Spring of 2011, and sees public anger at corruption as a major factor in the collapse of the regimes and systems in Egypt and Tunisia.

Thus corruption can undermine system legitimacy—the perceived right of the rulers to rule. Too much corruption and its reporting can result in people losing faith in the market, democracy, and the rule of law. While this tends to be more destabilizing in transition states, the point applies even to developed Western states. In January 2013, the Secretary General of the Council of Europe argued that Corruption is the biggest single threat to democracy in Europe today. More and more people on our continent are losing faith in the rule of law.

If people lose faith in the rule of law in states where it has previously existed, the likelihood of arbitrary abuse of civil liberties and human rights increases. While this problem initially affects ordinary citizens, excessive arbitrariness can be dangerous to political elites too, as their rule is threatened by mass unrest. Like so many other aspects of corruption, this danger is nothing new; in East Asia's traditional concept of the mandate of heaven, the people had the right to remove an emperor who was inept, tyrannical, or corrupt.

Security

For a state to exercise its defence, law enforcement, and welfare functions properly it needs adequate funding; if corruption reduces government revenue, this has detrimental effects on the state's overall capacity to protect the populace. There is a strong correlation between weak states and high levels of corruption.

During the 1990s, when security at military bases in many Soviet successor states was frighteningly lax, various Western government reports and academic analyses claimed that corrupt officials in Russia and Ukraine were illegally selling nuclear materials to whoever would pay them. While much of the evidence on this is circumstantial, there is irrefutable proof that corrupt officials in weak states have sold various kinds of weapons to organized crime gangs and terrorists.

But this point can apply to mature democracies too. In March 2014, as a result of an FBI sting operation, a Californian state senator was arrested and charged with colluding with US-based Chinese organized crime in trafficking weapons to an Islamic rebel group based in the Philippines: the senator's pay-off, according to the FBI, was donations to his political campaign. He was allegedly planning to expand his trafficking operation into Africa, and was indifferent to the harm his trafficking might cause; the case was ongoing at the time of writing.

A final point about mature democracies and arms dealing is that a number of Western corporations have been accused of paying substantial bribes to overseas government officials to secure contracts for the purchase of military equipment; it is not only individuals and gangs that are corruptly involved in this potentially deadly business.

International

Some of the effects of corruption in one country on other countries are irritating rather than a real danger. For instance, car insurance premiums in Germany increased in the 1990s partly because so many cars were being stolen there and smuggled to Central and East European states; this racket often involved gangs bribing customs officials to look the other way while the cars were in transit.

But many international ramifications of corruption are far more serious. For instance, criminal organizations involved in international trafficking—including of drugs, weapons, humans, and human parts—would be far less effective were it not for the fact that they can often bribe customs officers, police officers, and other officials to turn a blind eye to their activities, or to warn them in advance of impending raids (e.g. of illegal brothels in which there are transnationally trafficked persons).

Unfortunately, pragmatism often dominates principle in international relations, and countries that appear to have relatively low levels of corruption may de facto tolerate high levels of corruption in a country that has nuclear weapons or commodities (e.g. oil) on which the less corrupt countries are highly dependent. But occasionally, the corruption in another country becomes so intolerable that other countries decide to do something about it. A prime example is the USA's 2012 Magnitsky Act, which was designed to punish (through visa-bans and freezing bank accounts) Russian officials deemed to have played a role in the death of auditor Sergei Magnitsky. The relevance to corruption is that Magnitsky had been investigating fraud among Russian tax officials and police officers, and had then been arrested himself for alleged collusion with an investment advisory company that had reported alleged corruption to the Russian authorities and had in turn been accused by those authorities of tax evasion. Magnitsky's death in custody was highly suspicious. Not unexpectedly, the act soured relations between Moscow and Washington; the Russians soon produced a list of Americans who would not be granted visas, and placed a ban on US families adopting Russian children.

Many readers who prefer a broad definition of corruption will be aware of the allegations made against various international sporting bodies, including the leading soccer organization, FIFA. In early 2014, the most widely reported example related to the bidding process for the 2022 World Cup. Such allegations, whether proven or not, undermine the international legitimacy of such bodies, as well as of the states accused of involvement in corrupt practices.

Beneficial corruption (revisionism)?

This section has concentrated on the negative effects of corruption. But it would be misleading not to acknowledge that some well-regarded analysts have argued that corruption can sometimes be beneficial. Indeed, some maintain that it can be morally justifiable: a classic situation cited to argue this is of the Nazi prison guard who allows Jewish prisoners to escape in return for a bribe. Exploring the ethics of this scenario involves a long and complex discourse, and is beyond the scope of the present exercise. But the more general point about corruption's possible benefits must be addressed.

In the 1960s, several American and British academics—notably Nathaniel Leff (Columbia University), Joseph Nye and Samuel Huntington (both Harvard professors), and Colin Leys (Sussex University)—argued that we should move away from moralizing approaches towards corruption and instead consider it in rational, functional terms (i.e. the functions it performs). This approach is sometimes called revisionism in corruption studies. They argued—each in his own way and to differing degrees—that developing states could sometimes benefit from corruption, since it could grease the cogs or be a tonic rather than being sand in the cogs or toxic. They maintained that if a state was weak and in various ways dysfunctional, corruption could assist in getting necessary things done.

Some still maintain that corruption is not always a collective bad. For example, Bulgarian analyst Ivan Krastev has argued for a more nuanced approach to corruption relating to investment; favouring domestic investors over foreign ones, perhaps in return for bribes, gives locals a chance to get their foot on the capitalist ladder in post-communist states, where there was previously no bourgeois class. Others have suggested that current Chinese leader Xi Jinping's clampdown on corruption in his country is having a negative impact not only on exclusive shops and restaurants in China, but also on Chinese economic growth and thus the world economy, implicitly suggesting that corruption might be a lesser evil.

A third recent example of this viewpoint can be found in a 2007 article by Luigi Manzetti and Carole Wilson, who argued that many citizens will support corrupt politicians if the state is weak and those politicians can deliver what the citizens want. Such an argument can even apply to strong states. Thus a six-country survey conducted by this author 2004–6 on the connections between party financing and corruption suggested that between 14 per cent (Germany) and 35 per cent (France) of voters—with the figure being around 25 per cent in Bulgaria, Italy, Poland, and Russia—would be more likely to vote in a two-person electoral race for a dynamic but corrupt candidate with a reputation for getting things done than for a squeaky clean but ineffectual one.

Such results are interesting and in many ways counter-intuitive, but need to be deconstructed. First, survey respondents may behave differently in a real-life situation—here, an election—than they claim they would in a survey; but determining whether more or fewer would actually vote for the corrupt but effective candidate is extremely difficult. Second, respondents were only given an option between two sub-optimal candidates; in the real world, if there were a dynamic but clean candidate, s/he would provide serious competition to the other two. Expressed another way, the respondents who indicated that they would vote for the corrupt candidate were not clearly demonstrating a preference for corrupt officials, merely one for the lesser of two evils. This all said, evidence from India and Italy makes it clear that voters will sometimes elect candidates they know are corrupt.

While there are still revisionists who maintain that corruption can sometimes be beneficial, a subtly alternative approach is that of Robert Klitgaard, who in the late 1980s argued for an optimal amount of corruption. Klitgaard does not condone corruption, but, perhaps reflecting his economist's perspective, argues that the costs of countering corruption should not exceed the economic damage being wrought by that corruption; the point at which corruption is being maximally combated relative to resources is the optimal amount.

Nowadays, there is widespread—though clearly not universal—agreement that even if corruption may in some specific situations be beneficial, this is only ever short term; eventually, the costs of corruption invariably outweigh the benefits. One of the problems with excusing short-term corruption is that a culture of corruption can be established that is extremely difficult to counter further down the track. Rather than excuse corruption altogether, a better approach is to relativize it, along the lines of Heidenheimer's threefold distinction between black, white, and gray corruption. This allows for differentiation or nuancing without resorting to outright apologism.