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Is Corruption an Advertising Problem?

August 4, 2011

By Ryan Isakow

Ryan Isakow, a student at the Gerald R. Ford School of Public Policy at the University of Michigan, is a communications intern at Global Financial Integrity in Washington, DC.

My Hourglass/Flickr*

An explosion of anti-corruption protests this month saw effigies burnt in India, hundreds protesting in Russia, and mass riots in China. As tensions rise, the focus of the anti-corruption debate has begun to shift. Instead of seeing corruption as hurtful because it destroys the environment, weakens governments, and harms the poor, some governments have begun to see corruption as hurtful because of its economic consequences.

A recent Moscow Times article by Anders Aslund incorporates this shift in thinking. Claiming corruption is so pervasive that investments to increase productivity are virtually impossible, Aslund writes: “Russia cannot build public infrastructure because standard kickbacks are about 50 percent, and infrastructure, especially roads, are now becoming absolute bottlenecks.” Corruption has progressed to the point that any kind of investment is futile, meaning that sustainable or diversified growth is impossible. Borrowing costs skyrocket, foreign investment is scared away, and the country stagnates. The language the article uses in describing corruption is itself revealing (emphasis mine):

Corruption is concentrated at the top of the state. High-level, large-scale bribes are extracted through kickbacks on state procurement, asset-stripping of state corporations, transfer pricing, extortion of private business and embezzlement. This greatly harms efficiency and growth.

Instead of focusing on the horrific human impact of corruption (which is massive), all that is in play is economic growth, with an implicit understanding that growth will help the poor. The argument makes sense: Russia has been unable to develop into anything beyond an oil economy largely due to its crippling corruption. This new attitude places poverty as a secondary concern; the primary issue is that economic growth is stagnating because of corruption. Solving that, through democratic reforms or otherwise, will alleviate poverty.

This line of thought extends outside of Russia. In India, economists have come out claiming that corruption has kept India from a 10% growth rate. Other organizations are saying that corruption is deterring foreign investment, with 45% of businesses claiming that corruption has affected their operations. Similar concerns are arising in Pakistan, Nigeria, and China, to name a few. It’s beginning to look like developing countries—obsessed with economic growth—now see corruption as the great limiter, the obstacle in reaching a new frontier of economic prosperity.

Not surprisingly, as policy-elites adopt this attitude, an anti-corruption movement has emerged within developing country governments. There has been a worldwide surge of anti-corruption laws, from Russia and China to India and Kenya. While some countries are handling corruption in questionable ways (China has executed several officials for bribery), increased awareness and enforcement is a positive sign. Although there’s a long way to go, efforts by governments are a move in the right direction after years of blatant corruption.

It’s interesting to note that connecting corruption to something which directly interests those in power—economic growth— has elicited a bigger response from government leaders than the abundance of stories written everyday on the impoverishing effects corruption has on their own countrymen.  After all, if exploiting the poor bothered them, they would have more reservations about robbing their country’s resources in the first place.

While a world free from corruption isn’t likely anytime soon, increased attention and action is indicative of a broader shift in attitudes. With anti-corruption protests on the rise, it seems inevitable that regimes will have to take action on corruption, or be crushed by an avalanche of activism.

*Image License: Some Rights Reserved By My Hourglass

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Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.

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