It cannot be wiped out without collateral damageby Alina Rocha Menocal, Heather Marquette / April 26, 2016 / Leave a comment
Few challenges in international development ignite as much passion as corruption. Perhaps ironically given the recent Panama Papers scandal, the UK government has encouraged the “zero tolerance” approach to corruption in international development. This approach may be the ideal, but an effective strategy for tackling corruption must acknowledge that it is a social and political problem, rather than purely a moral one.
In March, we contributed to the UK parliament’s International Development Committee inquiry on tackling corruption overseas. In our evidence, we argued that corruption in the developing world is not the worst of all evils—and that it cannot be wiped out without collateral damage.
Some examples can illustrate why. In places where violence is an ever-present threat, such as Afghanistan, Nepal and Pakistan, corrupt patron-client networks are often the sole source of security and safety. Bargains between local elites, service providers and insurgents can be the only way forward. Research by the World Bank and others suggests that it may be necessary to tolerate corrupt practices to ensure the delivery of services such as health, transport and utilities.
What is more, corruption doesn’t necessarily inhibit macroeconomic growth. At the micro level, corruption certainly adds to the cost of domestic investment and business productivity and performance. Yet countries with highly variable levels of corruption have still managed to have prolonged periods of economic growth (for instance, Botswana, Brazil, Cambodia, China, Ethiopia, Indonesia, Mexico, Rwanda, South Africa and Vietnam). Some have also made important progress in the fight against poverty.
The key lesson here is that palm-greasing and the selective allocation of assets and wealth by those who control the gateways to trade, resources and influence isn’t necessarily damaging in itself. What matters more, in terms of how damaging corruption is, is how that process is managed. For instance, are there mechanisms in place to ensure that beneficiaries of such unearned income funnel it back into domestic growth in one form or another? (Rwanda is a good example of this) Or do they siphon it off into distant tax havens—or, indeed, into prime London real estate?