Content area
Full Text
EXECUTIVE SUMMARY
Building upon Lambsdorff's (2005) review of empirical studies on corruption leads to an integrative, casual model that presents corruption as a central node in a pathway from independent variables (free-press, independent judiciary, and ease of market entry) through mediating variables (degrees of democracy, crime, and free markets) to outcomes (capital formation and social welfare). The elements of the model directly influence economic growth and competitiveness. Analysis shows that privileges act both directly and indirectly on the likely causes of corruption. This leads to policy proposals that might work to reduce corruption and facilitate developing stronger national economies and democracies.
Keywords: Corruption, Privilege, Economic growth, Economic development, Democracy, Free markets
INTRODUCTION
Corruption is of great concern to multinational corporations as they decide where to locate facilities and do business; to nation-states as they consider how to make their economies and societies effective and efficient; to employees, citizens, migrants - everyone who interacts with government at any level. Corruption corrodes our institutions, stifles economic activity, and degrades the human experience.
According to Transparency International (2011), citizens of more than three quarters of the 178 countries in their surveys perceive their institutions as corrupt. Even in relatively "clean" countries, such as the United States, citizens perceive corruption on the rise. Corruption is pervasive. Therefore, it is important for organizations, citizens, political bodies to understand the sources of peoples' perceptions and experience of corruption.
Perhaps the perception of increased corruption in the West flows from governments' preferred recent response to financial crises: granting special payments, opportunities, rights, or advantages to specific firms or industries - that is, granting privileges. If the public perceives those privileges as a misuse of public power for private benefit, then those privileges fit the definition of corruption (Transparency International, 2011).
It is likely that the economic problems that led to this great recession came largely from corruption and privilege. For example, the Office of Comptroller of the Currency passed regulations that granted interstate banks the privilege of immunity from state laws regulating home mortgage lending (Bagley, 2008). As there were not sufficient resources at the federal level to monitor lending regulations, many firms engaged in corrupt behavior, breaking laws with regularity.
This paper proposes a model for mapping causes and consequences...