Corruption and economic growth

Can corruption risk a country’s economic growth?

- Boo CHANCO

That question is at the core of discussions among some economists and political scientists amid the current national trauma over a trillion pesos disappearing at the hands of senators, congressmen, DPWH district engineers and private contractors.

Corruption, some economists say, is not a deterrent to economic growth. They cited South Korea, China and Vietnam as proof.

Yuen Yuen Ang, a professor of political economy at the Johns Hopkins University, in a recently published book by the Cambridge University Press, wrote that “while corruption is never good, not all forms of corruption are equally bad for the economy, nor do they cause the same kind of harm.”

“The rise of capitalism,” she pointed out, “is accompanied not by the eradication of corruption, but rather by the evolution of the quality of corruption from thuggery and theft to influence peddling.”

I take it that she is saying a corrupt developing country can still grow significantly and even reach developed-economy status, but corruption makes that path harder and riskier, and the costs are substantial.

Prof. Ang distinguishes four types of corruption: petty theft, grand theft, speed money and access money.

Petty theft is when bureaucrats steal, extort, or misuse small amounts of public funds. The bureaucrat is simply pocketing money or valuables for personal enrichment, without providing any service in return. Like grand theft, it is directly growth-damaging by draining public and private wealth.

Grand theft is the embezzlement or misappropriation of large sums of public money by political elites who have control over state finances. It is perpetrated by high-ranking officials and political leaders, as opposed to street-level bureaucrats.