Why Worry About Corruption From An Economics Perspective
by Harits Haikal
A world free of corruption is one of unimaginable peace and fairness, but the reality is bitter to swallow. Humans are born with a desire for greatness — a desire to own assets and possess control over life. Desire can lead to productivity and hard work, but many people choose the simplest path to fulfil their boundless desires.
There will be news about corruption every day. People who engage in dirty politics endanger others for personal gain. We must ask ourselves what corruption is, how it occurs, and, most importantly, how it affects our lives.
Corruption is defined as the use of a trusted higher position in one of the branches of power, such as the executive, the legislative and the judiciary, for personal gain. Simply put, it is the act of obtaining self-benefits through the usage of power that people have in their positions. It can be done in a variety of harmful ways, such as accepting bribes, sending threats, and selling their power to others. Corruption has never produced a positive outcome, be it in the short-term or the long-term. It has an impact on our society by destroying trust and destroying our economy by causing inequality.
Corruption has existed for a long time, but it was only 30 years ago that it was investigated further. Corruption and economics are inextricably linked because most people commit corruption by exchanging and giving money. As the government controls so much of the economy, it is unavoidable that government officials have a strong desire to commit corruption because they have direct access to a resource which is money. In economics, this is known as rent-seeking. Rent-seeking is an act of acquiring wealth without contributing to economic activity. It is possible to achieve this by evading taxes and changing policy regulations for their self-interest.
Corruption can occur anywhere, and the motivations for doing so are subjective and complex. From an economic standpoint, here are some of the reasons why corruption occurs in our daily lives. First, there are low wages in the public sector. When civil servants, such as teachers and public officers, are paid insufficiently, they may be forced to use their position to collect bribes as their primary source of income. It is more likely to occur in a low-income or developing country where the cost of living is higher and the tax system is inefficient in remunerating public employees. Although it appears that public employees are the most likely to contribute to corruption, it is preventable if the government has a strong state of public administration. A poor government administration can increase the likelihood of corruption. An inefficient system for detecting money circulation and declaring high-level officials’ wealth may lead to corruption. This is because people can easily commit corruption without being caught and questioned.
Furthermore, the implementation of a price mechanism to reduce the price of some goods below market value to achieve equality may result in high-level corruption. Minimum price legislation is implemented to help reduce consumer burdens while also affecting producer income, which is likely to be reduced. As a result, the price mechanism creates incentives for an individual, such as a seller, to bribe higher officials to secure a greater flow of money and receive an unfair share of the profits. This results in resource misallocation and prevents some socioeconomic groups from consuming certain goods. Furthermore, a country with a pure command economy is more likely to have bribery than a mixed economy. The majority of economic activities are governed by state authorities, and decisions are mostly made by individuals in higher government positions. As a result, it stifles productivity and the freedom to control the market, leading to an increased desire to gain self-interest. As a result, public officials can easily change policy while receiving bribes for their benefit.
While protecting the home industry can stabilise the balance of payment, it can also create unfairness and encourage corruption. Local manufacturers will lobby for the establishment and maintenance of these tariffs, and some may be willing to corrupt powerful politicians to maintain the monopoly. This empowers them to realise their evil plan and sustain their profits. To put it simply, protectionism is more harmful than free trade, in which all goods are free to be traded without tariffs. People will be able to choose their whatever products without being restricted. As a result, a closed economy will almost certainly result in corruption.
The majority of the reasons for corruption mentioned above have negative economic consequences. Economists have identified some of the reasons why we should be concerned if corruption becomes more common in our daily lives. For starters, corruption reduces private investment and economic growth. Businesses have become aware that high levels of corruption can stifle growth by impeding competition and productivity. They will also consider bribery to be a form of tax if they want to communicate with higher-ups, limiting their ability to grow as a company. In the end, they will reduce private investment because it is deemed inefficient, resulting in low economic growth.
Furthermore, corruption inhibits talent. Corruption can be done through power, so the majority of talented people have no ability to advance because most of their positions are taken by those who commit bribery. They are prone to failing and being let down by a source of power. As a result, there are fewer new talents and innovations to create incentives for new advancement. Corruption then leads to inefficiencies in public infrastructure. Higher-ups who accept bribes to grant permission for the construction of public infrastructure are often blind to the money. Their decisions are inappropriate and are made for their benefit rather than the benefit of the public. They do it to increase their wealth, not to benefit the people.
In conclusion, for proven reasons, we should be concerned about corruption and do our best to prevent it. Corruption is synonymous with a lack of self-development. It only creates opportunities for those with power while preventing people on the lower ground from increasing their wealth. Economists and researchers are still working on solutions to this problem, but it is up to us to be aware of the possibility of corruption. Education is the first step to preventing corruption from happening. Only we, as good human beings, can educate ourselves that corruption is a toxic poison that can destroy a newborn’s life while also preventing a better world with a brighter future.
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- Šumah, Š. (2018). Corruption, Causes and Consequences.
- United Nations : Office on Drugs and Crime.
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- The World Bank (2016). Combating Corruption.
- www.cpib.gov.sg. Prevention Of Corruption.
- Transparency International (2022). What Is Corruption?