Corruption in Developed and Developing Countries

Modern social science defines corruption in terms of three basic models: First, corruption is related to the performance of the duties of a public office. According to J. S. Nye, corruption is

[b]ehavior which deviates from the normal duties of a public role because of private-regarding (family, close private clique), pecuniary or status gains; or violates rules against the exercise of certain types of private-regarding influence. This includes such behavior as bribery (use of reward to pervert the judgment of a person in a position of trust); nepotism (bestowal of patronage by reason of ascriptive relationship rather than merit); and misappropriation (illegal appropriation of public resources for private regarding uses). (p. 419)

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Second, corruption is related to the concept of exchange derived from the theory of the market. Jacob Van Klaveren argues that the bureaucrat views his public office as an enterprise from which to extract extra-legal income. As a consequence, the civil servant's compensation package "does not depend on an ethical evaluation of his usefulness for the common good but precisely upon the market situation and his talents for finding the point of maximal gain on the public's demand curve" (p. 26). In an economy pervaded by high levels of government regulations, civil servants may devote most of their time and effort to assisting entrepreneurs in evading state laws and statutes. In exchange the civil servants are paid extra-legal income (Mbaku, 1992).

Finally, the definition of corruption is couched in terms of the public interest, as argued by Carl Friedrich:

[t]he pattern of corruption may therefore be said to exist whenever a power holder who is charged with doing certain things, that is a responsible functionary or office holder, is by monetary or other rewards, such as the expectation of a job in the future, induced to take actions which favor whoever provides the reward and thereby damage the group or organization to which the functionary belongs, more specifically the government. (p. 15)

Friedrich argues further that the opportunistic activities of corrupt bureaucrats can severely damage the public interest and should be considered important variables in the study and evaluation of corruption.

Public choice theory and corruption.

Economists, dissatisfied with these explanations for corruption, have turned to public choice theory, which sees corruption as post-constitutional opportunism designed to generate benefits for individuals or groups at the expense of the rest of society. According to public choice theory, the scope and extent of corruption in a country is determined by that country's institutional arrangements and not necessarily by the character of its civil servants and politicians. Once the constitution has been designed and adopted and a government established, there is an incentive for individuals and groups to subvert the rules in an effort to generate benefits for themselves. Rules subversion, if successful, can allow individuals to secure benefits above and beyond what would have accrued to them otherwise. This kind of behavior can occur in both democratic and nondemocratic societies.

Bureaucrats, whose job it is to design and execute public policies, may attempt to use the process to maximize their private objectives at the expense of serving the general public efficiently and equitably. The desire by civil servants to maximize their private objectives and the effort by organized interest groups to subvert the rules and to extract benefits for themselves create opportunities for corruption. For example, an entrepreneur who wants to secure a lucrative import or production permit may bribe a clerk at the ministry of trade in order to (1) secure the permit and (2) make sure that the bureau protects his new monopoly position by not issuing additional permits to entrepreneurs from the area in which he operates. In exchange for providing the entrepreneur with opportunities to earn supranormal profits, the civil servants at the ministry of trade "earn" extra-legal income, and the importer who receives the permit earns an above normal rate of return on investment, but society loses.

Government regulatory activities usually impose significant transaction costs on enterprise owners and severely affect the profitability of their operations. To minimize these regulation-induced costs, some entrepreneurs may seek help from the civil service, whose job it is to enforce the laws. Usually, the business owner pays a bribe to the government regulator in order to receive preferential treatment and minimize the burden of the regulations on his or her operations. Public choice theorists argue that bureaucratic corruption is directly related to the scope and extent of government intervention in private exchange (i.e., in markets). Effective control of corruption, then, must be based on a modification of existing rules in order to change incentive structures and constrain the ability of the state to intervene in private exchange and create artificial scarcities.