How would you explain the correlation between the amount of corruption in a country and economic development?

Post your Initial response to the Discussion question. This posting should be at least 250 words. Respond to at least 2 other students’ responses. Your primary posting can end with a “tag- line” or a related question of your own. 

REPLY – 1 (YASHWANTH KUDIKALA)

The correlation between corruption and economic progress in a country

Corruption is an illegal and immoral practice that people in a position of power and authority are likely to adopt to further their agendas. When such powerful and influential people exploit their powers, the adverse impact is directly on the overall growth and development of the country. It has been witnessed on numerous occasions that the economic development of a country, more specifically, a developing or underdeveloped nation is more often than not affected by corrupt activities. Furthermore, in these regions, along with economic growth, even significant aspects of a country, including healthcare and education, are also significantly affected due to the presence of corruption. Corruption is the main reason behind the rich becoming richer and the poor becoming poorer.

Primary reasons for the rise in the level of corruption

There is a significant difference between the level of corruption in emerging economies and that in developed countries. It is a known fact that since the low-income nations are in a state of continual transition and change, there is a chance of higher corrupt activities. Moreover, the low quality of education in such countries is also responsible for the higher number of illegal activities by those in power (Blackburn, Bose & Haque, 2006). Apart from these, culture, customs, and traditions are significant influencers of corruption as well.

Therefore, it is evident that when the government fails to enforce strict regulations on the people, the result is the concentration of power into a few hands, which leads to its misuse.  It is imperative for decision-making powers as well as other significant powers to be in the hands of only those who are committed to using them for the betterment of the society (Jimenez & Pulos, 2018).

Impact of corruption on the national economy

It cannot be doubted that the economic development and growth of a country is directly affected due to corrupt activities such as frauds and bribery. When members of a business organization get themselves involved in corrupt practices to fulfill their personal goals and agendas, they are essentially allowing themselves to get involved in what is termed as ‘bureaucratic corruption.’ Such practices have the potential of negatively impacting the overall development and productivity of the company. The worst affected is always the labor in such scenarios. Bribery also has negative implications on the sales of the company (Blackburn, Bose & Emranul Haque, 2010).

Corruption is responsible for the reduction of domestic investments and FDIs; not only that, but it also increases the government’s costs and expenses while at the same time, prevents it from spending more on vital areas of development such as healthcare, education and the proper maintenance of infrastructure. Moreover, the focus of a corrupt government is to invest more in unnecessary and less efficient projects. To conclude, it can be stated that the level of productivity of a corporation is heavily dependent on the level of ethical business practices. Therefore, the lower the amount of corruption in the organization, the higher would be the productivity and success.

Reference

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Blackburn, K., Bose, N., & Emranul Haque, M. (2010). Endogenous corruption in economic development. Journal of Economic Studies, 37(1), 4-25.

Blackburn, K., Bose, N., & Haque, M. E. (2006). The incidence and persistence of corruption in economic development. Journal of Economic Dynamics and Control, 30(12), 2447-2467.

Jimenez, G. C., & Pulos, E. (2018). Good Corporation, Bad Corporation: Corporate Social Responsibility in the Global Economy.

REPLY – 2 (ANIL KUMAR METHARI)

Corruption affects economic development in various ways including the social and cultural aspects. Corruption has become widespread today and it is also a popular debate in researches being conducted on economic growth and expansion. Hence there exist a straight link of economic development and fraud (Lash, N. A. 2004). There are various forms of corruption that people are aware of and use it to negatively affect the economic growth of their country. Corruption is not a new thing in society today it has been there but today it has been given more attention than before.

            Bribery has become very widespread in the developing nation where these kinds of bribery make the transaction cost increase thus causing insecurity in the country’s economic growth.  Bribery, therefore, causes ineffective results on economic growth and expansion where eventually it affects domestic and foreign investments.  Ineffective economic growths are also experienced due to the relocation of talents owing to the distortion of technology choices and sectorial priorities (Mo, P. H. 2001). In addition to that, corruption also causes a lack of proper control in public entities and lack of transparency. As a result, in the case where there is no sufficient political or legal basis will control that enhances transparency the corruption is going to be very high. In addition to that, corruption is also capable of reducing tax revenues since it compromises the ability of the government to collect fees and taxes.

Reference

Lash, N. A. (2004). Corruption and Economic Development. The Journal of Economic Asymmetries, 1(1), 85-109.

Mo, P. H. (2001). Corruption and economic growth. Journal of comparative economics, 29(1), 66-79.