Issue Analysis

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Make Poverty History: Tackle Corruption

Wolfgang Kasper | IA67 | 19 January 2006

The results of the latest international survey of corruption reveal huge international differences. Poor countries tend to be more corrupt than developed, affluent countries, mainly because of foreign aid is rewarding incompetent despots and kleptocratic elites. It is time to listen to the Third-World corruption fighters, confine overseas aid to emergencies, and tie all aid to stringent conditions of corruption control.

  • Corruption is a blight on social stability and economic growth. The abuse of political power for private benefit is profoundly unjust to those who are honest or poor. This is now recognised in a new UN Convention Against Corruption, which entered into force in December 2005.
  • The recently published 2005 Corruption Perception Index offers credible estimates of corruption levels in 159 countries. It reveals huge international differences. Poor countries tend to be more corrupt than developed, affluent countries. Some countries have improved standards of probity in government over time (including highly ranked Australia and New Zealand); others have let matters slip (including the United States, Japan and major European Union countries). Most Third World and many ex-communist regimes are graft riddled. In Australia’s neighbourhood, corruption is pervasive, including in Indonesia and Papua New Guinea.
  • Countries with poorly protected private property rights, over-regulated markets, and a poor rule of law tend to suffer more from entrenched corruption.
  • Rich natural resources, notably oil and gas, facilitate corruption and hence political instability, and possibly even government failure. This is a serious concern for the West, which will for some time yet depend on resource imports. The Corruption Perception Index also shows that, unfortunately, Western military intervention in Afghanistan, East Timor and Iraq has not been able to create honest government rather the opposite.
  • Foreign aid also tends to facilitate corruption. Attempts to improve accountability in foreign aid, though costly, are becoming more common, because simply disbursing aid to kleptocratic regimes has debased the institutions essential for economic growth and has entrenched corrupt elites.
  • Ruling priviligentsias frequently draw on nationalist and socialist sentiments to defend their privileges and to combat openness and transparency. Anti-globalisers now lend them support.
  • For a long time, corruption was accepted with fatalistic resignation. But now the global spread of originally Western, liberal worldviews has changed attitudes in many parts. There is now a new optimism among the emerging middle classes of many countries that graft can be cured. Countries as disparate as Singapore and Estonia have demonstrated that this is the most promising path to promoting economic growth and thus eradicating poverty.

Wolfgang Kasper is a Senior Fellow at The Centre for Independent Studies and an EmeritusProfessor of Economics at The University of New South Wales.

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