WarnerCorruption - Chaz Warner Econ 508 Corruption in...

Chaz Warner
Econ 508
Corruption in Transition
While the common conception about corruption is that it is bad and morally reprehensible
few understand the actual effects corruption has on an economy. The results from a corrupt
government can be severe and far-reaching. However these results will soon be seen. The key
idea behind this paper is to not only explain corruption, but to show the ways in which it is
harmful to a country’s maturation and growth economically. Also, corruptions effect on poverty
and the gap between rich and poor will be examined. Finally, some alternative views about
corruptions effect will pose the question “Is corruption really bad?” Empirical data will initially
prove that corruption has nothing but a ruinous effect on a nation in transition. However, other
theories hypothesize that, in reality, corruption is not as much of a hindrance to the progression
of a society as was once thought.
In order to understand all that happens as a result of corruption we must first understand
what corruption truly is. What all does it entail? There are two primary divisions of corruption:
State Capture and Administrative Corruption. “State Capture is defined as actions of individuals,
groups, or firms both in the public and private sectors to influence the formation of laws,
regulations, decrees, and other government policies to their own advantage as a result of the
illicit and non-transparent provision of private benefits to public officials.”(Transparency.org)
An example of State Capture would be an influential “oligarch” at the head of a powerful
financial-industrial group buying off legislators to erect barriers of entry in a particular sector.
(Worldbank.org) “The other type, Administrative Corruption, is defined as the intentional
imposition of distortions in the prescribed implementation of existing laws, rules, and regulations
to provide advantages to either state or non-state actors as a result of the illicit and non-
transparent provision of private gains to public officials.”(Transparency.org) The classic example

Chaz Warner
Econ 508
of Administrative Corruption is a shop owner forced to pay bribes to official inspectors to
overlook minor (or possibly major) infractions of existing regulations.(Worldbank.org) The
levels of each type of corruption present in a government are explained in the following way:
• High-High - a serious problem of administrative corruption—and hence, weak state
capacity—is nested in a state highly subject to capture.(Worldbank.org)
• High-Medium - countries that have been able to contain the level of administrative
corruption relative to other transition countries, but nevertheless have done so in a
context of high state capture.(Worldbank.org)
• Medium-High - the problem of administrative corruption remains the central problem,
while the state has been less subject to capture by the private sector than have other
transition countries.(Worldbank.org)
• Medium-Medium - countries that have lower levels of both state capture and