investing money – the third represents money earned from control over
a previously-acquired valuable resource and therefore does not increase
overall value in society. Neo-classical economists have expanded this
concept of rent to mean money people earn from something above which
they would normally earn or should earn if the economy were to function
properly. (One example might be a job whereby you earn £20,000 but the
next-best job pays only £15,000. Thus you are earning a rent of £5,000 –
i.e. you are earning £5,000 more than what the market would predict.)
Economists thus call the energies expended to acquire these rents ‘rent-
seeking’, which, as should be clear, are unproductive for the economy in
that it is competition for an unproductive resource.
Thus corruption is one of the rare subjects on which it seems like a
majority of people can agree in development studies, from activists and
academics in the developed world to local businessmen and farmers
in the developing world, in that everyone agrees that it is harmful to
development. Certainly no one wants money which could be used for
developmental purposes, whether it comes in the form of aid from
‘refers to effective, ‘user-friendly’ rule which may be less than
fully democratic…It is purposive and development-oriented,
seeking to improve the mass of people’s quality of life…By way
of contrast,
governance
nearly always alludes to the necessity
for liberal democracy as a prerequisite for development…
Governance is synonymous with democracy.’
171 Introduction to international development
130
donors or taxes from local citizens, to be used by an official for his/her
own purposes. Yet there is some controversy as to how much damage
corruption actually causes to development.
On the one hand, many economists like Shleifer and Vishny (1993) claim
that corruption is damaging and ‘costly to development’. They give the
example of medieval Europe, where England developed faster than the
continent due to the larger number of tolls in the latter’s case.
Shleifer and Vishny (1993) argue that one part of the problem with
corruption is that multiple officials in government can collect them for the
same reason, as with the above example with tolls, while another problem
involves the costs involved in keeping corrupt activities secret. All of these
costs make corruption very damaging to development (see Box 2).
Gray and Kaufman (1998, pp.9–10) and others have argued that to
combat corruption countries need to set up anti-corruption watchdog
agencies, embrace deregulation and civil service reform, strengthen legal
and judicial systems, improve financial management, and promote a free
press, among others.
Activity 1
Recall a prominent corruption scandal in your own country or region. Come up with three
ways this scandal and similar types of corruption could have been avoided.
