investing money the third represents money earned from control over a

Investing money the third represents money earned

This preview shows page 135 - 137 out of 174 pages.

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.’
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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.
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