AbleToTrain by Willing & Able

Corruption’s Effects

Corruption has a wide range of consequences. Some of these impacts are self-evident, while others need to be explained. They are as follows:


Putting the sustainable development goals in jeopardy

The achievement of the United Nations Sustainable Development Goals is hampered by corruption (SDGs). The SDGs are broad, and their vulnerability to corruption is understandable: “a better and more sustainable future for all” often runs against to the interests of a few, and can be derailed by a variety of means. Nations fail to eradicate poverty, solve hunger, provide good health care and high-quality education for their population, guarantee gender equality and other human rights, reduce inequality, and so on when their state capacity is weakened. Goal 16 of the Sustainable Development Goals (or SDG 16) is especially important since it intends to “promote peaceful and inclusive communities for sustainable development, guarantee access to justice for all, and establish effective, accountable, and inclusive institutions at all levels.” Given the significant relation between corruption and ineffective, unaccountable, and exclusive institutions, SDG 16’s three targets – 16.4, 16.5, and 16.6 – call for eliminating all kinds of corruption, improving the recovery and restitution of stolen assets, and building transparent institutions. At the same time, corruption obstructs the achievement of all SDGs in a number of ways, as enormous monies lost to corruption could have been utilized to enhance living standards by expanding access to housing, health, education, and water. For example, the African Union estimates that corruption costs the continent 25% of its gross domestic product (GDP) (UNODC, 2015). Aidt (2010) investigates the link between corruption and long-term development and discovers that there is a negative association between corruption and growth, and that corruption can lead to a country’s capital base eroding. Furthermore, decisions approved by the Conference of the States Parties to UNCAC have frequently stressed the link between corruption and sustainable development. If we truly want to accomplish the SDGs, the global community must recognize corruption as a barrier to their achievement and increase anti-corruption measures. An SDG table in the appendix briefly describes how corruption relates to each of the 17 Sustainable Development Goals. The table also shows which Modules from the E4J University Module Series on Anti-Corruption deal with the relationship between corruption and each SDG.


Inefficiency and financial loss

Although specific numbers on the economic consequences of corruption are difficult to come by, the International Monetary Fund (IMF) estimated that bribery alone costs between $1.5 and $2 trillion per year in a 2016 research. This equates to a global economic loss of around 2% of global GDP. Nonetheless, it ignores the economic costs of all other forms of corruption. The millions of leaked documents known as the Mossack Fonseca Papers (often referred to as the Panama Papers) showed the massive economic ramifications of offshore entities for many governments and for economic inequality in general, for example, in terms of fraud, money laundering, and tax evasion. Finally, there is economic inefficiency to consider in addition to deadweight economic loss. It is to the harm of competition when jobs (or contracts) are handed to people (or firms) who provide bribes or have a personal connection. As a result, more competent candidates and businesses are being turned down. The more common these activities become, the less efficient the economy becomes. Corruption in emerging countries has the potential to stifle growth. When funds disbursed from loans and help are embezzled or handed out to inferior contractors who won their bids through corrupt ways, this can happen (kickbacks, bribery, nepotism, etc.). Furthermore, as resources are diverted from their most effective use, investment in physical and human capital is reduced.


Inequality and poverty

Corruption is not usually a weapon used by the weak. An (in)famous bribery case in Nigeria involving the major oil corporation Shell cost the Nigerian people approximately $1.1 billion since the money went to corrupt officials rather than the national budget (Global Witness, 2017). Meanwhile, the World Bank estimates that more than half of the population of the oil-rich country lives in extreme poverty (2019). This example demonstrates how wealth is transferred to the least needy sources as political and economic systems are enlisted in the service of unscrupulous players. Self-dealing and hidden exchanges jeopardize mechanisms like political representation and economic efficiency. Funding for education, health care, poverty alleviation, elections, and political parties’ operational expenses can become a source of personal profit for party officials, bureaucrats, and contractors in the face of corruption. As a result, social programs and political regimes’ redistributive potential deteriorate. A situation of unequal opportunity emerges as a result of all of the aforementioned situations, with benefits accruing only to those who are part of a corrupt network.


Intimidation, embarrassment, and inconvenience

When people encounter corruption, it is almost never a pleasant experience. To receive medical attention, obtain a building permit, pick up a delivery, or use phone services, a bribe must be paid. A court may decide against a party not on the merits of the case, but because the opponent paid a bribe, knew a powerful person, or is of similar racial or ethnic heritage. If a person refuses to pay a bribe demanded by a police officer, he or she may be abused, jailed, or face a larger fine. Retirement monies are either stolen or become involved in a money-laundering scam. While victims of corruption face personal loss, intimidation, and inconvenience, those who commit corrupt acts and schemes enjoy personal gain, a sense of superiority, and greater ease – at least until the law is enforced.


Dysfunction in the public and private sectors

Individual acts of corruption have a cumulative effect of dysfunctionality. Regardless of whether they are provided by the public or private sectors, the quality of goods and services declines, and the process of acquiring them becomes more expensive, time-consuming, and unfair. If bribes can be successfully provided to police officers, doctors, and civil workers, those who are most effective in obtaining these monies have an advantage over more honest colleagues and competitors who could perform better on merit. Furthermore, if firms can damage competition by getting government favors, they lose the incentive to provide superior services and goods. Instead of promoting innovation and efficiencies, state-owned firms and industries are structured to enrich government officials. This might cause organizations to lose their intrinsic motivation. Employees and bosses are dissatisfied. People begin to question the worth of hard effort and creativity.


Infrastructure breakdowns

There were numerous plausible explanations to explore when a bridge collapsed in Genoa in August 2018, killing at least 39 people (NZHerald, 2018). Corruption was not immediately apparent, but further investigations revealed that a Mafia-controlled construction firm used “weakened cement” in the construction process. The construction business is well-known for being a lucrative source of revenues and a conduit for Mafia money laundering (additional information on organized crime can be found in the E4J University Module Series on Organized Crime). In industries and businesses beset by organized corruption, both oversight and competition are harmed. In a related report from 2017, Mexicans Against Corruption and Impunity blamed corruption for the collapse of more than 40 structures in Mexico City following the September 2017 earthquake. Bribery, cronyism, and influence trading seems to have been used to get around land-use and permit restrictions, resulting in the existence of fundamentally dangerous buildings around the capital.


Economic and political systems that are rigged

For unscrupulous actors, what is labeled as dysfunctional is actually useful and profitable. Political cronyism, crony capitalism, political party cartels, oligarchy, plutocracy, and even kleptocracy are all terms used to describe extensive patterns of private and governmental corruption that create societal institutions that are rigged in the private benefit. Citizens with strong ethical values (as well as citizens without large finances, contacts, favors to dispense, or “hard power” over others such as firearms or private enforcers) lose representation, influence, and authority.


Partial justice and impunity

When the justice system is tainted by corruption, citizens can no longer trust prosecutors and judges to conduct their duties. The powerful may be able to evade justice. Citizens, particularly those with limited wealth or few powerful allies, may be falsely accused of crimes, denied due process, and imprisoned without cause. On the website of the UNODC Global Judicial Integrity Network, there are resources for preventing corruption and strengthening judicial integrity.