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Corruption is attracting a lot of attention around the world. This paper surveys and discusses issues related to the causes, consequences, and scope of corruption, and possible corrective actions. It emphasizes the costs of corruption in terms of economic growth. It also emphasizes that the fight against corruption may not be cheap and cannot be independent from the reform of the state. If certain reforms are not made, corruption is likely to continue to be a problem regardless of actions directly aimed at curtailing it. [JEL E62, H1, H3, K4, N4]
I. The Growth of Corruption
IN RECENT YEARS, and especially in the 1990s, a phenomenon broadly referred to as corruption has attracted a great deal of attention. In countries developed and developing, large or small, market-oriented or otherwise, governments have fallen because of accusations of corruption, prominent politicians (including presidents of countries and prime ministers) have lost their official positions, and, in some cases, whole political classes have been replaced. For examples, see Johnston (1997).
Corruption is not a new phenomenon. Two thousand years ago, Kautilya, the prime minister of an Indian kingdom, had already written a book, Arthashastra, discussing it. Seven centuries ago, Dante placed bribers in the deepest parts of Hell, reflecting the medieval distaste for corrupt behavior. Shakespeare gave corruption a prominent role in some of his plays; and the American Constitution made bribery and treason the two explicitly mentioned crimes that could justify the impeachment of a U.S. president. However, the degree of attention paid to corruption in recent years is unprecedented. For example, in its end-of-year editorial on December 31, 1995, The Financial Times characterized 1995 as the year of corruption. The following three years could have earned the same title. The writing of books on corruption has become a growth industry in various countries.
The degree of attention now paid to corruption leads naturally to the question of why. Why so much attention now? Is it because there is more corruption than in the past? Or is it because more attention is being paid to a phenomenon that had always existed but had been largely, though not completely, ignored? The answer is not obvious, and there are no reliable statistics that would make possible a definitive answer.