corruption and dictators
zaire, in 1961, was disparately poor country with a per capita annual income of $67. mobutu seseseko came to power in a military coup in 1965 and ruled until 1997. he is estimated to have stolen $ 5 billion during his 32 years rule (about 4.5 times the country's national income in 1961}.
indonesia was even poorer than zaire. it had a per capita annual income of $49. mohammad suharto came to power in a military coup in 1966 and ruled until 1998. he is estimated to have stolen at least $15 billion during his 32-year rule. some suggest the figure may even have been as high as $35 billion. thus, suharto has stolen the equivalent of 5.2 times his country's national income in 1961 (54.8 billion).
zaire's income per capita in purchasing power terms in 1997, when mobutu was deposed, was one third of its level in 1965, when he came to power. in 1997, the country stood 141st among the 174 countries for which the united nations calculated a 'human development index' (hdi). the hdi takes into account not only income but also 'quality of measured by life expectancy and literacy.
as per the corruption statistics, indonesia should have performed even worse than zaire yet where zaire's the standards had fallen by three times during mobutu rule, that of indonesia rose by more than three times during suharto's rule. its hdi ranking in 1997 was 105th - not the score of a miracle economy but creditable nonetheless considering where it had started.
the zaire-indonesia contrast shows the limitations of the popular view propagated by the bad samaritans that corruption is if the biggest, if not necessarily the biggest, obstacle to economic development.
why is this so?
bribe is passing of money from one person to another. the effect on economy is determined by what the receiver does with the bribe received. if he deposits it in swiss bank, as mobutu did, it has disastrous results. suharto did not do that. the money remained in indonesia and was invested. the money which could have been invested by the giver was invested by the receiver. the net result is the same, so far as country is concerned.
the giver must have calculated how much he can give. the balance would have been invested in more productive line which would offset the loss due to bribe. the net result is better efficiency.
it all depends upon the regulations which the government imposes. if it requires too many clearances, the bribe opportunities for officials increase and the corruption increases. it is said that with too many regulations, the country suffers more with honest dedicated bureaucracy than with corrupt bureaucracy. it follows that if the regulations are reduced, the efficiency of economy will increase.
the conclusion, it is not corruption which hurts the economy but the unnecessary regulations.
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