How Public Corruption Affects Your State

Public corruption poses a serious development challenge. It undermines democracy and good governance by flouting or even subverting formal processes. It reduces accountability and distorts representation in policymaking; It compromises the rule of law; and it results in the unfair provision of services. More generally, public corruption erodes the institutional capacity of government as procedures are disregarded, resources are siphoned off, and public offices are bought and sold. At the same time, it undermines the legitimacy of government and such democratic values as trust and tolerance.

Public corruption also undermines economic development by generating considerable distortions and inefficiency. In the private sector, it increases the cost of business through the price of illicit payments themselves, the management cost of negotiating with officials, and the risk of breached agreements or detection. Although some claim public corruption reduces costs by cutting red tape, the availability of bribes can also induce officials to contrive new rules and delays. Openly removing costly and lengthy regulations are better than covertly allowing them to be bypassed by using bribes. Where public corruption inflates the cost of business, it also distorts the playing field, shielding firms with connections from competition and thereby sustaining inefficient firms.

Public corruption also generates economic distortions in the public sector by diverting public investment into capital projects where bribes and kickbacks are more plentiful. Officials may increase the technical complexity of public sector projects to conceal or pave way for such dealings, thus further distorting investment. Public corruption also lowers compliance with construction, environmental, or other regulations, reduces the quality of government services and infrastructure, and increases budgetary pressures on government.