According to the objective of this research as we want to identify the impact of corruption in the economic cycle of Bangladesh, this research is exploratory in nature. This research is primarily based on secondary data. Data is collected from newspaper, journals, magazines, and prior research works. A qualitative analysis is done to identify the cause and effect relation between corruption and the economy of Bangladeshi.
- Findings from Secondary Study
- Definition of the Terms
Before going further to our discussion, some terms need to be cleared very well. Corruption refers to dishonest or illegal behavior especially of people in authority like government. The corruption slowly becomes the part of our government. It is already an established fact that Bangladesh is the most corrupted country in the world. Corruption refers to a large range of illicit and illegal activities. Although there is no universal definition of corruption, the most prominent definitions emphasize upon the abuse of public power or position for personal advantage.
The circular flow diagram of the economy is a visual model of the economy that shows how transactions are being made through different markets among households, firms, and the governments. However the circular flow diagram of economy has interpreted differently by different economist. Prof. N Gregory Mankiw of Harvard University termed it as a schematic representation of the organization of the economy (Mankiw, 1998).
Figure-1 represents the economic cycle that has been discussed by Dr. Golam Mohammad of North South University.
Figure 1: The Circular Flow Diagram of Economy
The above diagram indicates that there are three decision makers in an economy- household, firm, and the government. Household supplies factor of production to the factor market for which the factor market pay the wages to household. The firms demand factors of production to the factor market for which it also pays. The firm supply goods and services to product market and gets sales revenue. The household, on the other hand, demand goods and services from the product market and makes their expenditure. The financial market consists of banks and other financial organizations. They supply funds for investment to household and firms. They also receive surplus from firms and households. The foreign market involves with export and import.
The government provides welfare and other services to household and in return takes property and land taxes. They provide subsidies to firms and get corporate profit and taxes. From the factor market the government gets income taxes and from the product market it gets VAT.
- Role of Government in the Economics
As illustrated by Prof. Samuelson, government has four major functions in the economy. These are:
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Improving economic efficiency- One of the main economic purposes of government is to allocation of resources into socially desirable manner.
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Improving the distribution of income- The government accomplishes the income redistribution through taxation and spending policies. Sometimes government imposes regulation in this purpose.
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Stabilizing the economy through macro-economic policies- Government has the responsibility of preventing depressions by the proper use of monetary and fiscal policy, and close regulation of the financial system.
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Conducting international economic policy- Government plays a critical role representing the interests of the nation on the international stage and negotiating beneficial agreements with other countries on a wide range of issues.
- Governmental Politics in Bangladesh
In Bangladesh the ruling party in the parliament forms the government. It is common practice in Bangladesh that the parliament members spend a lot of money in their election for their winning. After the election when they win, they start recovering their money by abusing the position. Parliament Members are given lot of power and special positions in the government. Thus the government becomes politically manipulated by the ruling party.
A government also has the discretionary power over the secretariat. All governmental activities thus become politically influenced.
- Nature and Areas of Corruption in Bangladesh
Corruption has long been seen as a moral and legal problem. However, there is a growing body of research which has established that corruption and other forms of poor governance are also associated with lower economic performance. Most of this research employs data bases with information on large numbers of countries. The variables include indices of various aspects of governance, performance measures such as economic growth and human development outcomes, and other socio-economic variables used as controls in regression analyses. Many studies have shown that bad governance, including corruption, reduces economic growth – countries with poor governance grow more significantly more slowly than countries with honest, accountable governments. Furthermore, some studies are also showing that poor governance is associated with lower performance in areas such as adult literacy and infant mortality.
According to Corruption Perception Index (CPI) Report 2002, Bangladesh is the most corrupted country out of 102 countries in the world. According to this report top ranking 10 countries are shown by the following table No: 1
Note: 2002 CPI score relates to perceptions of the degree of corruption as seen by business people and risk analysists, and ranges between 10(highly clean) and 0 (highly corrupt)
Table -1
According to this Report sector-wise corruption in Bangladesh is as follows:
In a country such as Bangladesh, corruption and other forms of weak governance are an impediment to the reduction of poverty. Economic growth is essential to reduce poverty, and corruption slows economic growth. The poor suffer from corruption in many ways. Their access to services, such as public health and education, is reduced when drugs and textbooks are stolen from public facilities and sold privately and when doctors and teachers have high rates of absenteeism from their public jobs and sell their services privately. Most of these mentioned corruption become possible for the political backup. Corruption invariably channels public resources to the rich – the poor lack the funds to bribe or pay for the private provision of services that are supposed to be provided for free as public services. Almost everybody suffers from corruption, but the poor suffer more.
As in most countries, corruption is not a new phenomenon in Bangladesh. Since Independence, Bangladesh's leaders have often condemned the high incidence of corruption, but even since the return of democracy during the 1990s, neither government has been able to take effective action to address the systemic issues which allow corruption to flourish. The business community has put up with it and, many would argue, benefited from it. It has unfortunately been the tax payers and ordinary citizens, especially the poor, who have largely had to pay for it.
Most observers believe that the incidence of corruption in Bangladesh is high. According to surveys conducted by organizations such as Transparency International, Business International, Political Risk Services and the World Economic Forum, Bangladesh ranks among the most corrupt nations in the world. In 2002 and 2003 Transparency International ranked Bangladesh as the most corrupt country in the world. While TI's exact ordinal ranking may be open to debate, the point to recognize is that unfortunately Bangladesh falls among the high corruption group of countries.
Amongst the most corrupted sector, police department is reported to be number one. It is found that police made prior arrangement for the disposal of the cases. They also deliberately delayed sending the cases to the court. It is almost impossible in this country to get help from the police without money or influence.
Municipal Service Sector like water, electricity, holding tax and business & trade license is another governmental sector for corruption. There is a great difficulty in getting water supply from them and it requires extras money. Electricity supply and other services are also observed to act in the same manner.
- Analysis of Findings
The above discussion indicates that the main source of corruption is the political government. Our discussion also shows that corruption is a governance problem. Corruption is a result of weak state management and exists when individuals or organizations have monopoly power over a good or service, discretion over making decisions, limited or no accountability, as what we can see to the political leaders in this country. Corruption is the abuse of public office for private gain.
Now if we carefully analyze the discussion, we can find that the corruption significantly effect the transactions made in the circular flow diagram of economy. First, government does not provide welfare and other services free of cost to the household. In the government hospital this scenario is very crucial. Patients seldom find a doctor in Thana Health Complex. Rather attending the hospital the doctors go to private clinics for their personal income. It is also found that the officials in the government hospital sell the medicine to outside. Government Sub-Registry Office is another most corrupted division in Bangladesh. This government office does not give any service without money.
Again the tax collectors take bribes from the household to manipulate the property and other taxes. They also manipulate income taxes, corporate taxes and VAT in this way.
The firms also spend a lot of money in the form of bribe to avail subsidies and other services from the government.
- Conclusion
Reducing corruption is a daunting challenge, because the factors which enable it are deeply embedded in socio-political and administrative systems. However, Bangladesh can take courage and learn from the examples of other countries which have begun to attack corruption. Countries all over the world are focusing increasing attention on issues of governance and corruption and are investing substantial resources in making their governments more accountable, transparent and responsive to the needs of their citizens. Governance and corruption reforms have become a central issue in many recent elections, and because of democratic reforms, new leaders dedicated to fighting corruption and improving public administration are attaining power as never before.
The countries that are beginning to show signs of early success are those that have unbundled the governance agenda and are implementing programs that address a variety of structural reforms aimed at changing the manner in which their governments conduct business. These reforms present a broad menu of options that Bangladesh can learn from.
- Recommendation
To reduce the impact of government corruption and politics in the economy we can recommend the following actions:
- Establish the office of Ombudsman for curving corruption;
- Reform the anticorruption bureau of Bangladesh for active against corruption;
- Develop comprehensive national strategies for combating corruption;
- Strengthen law enforcement mechanisms, including the role of the judiciary;
- Improve conditions for international investment through simplification of government procedures,
- Improve transparency and accountability in budget preparation, execution, and oversight of expenditure,
- Develop codes of ethics in public administration to be enforced by strong sanctions;
- Strengthen procedures for an effective and merit-based civil service, particularly recruitment, promotion and pay,
- Strengthen parliamentary oversight, independent audit and investigative bodies to be backed by sufficient human and financial resources.
- Enabling the media to effectively exercise public scrutiny;
- Improving ethical and professional standards of journalists and promoting training in investigative journalism.
