Why do some corrupt regimes do very well and others badly?

This list is neither complete nor exhaustive. Saddam Hussein and his cronies might have skimmed more than some of the above rulers.

Now the point of discussion is: Why do some corrupt regimes do very well and others badly?

If we take the case of Indonesia, we see the income of Indonesian’s quadruple to $1000 per capita under the regime of Suharto. Indonesia’s economy during 1980-1990, showed miraculous uptrend, graduating from a mere commodity producer it became a big exporter to manufacturers. During this golden period under Suharto poverty, infect mortality and fertility plummeted while the literacy soared high. The era ended in ruins during the Asian Financial Crisis, but that event upended regimes from Korea to Bangkok. The achievements during the period had remained impressive and remarkable.

On the other hand, Mobutu left Zaire poorer and in more desperate condition than ever, like Nigeria and Haiti, where too, no progress was made. Marcos and Fujimori tried to rebuild the collapsing economies amidst lot of praise for their efforts, but the prevailing corruption and maladministration eroded the initial gains seriously.

If we look at transparency international's list of 133 countries ranked. In order of corruption, we will find that the well-off western countries all figure in the top of 35. Singapore, the most successful developing country, ranks at 5, Botswana Africa's star performer, ranks at 30, the Scandinavians are generally regarded the most honest (Finland is No.1) and the USA comes a bit lower at 18. Paradoxically, some of the poorer countries are also among the most corrupt and some of the less corrupt are progressing.

Again it is difficult to find any correlation between corruption and economic growth. Some of the fastest growing countries in the world are also in the bottom half of the corruption list. China stands at 66, India at 83 (alongside Malawi), Russia at 86 (alongside Mozambique) Vietnam at 100 (alongside Guatemala and Kazakhstan).

Corruption in long run may destroy the whole society morally, ethically and economically. May be in the long run, a country needs clean government to reach the top of the income ladder, may be rapid income growth by itself induces better accountability and governance, may be corruption in long run degenerates the society into several misfortunes and evils. But one fact still stands out: Clean government is not a necessary condition for rapid economic growth.

Bangladesh stands at the last of list of 133, yet it has been growing at five percent annually for a decade. Italy, the most corrupt country in Western Europe, has been one of the fastest growing economies. Corruption is often a good predictor of eventual economic crisis, yet when Argentina (92) went bust, the ensuing financial crisis also consumed its neighbors Uruguay which ranks at 33.

The puzzle to ponder is why does corruption coexist with both good and bad economic performance? Why has India over the decades grown more slowly than Indonesia despite less corruption?

A survey conducted for World Development Report some years ago, find one answer. Businessmen in surveyed countries said that the main problem with corruption was that it increases risks and uncertainties. The risks declined dramatically, if corruption produced reliable outcome (as in Indonesia). If all players have to pay 10% and could sure of getting their licenses (Madam Suharto was called 10%) entrepreneurs could treat this as just one more tax, factor it into their calculations of profit and so could invest with confidence of sure gain. Most businessman fear the arbitrariness where some entrepreneurs pay huge sums in vain, while others pay little or nothing and succeed. This happens when there is much discretion in decision making.

It also happens when some decision makers are corrupt and others are not. India is such a country where entrepreneurs are not sure of the things, some decision makers are corrupt and others are honest. One more crucial things about India is the rule of nepotism, rule of criminals and blackmailing through other modes even after paying demanded money. Arbitrariness in decisions, unreason ability of demands makes the business wary of dealing in such cases. There is a saying in India that we have honest politicians, who take money and do the needful, dishonest politicians who take money and do not deliver the goods and madmen who do not take money at all. In this lexicon, Suharto was both honest and sane and delivered the goods.

The worst situation is when the ruler extorts without giving anything in return, this seems to be a case in Zaire and Nigeria. Finally, the quality of institutions seems to be the most important factor for the growth of a country. If the institutions work even moderately well, progress is possible even if money is skimmed off at the top. But if the institutions are incapable of enforcing any rights, corruption will hasten economic collapse.

So far Indian economy is concerned the slow progress is the result of lack of decision making at higher levels. Many politicians who takes money but could not enforce their will because of powerful lobby of bureaucrats at many places and in a democracy like India, voice of media, voice of opposition could suppress the wish of the leader. Ours is a peculiar democracy where politicians are corrupt but not authoritative, ours is a multi-party system where leg pulling for no cause, accusation without any evidence is common. Instability in political system is also responsible for the slow economic progress where the Prime Minister is always busy in satiating the coalition partners to keep attached. So far quality of institutions are concerned we are having well matured corporate and the fast development reflected during the last years, has brought stability in the country and good relations with the neighboring nations.

India’s economic growth on an average 6% GDP despite considerable corruption is because of the stability and the liberalization measures taken by the present government, gradual privatization of various sector, reducing bureaucratic intervention in routine work and other measures adopted by the government. It is important to note that growth in some States, where institutions are strong and decision making is least arbitrary is faster than other States.

In brief, it can well be concluded that corruption and economic growth has no clear correlation. Strong institutions, political stability, fast and reasonability in decision taking are some of the requirements for fast economic growth.