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The business of corruption

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The business of corruption

By Geronimo L. Sy

PERHAPS there is no field of economics as overstudied or understudied as the causes, effect, and impact of corruption as a good and a service, as an industry and a business.


There are millions of reports on graft since the beginning of man, his family and his organizations. Corruption is classified scientifically. There are institutes dedicated to the discipline and think tanks whose sole purpose is its control. Yet the phenomenon, though widely experienced and personally distasteful to most while delicious for others, is taken like breathing dark air or drinking brown water.

Coffee money may grease a transaction to make it faster or smoother, or taxes can be collected on bribes, but there is no serious argument that corruption is good for anyone, giver, intermediary or taker, whether in the short, medium or long term. It is after all biblical in the form of a sin. Is it then like the poor who will always be with us?

At its essence, corruption is an abuse of power, authority, or any type of privilege. When it is done with regularity, with a range of fees, dedicated personnel and set processes, it is a business. It is a going concern that is systemic. It is also opportunistic as an enterprise.

For jurisdictions where economic liberty is severely restricted or non-existent, where the honest and hardworking little guy ends up exactly where he started, corruption becomes the mode of making a living. It is a way of life like any other business person running a sari-sari store, a franchise or a monopoly.

There being no sufficient creative outlets or other rewarding channels, he enters some position or takes on a role that is lucrative for him. When the scales of life are skewed, man does what he needs to do to survive and then to thrive.

The default approach to interdicting corruption is via the criminal justice system with specialized laws and agencies. This includes the setting up of an anonymous complaints mechanism, the provision for investigation and prosecution, the judgment of courts and the rehabilitation of offenders. Evolved strategies span increased penalties, simpler evidentiary proofs, anti-money laundering schemes and lifestyle checks.

Other approaches call for increase of salaries of civil servants and focus on prevention and audit. More innovative programs involve use of technology, designing transparency into rules and surfacing information flows.

All these are well and may work here and there, sometimes or often. What is absent is the clear insight that the only way to make corruption go away is to put it out of business, not literally to bankrupt it but to employ a coherent plan of action to compete and beat it. It is not the case of feeding a bigger shark to rid of smaller predators. It is to think of why people go into a business, any business including corruption as an industry. If corruption is not a ‘good’ product or a ‘reliable’ service’ for purveyors and users, it will naturally go away.

In any sector, anyone who provides a better alternative will win market and replace the others. This analogy and analysis to business is valid when there is no underlying offense except for the crime of graft and corruption itself punished by law.

But what about those cases when parties bribe their way out of a crime of murder or of plunder? Not only is bribery a crime but the offense of killing and stealing in large scale are abhorrent to society. In this case, no amount of economic reform or financial engineering can affect the problem of evil. It is through the criminal justice system that the balancing of the scales of divine and human justice takes place.

How do we deal with corruption in the criminal justice system? Is it to add another layer to supervise it — to police the policeman, prosecute the prosecutors, and judge the judges? It is a vexing metaphor of turtles all the way up and all the way down.

The research on the economics of corruption requires the dimensions of rational psychology, behavioral science, motivational theory on the complex issue of why people go wrong. When people fight over a bowl of rice, a property, or an electoral challenge, they are similar only in the way the actors calculate or not. When people extort and bribe, their reasoning is the same justification.

The responses, however, cannot be the same. It is the fallacy of employing the same treatment for similar symptoms but differing causes. The economics of corruption, the crime of corruption and the business of corruption are dimensions for understanding its occurrence. They also serve as platforms of action.