The Cancer Of Corruption

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During my recent visit to a village in a relatively poor district in India, I asked several
individuals whether they have had to pay any bribe to anyone in the recent past. All these
individuals are likely to be considered poor (income less than approximately $1 a day). All of
them reported no. Keeping in mind the fact that this district is not viewed as a corruption-free
district, a number of explanations are possible. It is possible that they have paid bribes without
realizing it. It is possible that they are lying out of fear of persecution. However, the most
plausible explanation in the light of other evidence seems to be that these people are too poor to
have any demand for goods and services, which require bribes. So, how are they affected by
corruption?
Generally speaking, corruption is abuse of public office for private gain (bribery in most cases).
It can take the form of extortion where clients or consumers of various government or public
services have to pay bribes in addition to the official price (license, permits, access to medical
facilities, education, jobs, etc). Corruption can also be collusive in nature where individuals
escape official regulations or sanctions by paying bribes to officials. Because of its nature, it is
difficult to measure corruption.
However, it is possible to survey a large number of individuals, experts and investors and arrive
at some measure of the perceived level of corruption in a society. Suppose we list various
countries according to these perception measures on one side and the proportion of the
population living below the poverty line on the other. Such an exercise shows a high degree of
correlation between corruption and poverty: Countries with high levels of corruption also have
higher levels of poverty. Various explanations are possible, but there is reason to believe that,
although the poor may not pay bribes, they experience adverse effects when corruption is
prevalent. Not only does aid not reach the poor, but they are also excluded from vital goods and
services because they cannot afford to pay the bribe.
Corruption undermines many of the income transfer programs designed to help the poor. In fact,
anti-poverty programs have earned a bad name because of corruption. For example, the
government of India recently sought to implement the National Rural Employment Guarantee
Act (2005). According to the Act, there is a legal guarantee of employment to anyone who is
willing to do casual manual labor at the statutory minimum wage. Each rural household is

entitled to a maximum of 100 days of employment (or equivalent allowance) per year. It was
estimated that 100 days of employment at the minimum wage would be enough to push a
significant proportion of rural poor above the poverty line. However, the Act was greeted with
several articles in the popular press bearing titles such as Corruption with a Human Face,
Rename NREG as Corruption Guarantee Scheme and Will it Reduce Poverty or Fill Corrupt
Pockets?
These articles reflect fears that are not baseless. Recent audits reveal that there is widespread
corruption in many areas. Payments have been made for non-existent public works, money has
been disbursed to fictitious (sometimes long dead) persons, employed persons are paid only a
fraction of the stipulated wage with the rest being appropriated by officials. This is not an
isolated example; anti-poverty programs around the world have encountered similar problems. In
some cases, the leakage from corruption can be as high as 80%.
But leakage is only part of the story. More worrying is the fact that laws and regulations to
apprehend and punish corrupt individuals seem to be ineffective. First, the poor who are the
intended beneficiaries are mostly without a voice and cannot complain or appeal. Second, even
when these individuals are apprehended, they tend to escape punishments because of corruption
in the other parts of the system (police, judiciary, higher official and politicians).
Corruption also severely curtails the poors access to various publicly provided goods are
services like water, health care, credit and education. If access requires a bribe, only the betteroff sections of society will consume of these goods and services. Moreover, corruption erodes the
quality of public goods to such an extent that the population has to largely rely on private
providers. Once again, the poor household loses out. This non-access to vital public goods not
only affects the current generation of the poor, it also perpetuates poverty across future
generations by depriving the children of poor households from education and good health.
Lastly, even if you subscribe to some version of the trickle-down theory where overall prosperity
of the economy will eventually trickle down to the poor, corruption seems to affect the poor
adversely. Barring the experience of some Asian countries where rapid growth in national
income has coexisted with high levels of perceived corruption (China, Vietnam), evidence
suggests that corruption slows down or even reduces economic prosperity in a vast majority of
economies around the world. Certain individuals (especially those in power) may enjoy a
spectacular rise in fortune, but countries fail to achieve their growth potential because of
corruption. Hence, relying on the prosperity to trickle down may not really be an option for the
poor.
Large scale corruption is a real and present danger to the poor, whether or not they themselves
pay bribes. Anti-poverty programs and the provision and quality of public goods are directly and
adversely impacted by widespread corruption. If reducing poverty is a social priority, controlling
corruption must be an even greater one.