Introduction

Researchers at the World Bank estimate that $1 trillion is spent on bribes annually, some 3% of global GDP. The impact on economic growth and world income could well be much higher than this. Corruption is one symptom of a failure to achieve an appropriate balance between private wealth and public power. Ultimately, there is a risk that government will be captured by powerful interests and rendered dysfunctional. Both private citizens and companies are then drawn into the cycle of bribery, forced to pay corrupt officials to obtain routine services and major contracts and concessions.

Global solutions to this challenge are difficult to find because corruption and poor governance have a variety of causes. Solutions are not easy to implement because they disadvantage powerful vested interests that can block reforms. Despite these caveats, carefully tailored policies – carried out with the personal commitment of those on the ground – can have large benefits and very low costs.

Research on the causes and consequences of corruption

Before looking at reform proposals, we should examine the empirical evidence on the causes and consequences of corruption.

Cross-country comparisons show that, on average, rich countries have less reported corruption and better functioning governments than poorer ones. High levels of corruption are associated with lower levels of human development (for example, as measured by the United Nations Human Development Index, a composite measure of health, education, and income).