III. The Growth Process - 3

What about the effects of the growth
process on the extent of corruption? Although
the requisite time-series evidence
in terms of hard data is absent,
circumstantial evidence suggests that
over the last 100 years or so corruption
has generally declined with economic
growth in most rich countries (and in
some developing countries, like Singapore,
it is reported to have declined
quite fast in recent decades). While the
historical relationship between economic
growth and corruption is thus
likely to have been negative in general,
it is possible to envisage some nonlinearities
in this relationship: in particular,
in some countries with the process
of modernization and growth corruption
may have got worse for some
time before getting better. What kind
of forces work toward possibly increasing
corruption at the earlier stages of
economic growth? As the economy expands
and becomes more complex, public
officials see more opportunities for
making money from their decisions,
which now go beyond simple functions
like maintaining law and order and collecting
land revenue. As the markets in
many new products are “thin” for quite
some time, this gives scope for those officials
to milk the process of granting
monopoly rights and franchises. In the
process of transition from controlled to
market economy in Eastern Europe,
China, and Vietnam it has often been
observed that there are some special
factors increasing corruption even as income
grows. For a considerable period
of time the transition economy is on a
dual-track system: a part of output is
still under obligatory delivery at controlled
prices, while the rest is allowed
to be sold at market prices. This creates
all kinds of new opportunities for corruption.
The process of privatization of
state-owned enterprises in many countries
has also given rise to opportunities
for public officials to get kickbacks
from “crony capitalist” buyers of those
enterprises and contractors.