One of the most pressing pathologies facing developing economies is corruption. The very word is loathed by all people, even when they benefit from it. Many studies have claimed that corruptions impede economic growth (Mauro, 1995; Mo, 2019), stunt the delivery of goods and services (Olken & Pande, 2012), and cause a host of other efficiency-related issues. The global south suffers the adverse effects of corruption, since countries with the worst scores on corruption perception index (CPI) are developing nations. Only Singapore, a country with a colonial history in Asia, managed to finish in third place in 2024.

At first glance, this condition is alarming. As countries are struggling to attract investments, create jobs, and increase economic growth, the prevalence of corruption in the global south deters the objective of inclusive growth and social justice. However, this concern is only valid when we take the underlying assumption for granted: all kinds of corruption affect all nation-states negatively. Upon closer inspection and a review of recent studies on related topics, this assumption might be contested (Ahmad et. al., 2012; Ang, 2020). Corruption might have a positive effect on economic growth in the short run (Leff, 1964; Huntington, 1968; Ang, 2020).

Defining and Typologizing Corruption

Corruption is hard to define. This piece will not discuss this at length. For now, Khan’s definition of corruption is sufficient. He refers to corruption as a “behavior that deviates from the formal rules of conduct governing the actions of someone in a position of public authority because of private-regarding motives such as wealth, power, and status” (Khan, 1996). Central to this definition is the assumption of a surplus of power. Bureaucrats engaging in corrupt practices possess power in two senses: the legal authority they get from the formal rules and the possibility to deviate from the formal rules due to the absence of proper checks and balances. 

We know that there are many kinds of corrupt transactions practiced by officials and their counterparts, such as collusion, bribery, nepotism, extortion, theft, gratification, and others. For analytical purposes, corrupt practices are hard to conceptualize. One reason has to do with the fact that illegal practices in certain countries might be legal in other countries. Some examples are lobbying practices in the US, leveraging tax havens to avoid taxes, and donating to political campaign. Another reason would be how to differentiate corruption with other forms of crime, like theft. Add economic growth into the equation, models for understanding corruption may be tricky to build. 

Progress has been made and scholars have tried to come up with ideas to understand the forms and effects of corruption. Interestingly, some of the effects are actually ‘desirable’ when they are viewed from the vantage point of economic development. Different outcomes might lead to different ethical considerations. However, as I will show you, this exercise might lead to an awkward policy recommendation, especially when corruption produces desirable outcomes. 

A bit of a disclaimer: I do not endorse corrupt practices of any sort. Improvements should be made. However, acknowledging the possibility of a counter-intuitive conclusion will help us understand the nature and possible ways to deal with corruption, or to address things that might give rise to illicit transactions in the first place.

Greasing the Wheel of Development

The title of this section looks absurd, but bear with me. In 1964, Nathaniel H. Leff wrote a very interesting yet controversial paper. He argues that corruption might have positive impacts on economic development. His argument is, to a large extent, plausible. Some possible benefits of corruption are changing the attitude of bureaucrats toward economic enterprises, reducing uncertainty and increasing investment, safeguarding (rather than impeding) innovation, increasing competition, providing a hedge against bad policy (Leff, 1964). Except for the last point he made, Leff’s arguments suffer from a lack of evidence. Nevertheless, allow me to entertain the idea a little bit using hypothetical scenarios.

Take the first point, changing the minds of bureaucrats regarding economic activities. Imagine a country like North Korea which has no business whatsoever to develop or create an institution that promotes economic growth. In such a country, entrepreneurial spirits are suppressed since government’s sole aim is to expand political control over its citizens. When the only way to set up a new economic activity is through bribing, then it might be desirable to do so. Leff’s (1964) other arguments are equally plausible in hypothetical scenarios. 

The last point is supported by some evidence. Governments do not always come up with good policies and corruption might deter the negative consequences from bad policies. Leff (1964) marshaled the case of Brazil and Chile in responding to inflation caused by the rise of food prices. Both Brazil and Chile responded by freezing the food prices. In Chile, the bureaucrats were honest and they worked hard to maintain the food prices. However, the policy stagnated food production, making the inflation rate spiral out of control. The Brazilians, however, managed to limit the course of inflation because of collusions between food producers and corrupt officials.

The comparative story between Brazil and Chile is very counter-intuitive and we need to proceed with a critical eye. It should be noted that most economists and development experts still view corruption as “sanding” instead of “greasing” the wheel of development. However, if this is the state of the world, then finding conditions under which corruption promotes growth becomes even more important. What those conditions might be? 

A study by Spyromitros & Panagiotidis (2022) provides some lead for the question I posed above. In their study, they try to test whether or not corruption impedes growth. The general findings show that corruption clearly impedes growth. However, when the data are disaggregated into certain regions, they find that corruption promotes growth in the Latin American countries (which corresponds neatly to the cases of Brazil and Chile above). 

I derive two interpretations from this study. First, corruption might be favorable in certain conditions, although we do not yet know precisely what those conditions are. If one departs from Spyromitros & Panagiotidis (2022), then students should pay closer attention to countries in Latin America and try to find the conditions in which corruption might spur economic growth. Secondly, the study is a gentle reminder of how diverse countries in the global south are. I am not saying that no generalization about the Global South can be made. However, any good and parsimonious generalization will always pay attention to nuances.

Forms of Corruption

Allow me to take readers to another context. Perhaps, the most successful story of economic growth in the Post-Cold War era is China. The depth and breadth of China’s economic development is truly remarkable. Averaging over 9% GDP growth since the 1980s, China has managed to lift more than 800 million people out of poverty.

As impressive as China’s story is, there is a hidden paradox between its path towards economic growth. Ang (2020) argues that China has sustained a high level of economic growth despite rampant corruption. From 1995 to 2016, there were only two countries in the world that managed to acquire almost 11 trillion US dollars in absolute GDP growth. They are the US (representing the cleanest countries in the world) and China (representing corrupt countries).

So how did China achieve such a level of growth, despite suffering from vast corruption? What kinds of corruption does China engage in? Ang (2020) puts forward four types of corruption: petty theft, grand theft, speed money, and access money. The first two types are simply harmful to the economy. They may involve rank-and-file bureaucrats and even a state leader. When theft is carried out by street-level bureaucrats, it is considered petty theft. On the other hand, consider the corruption case of 1MDB involving Najib Rajak in Malaysia as grand theft. Speed money and access money are more ambiguous. Speed money can be equalized to simple bribery in exchange for bureaucratic efficiency. The effects of speed money are still a subject of debate. In the case of China, and some other developed countries, access money is more prevalent. 

Access money does not involve small bribery aimed at “speed things up.” Rather, it involves exchanges between state officials and big businesses, trading high-stakes reward with access to exclusive privileges. Think of a monopoly in the oil market or construction projects initiated by the government. Such monopolies are awarded by government officials to designated enterprises, which in turn provide hefty kickbacks to the officials.

Ang (2020) argues that “access money, …, is the steroids of capitalism” and I believe that this assertion is plausible. After all, having bureaucrats that serve the interest of capitalists to grow might boost the economy. However, there are adverse consequences from such practices including inequality and systemic risks. This is evident when one looks at the soaring Gini Coefficient in China, which sits at 46.6 in 2021. Nonetheless, reviewing Ang shows us that there are certain cases where certain forms of corruption actually spur growth.

The Ethical Considerations

The prevailing assumption is clear: corruption is inherently bad in all cases. Even when it leads to economically desirable outcomes, it is still unethical. Such a sweeping claim is understandable since we can argue that illicit transactions such as corruption do more harms than good. However, I urge readers to be more attentive to the specific conditions that render certain corrupt practices immoral.

Attention to detail is necessary here for two reasons: (1) different ethical assumptions lead to different conclusions; and (2) different situations might lead to different conclusions. Consider the never-ending debate over the trolley problem between two groups of moral philosophers: deontology and utilitarianism. They generate starkly different conclusions when faced with the same moral dilemma. In the case of corrupt practices, a utilitarian might evaluate whether such actions maximize the overall happiness of the community. On the other hand, a deontologist might say “no,” all corruptions are bad regardless. 

Now let’s address my second point using another hypothetical scenario that is not directly linked to the issue of economic growth. It is well-known that the Israeli Government re-blocked aid access to Gaza in early March this year. At that moment, the people of Gaza were barely surviving, let alone making any form of economic progress. Now, suppose there are circumstances in which it is possible to transport some children from Gaza to safety by bribing corrupt IDF officials stationed at the border. Is this bribery ethical? I would say yes. Of course, counter-arguments are needed to sharpen my case. However, notice that what I am trying to achieve is to showcase the possibility of ethically permissible corrupt practices.  

Concluding Thoughts

I am aware that the cases I use in this piece might be “the exceptions rather than the norm.” However, being ignorant to the exceptions might cost lives. As mentioned above, the policy recommendation is absurd: Officials living in countries with X condition(s) are allowed to engage in corrupt practices. Such a conclusion would only be defensible if my reasoning holds. Therefore, before arriving at what may well be a hazardous conclusion, I would ask the reader to join the conversation regarding corruption and economic welfare in the global south.