Corruption undermines state\'s legitimacy

According to a United Nations Development Programme (UNDP) Report, "Corruption is widespread in social services such as health and education, as well as in public utilities that provide electricity and water. As a result, poor people find themselves excluded from schools and hospitals that they cannot afford, or asked to pay extra simply to gain access to services to which they already have a right." The same report claims that standard kickback for infrastructure projects in Asian countries is often quoted as 10 per cent of contract value, though it is thought to be 20 per cent to 40 per cent in some countries. Corruption takes place at all stages of the project cycle, which includes project selection, planning and inspection, design, bid and contract signing, construction, service delivery, maintenance and management, subscription and billing, disconnection and fault redress. The  report further claims that corruption is often at its worst in justice systems, where the police, public prosecutors, court officials, lawyers, judges - all can demand payments, not just for doing the job but also for diverting justice from its right course. Based on a large body of empirical evidences and research, the UNDP pointed out numerous damaging effects of corruption including weakened national institutions, inequitable social services, blatant injustices in the courts, widespread economic inefficiency and unchecked environmental exploitation. 
The World Bank stated that corruption was a reflection of existing behavioural patterns, social values and norms of a society. Various reasons were cited like the nature of regulatory environment, lack of transparency, weakness in the legal framework, discretionary power of the bureaucrats, self-sustaining cycle of corruption, etc., as responsible for this social malady. Specific and general actions suggested by the World Bank to overcome the problem included: formulating medium-term programme to combat corruption, initiating a public awareness campaign, increasing citizens' access to information about government policies and decisions, repealing the Official Secrets Act, increasing civil service compensation packages, introducing judicial reviews and establishment of an office of Ombudsman. 
According to the World Bank, some corruption stems from opportunities generated by the environment at the bottom or top of the policy hierarchy. Payoffs are frequent to lower-level officials engaged in collecting tariffs, providing police protection, issuing permits and so on. When corruption becomes endemic, these officials may create additional red tape and hindrances to elicit even higher payments. Corruption also occurs at the highest levels of government, while awarding major contracts, privatising state-owned enterprises, allocating import quotas and regulating natural monopolies. Any policy that creates an artificial gap between demand and supply generates profitable opportunity for rent-seeking activities by opportunistic middlemen.
The probability of being caught and punished (for the person paying the bribe and for the official receiving it) also affects the level of corruption. Economic analysis of the law suggests that individuals weigh the expected benefits of breaking the law against the expected costs (the probability of being caught and punished multiplied by the level of punishment). Corruption may be high in a country where the government system does little to deter bribes, lawbreakers believe that there is little chance of being caught, or if caught, not having to pay the penalty, since they believe that the system of justice itself can be corrupted. Corruption can persist even in countries with substantial press freedom and public resentment against it, if there is little hope of independent judicial resolution of important cases. 
Corruption can thrive if the consequences of getting caught and disciplined are low relative to the benefits, especially in circumstances where officials frequently control the allocation of benefits and costs, whose value far exceeds their own salaries. Its likelihood increases if the salaries of public servants do not tally with comparable private sector salaries. Where civil service salaries are very low, officials may try to maintain a middle-class lifestyle by supplementing their pay with illegal payoffs. The above explanations tally quite well with the realities on the ground in South Asia. 
The body of theoretical and empirical research that objectively addressed the economic impact of corruption has grown significantly in recent years leading to five broad conclusions. First, corruption is widespread but there are significant variations across and within regions. Second, corruption raises transaction costs and uncertainty in an economy. Third, corruption usually leads to inefficient economic outcomes. It impedes long-term foreign and domestic investment, misallocates talent to rent-seeking activities, and distorts sector-based priorities and technology choices. It pushes firms underground, undercuts the state's ability to raise revenues and leads to ever-higher tax rates levied on fewer and fewer taxpayers. As a result, it reduces the state's ability to provide essential public goods, including the rule of law. A vicious circle of rising corruption and underground economic activities may result. Fourthly, corruption unfairly imposes a regressive tax that falls heavily on trade and service activities undertaken by small enterprises. Fifth, corruption undermines the state's legitimacy. All these find reflection in the socio-economic and political milieu of the countries of South Asia.
Dr. Helal Uddin Ahmed is a former editor of Bangladesh Quarterly, currently a freelance writer cum translator.
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