Why Corruption Is an Economic Issue

A CNBC pre-election survey concluded that government corruption was the top voter concern. Similarly, an AP voter poll confirmed that corruption ranked with or above gas and grocery prices. Meanwhile, we know that corruption concerns extended beyond U.S. borders.

So, let’s take a look.

Global Corruption

The CPI Index

Naming countries with corruption concerns, the World Political Review cited Serbia, Hungary, Nepal, Albania, and Brazil. Instead, though, the Corruption Perceptions Index (aka CPI), through 182 scores, illustrates the whole picture. As a result, we have Denmark, Finland, Singapore, New Zealand, and Norway in the top five slots with the least perceived corruption. Sadly, behind France, the UK, and Japan, at #64, the U.S. tied with the Bahamas. Then, far below, between 177 and 181, they listed South Sudan, Somalia, and Venezuela.

To calculate their index, the CPI included perceptions of bribery and “public officials using public office for private gain without facing consequences.” Also, it observed the prevalence of nepotism, “state capture by vested interests,” and whether corrupt behavior was adequately prosecuted.

This is the whole list:

Our Bottom Line: Corruption Economics

Returning to Adam Smith’s laissez-faire, a market with dependable rules functions best. Consequently, because bribery, less contract enforcement, and state capture multiply transaction costs, they constrain market activity.

In the Index of Economic Freedom, corruption is a government integrity metric. Displaying that market economies depend on the rule of law, the Index penalizes nations that engage in corrupt practices. Paralleling the CPI, as the government integrity score plunges, the free market score rises to repressed.

In the “Freedom Index,” high government integrity scores belonged to Australia, Denmark, Norway, and New Zealand. Meanwhile, they also were in the top 20 for a free market. At the same time, Nigeria, Russia, Turkmenistan, and Cuba populated the bottom. However, we should note that there were anomalies with weaker institutions and a functioning market, like Mexico.

My sources and more: Knowing that corruption was a top election issue, we began there. After that, the World Politics Review and the  CPI (Corruption Perceptions Index) came in handy as did the Index of Economic Freedom.