A few years back, I was travelling on a long bus ride through northern Vietnam when, just before reaching our destination, the driver pulled over, got out and, during a brief conversation, passed an envelope to a man in a parked car. On returning and seeing our querying looks, the driver wearily explained he had been paying the “thieves”, a reference to the local police who, as a matter of course, demanded bribes from vehicles entering the town.
Corruption is seldom so visible, which is why its impact can be so hard to measure. Transparency International (TI), an organisation that “gives voice to the victims and witnesses of corruption”, has constructed a Corruption Perceptions Index, which ranks 180 countries and territories by their perceived levels of public sector corruption, according to experts and business people. The least corrupt countries include Denmark, New Zealand, Finland and Singapore, while the worst countries are Somalia, South Sudan and Syria.
Portugal is ranked the 31st least corrupt country out of 180 countries and territories. While less corrupt than the likes of Israel, South Korea, Italy and Greece, Portugal is viewed as having a bigger problem than countries such as Hong Kong, Estonia, Bhutan and Chile. Germany is ninth, the UK 12th and France 23rd.
Portugal rates just below the average score in the EU, a fact that may surprise many of its citizens. A European Commission survey on corruption in 2017 revealed that 92% of Portuguese respondents believed that corruption is a widespread problem in their country, compared to an EU average of 68%, while 42% said that they were personally affected by corruption in their daily life, compared to an EU average of 25%. A staggering 59% of businesses respondents said that favouring friends and family members in public institutions was among the most widespread practices and 70% believed that political connections were required to succeed in business.
But how serious a problem is corruption to an economy? Some people argue that corruption can grease the wheels in inefficient and bureaucratic countries. Indeed, I remember talking to a businessman operating in India, who complained, after the government cracked down on graft, that business was taking longer than usual as he no longer knew who to bribe!
However, corruption is generally agreed to have a major detrimental impact on economic growth. Companies who are prepared to pay bribes will prosper while those that do not will lag behind, and, of course, the companies willing to pay bribes may not be the most efficient!
Corruption can also deter investment. Firms may simply refuse to do business in a country where, for example, they know that the outcome of any business dispute will be decided by who is prepared to pay the largest bribe to a judge. It can also add significantly to operating costs and, in some cases, may make ventures unviable. Carried out on the industrial scale seen in some parts of the developing world, it can cripple economies, even continents.
Take Africa. It may surprise you to learn that, in the 1950s, Ghana, which gained independence from the UK in 1957 under its charismatic leader Kwame Nkrumah, had a similar GDP per capita as Singapore, today a high-tech symbol of Asian prosperity. Ghana also “possessed the most efficient civil service in Africa, the best schools, the most enlightened lawyers … a free press, an independent judiciary and a freely elected parliament”, according to a contemporary report in The New York Times. The newspaper could have added a thriving economy to that list.
Today, Singapore’s GDP per capita amounts to around US$65,000, much higher even than the UK, from which it gained independence (within the Federation of Malaya) in 1957, and its citizens enjoy one of the highest standards of living in the world. Ghana’s GDP amounts to just over US$2,000 and many Ghanaians live in extreme poverty.
Much of Singapore’s success can be traced back to its visionary, first leader Lee Kuan Yew. Almost alone among independence leaders, he waged war on corruption, believing meritocracy and hard work would propel the resource-free, island republic’s economy. Apart from draconian sentences on those found guilty of graft, high salaries attracted the best and the brightest into government service, and eliminated the need to take bribes to survive.
Nkrumah, by contrast, oversaw appalling economic mismanagement and corruption. He was overthrown in a military coup in 1966 after Ghana, once a shining beacon to the developing world, had been reduced to penury. By then, Nkrumah had also accumulated a large personal fortune. Sadly, the country has never escaped the culture of corruption established by its first leader. The latest TI report simply states “corruption exists in all branches of Ghanaian government, and there is often a lack of accountability.
The culprits often enjoy impunity. The judiciary and police are viewed as the most corrupt.”
So, has corruption undermined Portugal’s economic performance? Last December, the Portuguese Economic Journal published a special report on the subject, studying the impact of corruption on economic growth in the country over the period 1980-2018. It found that if the level of corruption in Portugal had been the same as that in Germany, Portugal’s economic growth would have been significantly higher over the study period. It recognised that other factors have undermined the country’s economic performance.
Nonetheless, there is no escaping the fact that Portugal and its citizens would today be a much richer country if its leaders had, decades back, embarked on a Lee Kuan Yew-style war against graft. Corrupt public servants and bankers don’t just steal from today’s citizens, they rob future generations too.
By Anthony Beachey
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Anthony Beachey is a former BBC World Service journalist now working on a freelance basis in Portugal, where he specialises in economics and finance.