標題: Unit 4: Corruption and the economy
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Corruption and the economyMonday, March 17, 2014
by Tom White



Pub economics often explains the plight of poor countries in terms of the problems posed by corruption. That approach might have some value, and to raise the quality of your analysis of this topic, it’s helpful to say why and how it might arise, and the effects it might have. Rich countries are also vulnerable of course.
The Economist has a really helpful couple of articles on this topic, which it calls ‘crony capitalism’.
According to the article, corruption is a issue running through most poor countries, just as it was in the US at the end of the nineteenth century.
Yet a new middle class is flexing its muscles, this time on a global scale. People want politicians who don’t line their pockets, and tycoons who compete without favours.
Much of economics describes corruption in terms of “Rent-seeking” which is a special type of money-making: the sort made possible by political connections. This can range from outright theft to a lack of competition, poor regulation and the transfer of public assets to firms at bargain prices. Well-placed people have made their fortunes this way ever since rulers had enough power to issue profitable licences, permits and contracts to their cronies.
In the emerging world, the past quarter-century has been great for rent-seekers. Soaring property prices have enriched developers who rely on approvals for projects and insiders have gained from the commodities boom (or 'resource curse' in this context).
Some privatisations have let tycoons milk monopolies or get assets cheaply. The links between politics and wealth are plainly visible in China, where a third of billionaires are members of the ruling dictatorship.
Capitalism based on rent-seeking is not just unfair, but also bad for long-term growth. Resources are misallocated: crummy roads are often the work of crony firms. Competition is repressed. Dynamic new firms are stifled by better-connected incumbents. Gradually the rot spreads.
Transparency International Corruption Perceptions Index for 2013
The Index scores 177 countries and territories on a scale from 0 (highly corrupt) to 100 (very clean). No country has a perfect score, and two-thirds of countries score below 50. This indicates a serious, worldwide corruption problem. - See more at: http://cpi.transparency.org/cpi2013/results/#stha...
Crony capitalism across countries and over time
Another article contains an index to gauge the extent of crony capitalism across countries and over time.
It identifies sectors which are particularly dependent on government—such as mining, oil and gas, banking and casinos—and tracks the wealth of billionaires in those sectors relative to the size of the economy.
The idea is to show the scale of fortunes being created in economic sectors that are most susceptible to cronyism.
Rich countries score comparatively well, but that is no reason for complacency - the bailing out of banks has involved the transfer of a great deal of wealth to financiers, for instance.
The larger problem, though, lies in the emerging world, where billionaires’ wealth in rent-heavy sectors relative to GDP is more than twice as high as in the rich world.
Optimistically, the authors hope that corruption may soon go into decline. Firstly, they argue that, rules are ignored less freely than they used to be. Governments seeking to make their countries rich and keep people happy know they need to make markets work better and bolster the institutions that regulate them.
Second, the financial incentives for businesses may be changing. The share of billionaire wealth from rent-rich industries in emerging markets is now falling, from a peak of 76% in 2008 to 58% today. This is partly a natural progression. As economies get richer, infrastructure and commodities become less dominant.
The last reason for optimism is that the incentives for politicians have changed, too. Growth has slowed sharply, making reforms that open the economy vital.