Chapter 14 Corruption and Development by John Mbaku1.Introduction1. Introduction1.Introduction, contd.Slide 51.Introduction, contd1.Introduction, contd. How to deal with Corruption - General Approaches2. Defining & Explaining Corruption2. Defining & Explaining Corruption cont.2 Defining & Explaining Corruption cont.3. Causes of Corruption2. Defining and Explaining Corruption cont.- Cultural Factors3. Causes of Corruption in Africa4. The Public Choice Perspective in understanding Corruption5. One-Party Political System and Corruption-Centralization of Power5. One-Party Political System & Corruption- cont.6. Statism and Corruption in Africa7. The Impact of Corruption On African Economies7.The Impact of Corruption On African Economies7.Ways of Minimizing Corruption On African Economies8. Traditional Corrupting Cleanup Strategies8.Traditional Corruption Control Strategies9. Rules, Institutions and Public-choice Approach to Corruption Control9.The Public Choice Approach to Corruption10. Producing Self-Enforcing Constitution11. Challenges to Constitutionalism in Africa12. Summary and ConclusionRead Chapter 9-Agriculture for ThursdayEcon 388 T2-AnswersEcon 388 T2 CurveChapter 14 Corruption and Developmentby John Mbaku Summary: 1.Introduction, 2. Defining Corruption,3. Causes ,4. Public Choice Perspective, 5. One party Systems & Corruption, 6. Statism & Corruption, 7. The Economic Impact of Corruption , 8.Traditional means of fighting corruption, 9.New ways of fighting corruption-Institutions & Public Choice Approach, 10. Self-Enforcing Constitution, 11.Challenges to Constitutionalism in Africa, 12. Summary and Conclusion1.Introduction•Corruption is the use of public resources for private gain.•Corruption is an opportunist behavior aimed at producing benefits for individual or group at the expense of society•Corruption can be measured by corruption Index(CPI), which ranks countries based on how investors, political and risk analysts, and the public perceive levels of corruption.•The Index ranges from zero (high corruption), to 10 ( highly clean-minimum corruption)•The CPI is based on 1999 data is shown in table 14.11. Introduction•Based on CPI data, Denmark (CPI=10)and Finland (9.8) are the least corrupt or top two cleanest states. Nigeria (CPI=1.6) & Cameroon (CPI=1.5) are the most corrupt states.•Of the 10 most corrupt economies 4 are in Africa (Cameroon, Nigeria, Tanzania, Kenya)•Others- such as Botswana, Mauritius, Namibia, and South Africa are have relatively less corruption & making progress1.Introduction, contd.•Corruption Debates- Two Views•View 1- It may encourage inefficiency and discourage wealth creation and growth..•View 2: It may “grease” wheels of bureaucracy, and make government more responsive to the needs of investors and society.1.Introduction, contd.•1.But, studies show corruption has negative effects on economic development by contributing to less effective governance and retarding wealth creation, reversing democratic gains made since the end of the cold war, making economies less able to sustain viable and effective economic systems.•2. Cost of public service is high to provide more income to civil servants- contributes to high transaction costs1.Introduction, contd•3. Increases the burden of the public sector on citizens. 4. It demoralizes, and leads to political opportunism such as ‘rent seeking” that contribute to inefficiency. •5. Leads to inability of a government to sustain professionals and administrators, •6. Encourages the underutilization of skilled and educated labor cost or the ‘brain drain’.., •7. Distorts international trade and investment, •8. discourages investment and leads to capital flight, •9. May stunt innovation and introduction of new technologies.1.Introduction, contd. How to deal with Corruption - General Approaches•Examining the incentives and rules that regulate socio-political interaction of society and change those incentives if they are flawed.•Promote good governance that is accountable, transparent, honest, participatory, guarantees economic freedom, rights of individuals to freely exchange and contract, based on well secured property rights by law.•Move forward with constitutional reforms with constitutional limits on government officials to prevent abuse of power, guarantee economic freedoms, and to controls negative incentives. A clear delineation of political/public activities from private economic activities is necessary.2. Defining & Explaining Corruption•1. Two elements: Poor Performance of a public duty and deviations from the rules that regulate civil servants. A public servant can be corrupt if the his performance sacrifices the principal (citizens) for his own benefit.•Corruption in Africa is understood in practical terms such as: theft of public resources by civil servants, embezzlement, illegal extraction of public resources, nepotism, favoritism, bribery, etc…2. Defining & Explaining Corruption cont.•Corruption is an extra-legal institution used by individuals or groups to influence the bureaucracy for self-serving reasons.•In Nigeria and Cameroon, minority ethnic groups are denied for effective participation in governance. Anglophones are excluded from economic and political participation in Cameroon. •In Nigeria, ethnic minorities in the Delta Region are battling the federal government over natural resources and oil. Nigeria, state institutions are used by individuals and groups as tools of plundering local wealth. Rebels have began to kidnap oil company executives. Nigeria is the 5th oil exporter to the USA2 Defining & Explaining Corruption cont.•The Second Determinant of Corruption is inefficiency & incompetence of the civil service.•Citizens and businesses have no effective way of monitoring opportunistic way civil servants.•In Zaire, 1979, the World Bank determined about 92% of state employees were not able to meet their subsistence needs with their legal salaries. So, they have to take bribes.•Income inequality is another factor. Some teachers and professors are not paid on time in Nigeria, Cameroon and few other countries. So, they are compelled to engage in corruption3. Causes of Corruption•1. Most Corrupt State- Example-Nigeria is a leader where institutions are used by individuals as tools of plundering citizens.•2. Incompetence and inefficiency of civil service.•3. Poverty and severe inequality in income.•4. Cultural