Saturday, November 26, 2005


It’s a corrupted … corrupted … corrupted World !!

As everything else in the Science of Economics, corruption has a very well defined function. Not a positive function, to be sure, but very well defined. Corruption is in fact viewed as a barrier to economic development, a relic of the past wherein ambition and good will are impeded to flourish for the common good of society. As such, unfortunate people that live in a corrupted society are locked into a never-ending cycle of misery.

Corruption is economically defined as a practice or set of practices of dishonesty so widespread and powerful to interfere with the natural flow of process and equilibrium of free-market economic forces such as supply and demand. Whereas dictatorships or other undemocratic forms of government are by their own very nature corrupted, corruption is very much real in democracies as well. The general tendency of corruption is to create “oligopolies” – from the Greek words ‘oligos’ [few] and ‘polis’ [power] – that is market situations that are controlled or dominated by few. Oligopolies are, of course, similar to monopolies and more detrimental in many respects.

In order to expose and fight corruption, several watchdog agencies have sprouted all over the world in recent times. The most credible and thorough of them all appears to be Transparency International (TI), based in Berlin, Germany. TI is the only watchdog agency entirely financed by the private sector, and with a policy of emphatically refusing governmental contributions. It is also the largest, with over 85 chapters around the globe and surveying 64 countries. TI is the creator of the Corruption Perception Index (CPI) report that neatly locates each country surveyed on a score from 1 (very high level of corruption) to 10 (clean score). CPI findings are astounding and at the same time remarkable. They speak a lot about how government and institutions are perceived and how wealth, culture and lifestyle influence the development and spread of corruption through all levels of society. More than two-thirds of the 159 countries surveyed show a serious and worrisome level of corruption, and nearly half of them scored no better than 3. The worst, in fact, are Chad, Bangladesh, Turkmenistan, Myanmar and Haiti – also the poorest countries in the world.

On the other hand, wealth is no deterrent against corruption. For instance, in Canada and Ireland there is a marked increase in the level of corruption in 2005 over 2004 and 2003, whic has increased progressively over the past ten years. Canada scored an 8.4 and Ireland a 7.2 in 2005. The classification, from best to worse, of the G7+1 industrialized countries is as follows: U.K (8.6), Canada (8.4), Germany (8.2), U.S.A. (7.6), France (7.5), Japan (7.3), Italy (5.0) and with Putin’s Russia scoring a very low 2.4. The G7 are all eclipsed by the scores of the scandinavian countries, with Finland (9.6), Denmark (9.5), Sweden (9.2) and Norway (8.9).

The three winning runner-up are Iceland (9.7), Finland (9.6) and New Zealand (9.6) and the three worst countries, in descending order, are Haiti (1.8), Bangladesh (1.7) and Chad (1.7). Norway (8.9), Australia (8.7) and Austria (8.6) all registered improvements over 2004. China has scored a meager 3.2, quite a contrast with Hong Kong (8.3) and Taiwan (5.9).

Unfortunately, Central and South America, notorious powerhouses of corruption, have lived up to their reputation. Save and except for Chile that sets the example with an enviable score of 7.3, the rest of the pack lags well behind: Uruguay (5.9), Costa Rica (4.2), El Salvador (4.2), Colombia (4.0), Cuba (3.8), Brazil (3.7), Mexico (3.5), Peru (3.5), Honduras (2.6), Nicaragua (2.6), Bolivia (2.5), Ecuador (2.5) – and somebody should inform Hugo Chavez that Venezuela is the last at 2.3.

The lessons are clear: risk factors such as government secrecy, inappropriate influence of elite groups and distorted political finance apply to both wealthy and poorer countries, and no rich country is immune to the scourge of corruption. Stamping out corruption and implementing reforms are critical to realizing the crucial human and economic development goals that all people are entitled to.

Luigi Frascati


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Real Estate Chronicle

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