Karla Ray Mendoza

BSBA-II

Categories of Corruption

Political corruption is the use of power by government officials for illegitimate

private gain. An illegal act by an officeholder constitutes political corruption only if the
act is directly related to their official duties, is done under colour of law or involves
trading in influence. Forms of corruption vary, but include bribery, extortion, cronyism,
nepotism, patronage, graft, and embezzlement. Corruption may facilitate criminal
enterprise such as drug trafficking, money laundering, and human trafficking, though is
not restricted to these activities. Misuse of government power for other purposes, such
as repression of political opponents and general police brutality, is not considered
political corruption. Neither are illegal acts by private persons or corporations not
directly involved with the government. The activities that constitute illegal corruption
differ depending on the country or jurisdiction. For instance, some political funding
practices that are legal in one place may be illegal in another. In some cases,
government officials have broad or ill-defined powers, which make it difficult to
distinguish between legal and illegal actions.
Corruption is considered a strong constraint on growth and development. The academic
literature, however, finds different effects of corruption on economic performance.

 Some research considers corruption a ‘grease the wheels’ instrument.

In this view, corruption helps to overcome cumbersome bureaucratic constraints,

inefficient provision of public services, and rigid laws (Huntington 1968, Lui 1985, Lein
1986), especially when countries’ institutions are weak and function poorly (Acemoglu
and Verdier 2000, Meon and Weill 2010).

 Other papers argue that corruption only reduces economic performance.

This is due to rent seeking, an increase of transaction costs and uncertainty, inefficient
investments, and misallocation of production factors (Murphy et al. 1991, Shleifer and
Vishny 1993, Rose-Ackerman 1997) that come with corruption.

 A third stream finds ambiguous effects of corruption can be illustrated with

respect to public finances in new EU member states.

Hanousek and Kocenda (2011) show that reductions in corruption either increase or
decrease public investment, depending on the country and its institutions.

On the other hand, improvements in the corruption environment are mostly associated
with better fiscal performance (decreases in the deficit as well as debt).
 Corruption affects us all. It threatens sustainable economic development, ethical
values and justice; it destabilises our society and endangers the rule of law. It
undermines the institutions and values of our democracy. But because public policies
and public resources are largely beneficial to poor people, it is they who suffer the
harmful effects of corruption most grievously.

To be dependent on the government for housing, healthcare, education, security

and welfare, makes the poor most vulnerable to corruption since it stalls service
delivery. Delays in infrastructure development, poor building quality and layers of
additional costs are all consequences of corruption.

Many acts of corruption deprive our citizens of their constitutional and their
human rights.
 It is a paradox that living in a globalized world, at a time when we are
permanently connected, information is available immediately, and people travel more
frequently and further distances, we live our lives in an individualistic manner. It is as if
our everyday choices of what we consume and our ethics when doing business didn’t
have any consequences on the planet and its people.

We have lost our sense of belonging. The main hurdle for sustainable
development seems to be corruption.We only take responsibility for relatively small
things, limiting our sense of belonging to a reduced circle which we consider ours.
Under this notion, corruption is a vicious cycle when someone searches a personal gain
through unethical means or abuse of power.

However, one act of corruption touches many people’s lives. One example is
the HSBC case on palm oil deforestation in Indonesia reported by Greenpeace
International. Loans and financial services from the bank benefitted 6 palm oil
companies whose operations destroyed vast areas of rainforest including orangutan
habitat, seized land from local people, operated without legal permits, abused workers
and used child labour, caused forest fires, draining and developed carbon-rich peatland.
The effects that all of these have on the local communities go such a long way that it is
hard to quantify, and according to the report, it breaches HSBC’s own policies on
sustainability.