Corruption has a negative relationship with economic growth. The social cost of corruption is measured by distortions of incentives, the loss of output due to the misallocation of public resources and other inefficiencies in government caused by the corruption (Jennings, 2015). Most importantly, corruption reduces public’s trust in the government in turn reducing the government’s ability to fulfill its main task of providing adequate services. When the public has no trust in the government, it makes it hard for the government to provide any services since everything will be viewed suspiciously.

With corruption, there will be inequality in the society. Some people will have excess resources at their disposal which are otherwise meant to help the society and are now benefiting an individual. This will hinder societal growth. A social project will have a higher value than a private individual project in any society (Jennings, 2015). Investors willing to invest in social projects will not do so since they do not trust the government.

In the developing countries, the private sector is a major contributor to economic growth through providing employments and paying taxes. Corruption does not provide a conducive environment for the private sector to develop. While private firms are faced with bribe demands, they may choose to relocate in this global market (Jennings, 2015). A company can relocate to another country where there is no corruption.  With relocation, people will lose jobs and the government will lose taxes. An increase in unemployment is harmful to the economy and if several companies relocate, the effects will be huge.

Reference

Jennings, M. (2015). Business ethics: case studies and selected readings (8th edition).  Stamford, CT: Cengage Learning.

Response to Daniel Bailey

Hi Daniel, great line of thought over there, corruption has a negative relationship with economic growth. When there is no trust between the government and the people, the level of investment in the country goes down. Take for example a big corporation willing to open a branch in a country and employ many people. If it is faced with bribe demands, it will certainly divert to another country. Trust in the government is very significant. A corrupt government cannot even be able to serve its people. Everything it does will be viewed suspiciously. In countries where the private sector is the major employer, people will lose jobs when companies choose to relocate adding to unemployment levels. With corruption, there will be inequality in the society. Some people will have excess resources at their disposal which are otherwise meant to help the society and are now benefiting an individual. This will hinder societal growth.

Response to Sara Kauffman

Hi Sara, great argument over there, corruption has long term effects on economic growth. In the conduct of any business, trust is very significant. In any economy, there are investors, customers and the employees. The economic growth rotates around these three players. Investors produce goods by employing people and these goods are bought by customers. However, when there is a disruption in one of these players, a problem arises. In a corrupt country, the investors will relocate their investments to other corruption free countries, employees will lose their jobs and they are part of the customers, demand will reduce thus hampering economic growth.  Corruption reduces investors’ confidence not only in the present but in the future. In the long run, a corrupt country will become poor. Resources are misappropriated and the government will not be able to offer public services due to lack of resources. The public will have no trust left in the system.

 
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