Keywords

1 Introduction

The targets of Sustainable Development Goal (SDG) 16 are “access to justice for all, and building effective, accountable institutions at all levels.” Specifically, Target 16.5 is to “substantially reduce corruption and bribery in all their forms.” Corruption in the public sector typically involves bribery by a private actor, inducing a public official to change the implementation of a public policy or enact, amend, or repeal a law in favor of the bribe giver. The practice of corruption distorts public policy in such a way that it benefits only a subset of citizens at the cost of others, diverting government expenditure from its optimal use. All SDGs require substantial government involvement. If a government policy is distorted to benefit only those who offer bribes, we cannot expect the government to support the achievement of SDGs. In this sense, I believe that the alleviation of corruption is at the crux of the achievement of SDGs.

Corruption is more widespread in developing countries, where economic growth and poverty reduction are urgently needed (e.g., Olken and Pande 2012). Ugur and Dasgupta (2011), through a meta-analysis of the literature on corruption’s effects on economic growth, find a 0.59% and 0.86% decline in the growth rate of per capita GDP in a sample of low-income countries and all countries, respectively, for a one-unit increase in the perceived corruption index. Corruption has been shown to aggravate the prospects for poverty alleviation. For instance, Gupta et al. (2002) show that a one-standard-deviation increase in the growth rate of corruption leads to a 4.7% decrease in the growth rate of the income of the lowest 20% of the population. Furthermore, corruption exacerbates the inequality of income distribution, as well as access to public services. Those who give substantial bribes to public officials are more likely to become richer, while those who cannot afford to pay bribes remain poor (e.g., Gupta et al. 2002; Gyimah-Brempong 2002). In a corrupt society, poor people are sometimes excluded from public services, such as basic education and primary health care, which they are entitled to, and thus, are left behind.

Section 8.2 introduces the issues on the concept of corruption, and the consequences of corruption, which have been examined in previous studies. Section 8.3 discusses two views on the causes of corruption: the principal-agent model and the institutional view on corruption, and explains why it is difficult to escape from the equilibrium of prevalent corruption. Nevertheless, a number of countries, all of which were corrupt in the past, succeeded in transitioning from a corrupt society to a fair and transparent society. Section 8.4 discusses four success stories, of Britain, the United States, Hong Kong, and Singapore. However, the analysis of these success stories simply shows that it is indeed through the strait gate that a society can transform itself from a corrupt one to a non-corrupt one. Finally, Sect. 8.5 presents the conclusions.

2 The Concept and Consequences of Corruption

2.1 Concept of Corruption

Corruption is defined in many ways, as is usually the case in any social science concept. Transparency International adopts the definition of corruption as “abuse of entrusted power for private gains.” This definition presumes that there is somebody who is entrusted with power for the purpose of realizing a collective or public goal. However, the one entrusted with power exerts power to pursue private gains, and in such situations, corruption occurs. This definition of corruption applies to both private and public domains. An example is when the procurement section chief of a private company chooses the company’s supplier of materials or components in exchange for bribes, not based on enhancing the company’s profits. However, many scholars and practitioners have restricted their attention only to the public domain. The most broadly used concept of corruption along this line is “the misuse of public offices for private gain” (see, e.g., Rose-Ackerman 2008). In line with many previous studies, the present chapter focuses on corruption only in the public sector. Furthermore, Kurer (2005) clarifies the meaning of “misuse” in the definition above by adding a normative criterion, and defines corruption as “violations of non-discrimination norms governing the behavior of holders of public office that are motivated by private gain.” This definition is based on the ethical principle that public officials must not discriminate in favor of those who are close to them or pay them bribes. We follow this definition throughout this chapter, implying that corruption induces the distortion of public choices.

Corruption can occur in different spheres of the public domain. For instance, a large company provides huge bribes to a political leader or the members of a legislative assembly to enact a new law or amend or repeal an existing law in a way that benefits the company. Another type of corruption works at the front line of public policy implementation.Footnote 1 For instance, a citizen who applies for water connection may expedite the date of connection if bribes are paid. Another example is when a person gets a driver’s license without taking the driving skills test by paying bribes. Corruption can also occur in the judiciary domain. If a convict bribes the judges, they can receive a more lenient sentence than duly warranted in similar cases. This chapter focuses on the first two cases, namely, corruption in policymaking and policy implementation, although corruption in the judiciary often entails similar causes and consequences.

2.2 Consequences of Corruption

Next, we examine the effects of corruption in policymaking and policy implementation on a society, first at the macro level, and then at the micro level.

2.2.1 Consequences at the Macro Level

Here, the effects of corruption at the macro level refer to the aggregate effects of corruption on the whole society, not on an individual actor of a society. We discuss the effects that have been shown to be important in previous studies, starting with the economic consequences, followed by other social consequences.

Many previous studies have provided evidence that corruption leads to a reduction of physical investment (e.g., Knack and Keefer 1995; Mauro 1995, 1997; Campos et al. 1999). This negative effect is likely because physical investment often necessitates various licenses or permissions, which gives corrupt public officials opportunities to demand bribes, resulting in a decline in the marginal returns from investment in a corrupt society. The negative effect of corruption on investment is considered to be even worse when corrupt actions are disorganized because private firms cannot predict how much they need to pay as bribes at each stage of the administrative process; thus, they are concerned with the possibility that costs eventually exceed revenues (e.g., Campos et al. 1999; Shleifer and Vishny 1993). The negative effects of corruption also work against foreign direct investments through similar channels (e.g., Wei 2000; Wei and Wu 2001; Busse and Hefeker, 2007; Mathur and Singh 2013), but the uncertainty faced by foreign enterprises is even larger because they may not be familiar with the (corrupt) business customs of the host country, or they may not have useful connections with powerful political actors. Accordingly, some foreign enterprises refrain from investing or make joint ventures with local firms to rely on their local partners to manage corrupt deals with public officials (Smarzynska and Wei 2000). Interestingly, according to Habib and Zurawicki (2002), foreign enterprises whose countries of origin are regarded as more corrupt are less likely to be deterred from entering corrupt host countries.

Although less clearly, some previous studies have shown negative consequences of corruption on aggregate economic performance in terms of GDP per capita (e.g., Kaufmann et al. 1999; Wyatt 2002; Kato and Sato 2014) or economic growth rate (e.g., Knack and Keefer 1995; Tanzi and Davoodi 2001; Gyimah-Brempong 2002; Meon and Sakkat 2005), while others have found insignificant effects (e.g., Li et al. 2000; Abed and Davoodi 2002). Aggregated economic performance is realized through a variety of factors, including the accumulation of physical and human capital, as well as productivity enhancement; thus, the effect of corruption on aggregate economic performance may not be as clear as that on the investment in physical capital. Subsequent studies have attempted to trace the channels through which corruption exerts negative effects on aggregate economic performance in terms of GDP per capita or economic growth rates, finding a variety of important mediating factors such as physical investment, human capital, and political stability, through which corruption affects aggregate economic performance (e.g., Mo 2001; Pellegrini and Gerlagh 2004).

In some studies (e.g., Olson et al. 2000; Lamsdorff 2003; Salinas Jimenez and Salinas Jimenez 2007), corruption has also been shown to affect productivity negatively. The rise of productivity is considered to be mainly achieved through technological progress, and it is difficult for corrupt public officials to target technological progress, compared with physical capital; thus, productivity is considered to be less susceptible to corruption. However, the expected returns from investment in technological progress, such as R&D expenditures, tend to be lower if public officials capture a part of enterprises’ revenues, thus causing stagnation of productivity, as empirically shown in some studies.

Some scholars have shown so-called “greasing-the-wheel effects,” which means that corruption expedites administrative procedures that would have been very slow without bribery, and could have positive effects on the economic performance of a society (e.g., Klapper et al. 2006; Méon and Weill 2010; Dreher and Gassebner 2013; Kato and Sato 2015).Footnote 2 Except for these few studies, previous studies have generally shown the negative effects of corruption on economic performance at the macro level. A recent study by Ang (2020) indicates that certain types of corruption can facilitate economic growth. She classifies corruption into four categories: petty theft, grand theft, speed money, and access money, and claims that access money could stimulate economic growth. In this type of corruption, powerful public officials offer lucrative profit opportunities, such as exclusive public works commission or preferential license provision, to private enterprises, in exchange for large bribes. Access money generates misallocation of resources, risks, and inequality, but can realize high economic growth in the short run by motivating business people to make investments.

Aggregate economic performance may be aggravated by the effects of corruption on public expenditure, which may take various forms. First, corruption reduces the total amount of tax revenues because corrupt tax collectors receive bribes from taxpayers and collect less tax than the amounts due (e.g., Alm et al. 2016). Second, the allocation of public expenditures becomes distorted in a corrupt society because public officials prefer large infrastructure projects or military procurement, where they can more easily receive bribes (e.g., Mauro 1998; Gupta et al. 2001; de la Croix and Delavallade 2009; D’Agostino et al. 2016). This is because the order for such projects is voluminous and infrequent, such that private enterprises are willing to pay higher bribes to win the order, and it is less likely to be detected because of the low frequency. Because of this distortion toward large infrastructure projects and military expenditures, expenditures on education and primary health care are likely to be curtailed (e.g., Gupta et al. 2001), which in turn harms the development of human capital. Third, the efficiency of public expenditures worsens because corrupt public officials tend to commission public works to private firms that pay the highest bribes instead of the most efficient firms. Moreover, firms that pay the highest bribes obtain the money to pay bribes by reducing the quantity or quality of the commissioned public works (Wade 1982), resulting in the degradation of infrastructure.

Less expenditure on education and health care, as mentioned above, tends to aggravate the development of human capital in society, leading to further deterioration of the aggregate economic performance of a corrupt society. The awareness of citizens that corruption is harmful to themselves in the long run may change their political behavior, which, in turn, may allow the transformation of a corrupt society into a less corrupt one (see, also, Melgar et al. 2010). However, if insufficient education is provided in a corrupt society, such ideas may not be widely shared among citizens.

Corruption also induces private enterprises to go underground because they want to evade bribery payments to corrupt public officials (e.g., Johnson et al. 2000).Footnote 3 According to Schneider’s (2005) estimation, 46.1% of Russia’s GDP was produced by the underground economy in 1999/2000, while the figure was 52.2% in Ukraine and 60.6% in Azerbaijan. Enterprises in the underground economy cannot rely on public conflict resolution systems such as public courts or police. Thus, they have to design measures to avoid the opportunistic behavior of their economic partners, which is costlier, leading to a less efficient performance of economic activities.

Corruption may cause further inefficiency in terms of the allocation of human resources. The economic abundance of a society can be realized through the enhancement of the productivity of economic activities such as production and trade. For this purpose, as many people as possible should be engaged in value-creating activities (e.g., research and development activities, total quality control, or creation of a new business model) to enhance the productivity of economic activities. However, in a corrupt society, competent young students prefer to become public officials because they are more likely to enrich themselves by receiving bribes than by conducting business, thereby worsening the prospects for society’s economic development.

Corruption may also harm economic performance by hampering fair market competition, which ensures that firms providing the highest value to transaction partners make the deal, thereby inducing each economic actor to provide higher benefits to others. In a corrupt society, enterprises that pay bribes may obtain protection through regulations designed by bribe-taking public officials in such a way as to benefit them, or through discretionary implementation in their favor. Therefore, market competition does not work efficiently, resulting in the stagnation of firms’ productivity.

In a corrupt society, the inequality of income or wealth distribution tends to be more obvious than in non-corrupt societies, because those who pay higher bribes get treated preferentially by public officials, even though they are already rich people or large enterprises in the first place. Hence, the rich tends to become richer, while the poor tends to remain poor, aggravating the income or wealth inequality in a corrupt society (e.g., Li et al. 2000; Gupta et al. 2002).

The effects of corruption do not remain in the economic domain but extend to other facets of society. If the inequality of income or access to public services is salient across races, ethnic groups, or religious groups, the social divisions between them may get intensified by the grievances of the discriminated groups. This type of inequality is likely to occur in any society, because political leaders need support coalitions and often rely on specific socioeconomic groups. Political leaders provide more benefits to their support coalition members, while they impose more costs on other groups, igniting the anger of groups placed in the inferior position. Thus, social divisions tend to become more serious in a corrupt society, which does not guarantee the provision of public services based on the anonymity principle.

Corruption also tends to reduce trust among people. In a corrupt society, people try to obtain more benefits than others by bribing public officials. In other words, people tend to forestall others for their own private benefits. In such a society, people cannot trust each other, but rely only on close kin and friends, whom they can trust. As Putnam (1993) claims, a society with lower trust tends to incur additional costs in conducting economic activities, thus leading to lower efficiency (see also, Knack and Keefer 1997; Whiteley 2000). Corruption naturally reduces citizens’ trust in the government. According to Anderson and Tverdova (2003), citizens in corrupt countries tend to hold more negative views regarding the political legitimacy of their political system. This may, in turn, negatively affect citizens’ willingness to pay taxes.

Corruption even harms the environment. Corrupt public officials may impose environmental regulations less strictly on economic actors in exchange for bribes, leading to higher pollution in a corrupt society. Through a cross-country empirical analysis of the effect of corruption on six types of pollution indicators (e.g., urban sulfur dioxide concentration, SO2, and nitrogen dioxide concentration, NO2), Welsch (2004) find that the total effect of corruption on pollution is positive for all types of pollution. The size of the effect is considerable; for instance, a one standard deviation increase in the corruption index raises the SO2 pollution indicator by a 0.2–0.4 standard deviation.

2.2.2 Consequences at the Micro Level

Although corruption generally harms the aggregate economic outcomes of a society, corruption may or may not be beneficial to actors involved in corrupt deals. Corruption may be harmful to a bribe payer if the act by public officials is considered as purely stealing money from a citizen for ordinary public service that these officials are required to provide without bribes. Meanwhile, corruption can be beneficial for both parties if a bribe-taking public official implements a certain policy in favor of a bribe-paying actor. An example is when a public inspector of certain regulations overlooks the negligence of a private company after receiving bribes, whereby the private enterprise does not need to pay fines or incur additional costs to conform to the regulation. Another example is a situation wherein a public official commissions public works to a private enterprise that offers bribes. In both instances, private enterprises can increase their profits, while public officials can keep bribes for themselves. These corrupt arrangements, beneficial to both parties involved, occur at the cost of general taxpayers.

Some previous empirical studies have shown that enterprises that pay more bribes can achieve good performance such as higher sales growth (e.g., Wang and You 2012; Ayaydın and Hayaloglu 2014; Mendoza et al. 2015; Williams and Martinez-Perez 2016), while other studies show negative performance (e.g., Hanousek and Kochanova 2016; Bai et al. 2019).

2.3 SDGs and Corruption

As we have seen in Sect. 8.2, corruption generates a wide range of adverse consequences on economies and societies, which curtails the achievement of other SDGs. For instance, corruption may slow down the pace of poverty reduction (SDG1) or stifle the efficiency of efforts for hunger eradication (SDG2). It is evident that governments play a critical role, through public policies, in achieving other SDGs, such as SDG3 (good health and well-being), 4 (quality education), 5 (gender equality), 6 (clean water and sanitation), 7 (affordable and clean energy), 9(infrastructure), 10 (reduced inequalities), 13 (climate action), and 16 (peace, justice, and strong institutions). Corruption distorts the incentives faced by public officials in such a way that these officials are motivated to seek private benefits through corruption rather than provide public goods, such as those reflected in the SDGs. In this sense, curbing corruption is a prerequisite for the success of SDGs.

3 Causes of Corruption

Understanding the causes of corruption is necessary to conceive of measures to alleviate corruption. In this section, two different views on the causes of corruption are introduced. The first view looks at corruption from the perspective of a principal–agent model, while the second view considers corruption as a kind of social institution.

3.1 Traditional View on the Causes of Corruption

Scholars and practitioners have widely analyzed the causes of corruption in the context of the principal–agent model, where a principal, regardless of whether it is a citizen, a member of the legislative assembly, a minister, or a bureaucrat, is regarded as an incorruptible actor, while an agent is a corrupt actor who does not act up to the expectation of the principal. Based on this assumption, scholars have analyzed the causes of corrupt behaviors of an agent under specific conditions, such as asymmetric information and weak law enforcement.

First, the low salaries of government employees are considered to induce corruption, simply because government employees are forced to take bribes to survive (e.g., Van Rijcheghem and Weder 2001; Azfar and Nelson 2007).

Second, the weakness of institutions that are supposed to prevent corrupt behaviors encourages corruption because public officials do not worry much about the detection of and conviction for corrupt behaviors when institutions are weak. Political leaders often overlook or permit the corrupt behaviors of bureaucrats because they want to maintain the loyalty of bureaucrats; thus, they do not strictly apply to them such anti-regulation measures. Some countries do not have strict anti-corruption laws, and even though strict anti-corruption laws exist in other countries, such laws are not strictly enforced. According to Darden (2008), in Ukraine, political leaders can secure the loyalty and obedience of officials by allowing them to engage in corruption, within the state’s administrative hierarchies, which will not function otherwise.

Third, a larger discretionary space for public officials makes it easier for them to demand bribes. Public officials take advantage of their wide discretion in demanding bribes. For instance, if a specific regulation is not clearly defined, it will be up to an inspector whether a private firm is considered as violating the regulation. This room for discretion creates opportunities for corrupt deals between public officials and private actors. Previous studies have shown that wide discretion tends to worsen corruption (e.g., Decarolis et al. 2020).

Fourth, the concentration of decision-making authority in a handful of public officials induces private actors to provide bribes to these officials, because they have critical decision-making power and thus, can easily demand bribes. It is also more efficient if private actors need to exert influence on a few powerful public officials than in the case where authority is spread over many actors. For instance, if the legislative assembly takes the system of committees,Footnote 4 the members of each policy committee hold strong policy-making power; thus, private actors are more tempted to offer bribes to them or find it difficult to refuse their request for bribe payments.

Fifth, the ethics or values of people may affect their behavior. In a corrupt society, people, including public officials, typically do not hold strong ethical values against corruption. People may even believe that they should take advantage of corrupt opportunities to obtain private benefits as much as possible. In such a society, public officials do not face strong social sanctions from other people, leading to less hesitation regarding corruption. For instance, previous studies claim that familism, whereby people tend to remain loyal to their own family members, is positively correlated with corruption (e.g., Lipset and Lenz 2000). In addition, Gerring and Thacker (2005) have shown that socialist legal traditions are positively associated with corruption.

Based on a principal–agent model, a variety of anti-corruption measures have been proposed to curb the incentives faced by public officials. Such anti-corruption measures include reducing public officials’ discretion through deregulation and privatization, increasing accountability by supporting democratization and increasing public awareness, increasing the salaries of public officials, and encouraging greater transparency of government decision-making (Persson et al. 2013).

However, these measures have been unsuccessful in eradicating corruption (e.g., Meagher, 2005; Lawson, 2009). Scholars have inquired into the reasons for such failures, claiming that the principal–agent model of corruption may not capture the real interactions of actors in a corrupt society. For instance, even if public education makes people more aware of the adverse effects of corruption on the whole society, one would not take anti-corruption action unless the action brings more benefits than costs to the self. Even if the salaries of public officials are raised, as long as there remain opportunities for them to enrich themselves without much worry about punishment, they would continue to take bribes. Even with deregulation, there usually remains room for discretion in policymaking and policy implementation and thus, room for corruption.

3.2 Corruption as a Social Institution

The presumption, behind the traditional anti-corruption measures, that a principal is incorruptible and that an agent is corrupt may not hold in reality. It is the case that most actors, who are considered the principal in a situation, do not attempt to remedy the behavior of corrupt agents, but they also participate in such corrupt deals in many cases. For instance, private enterprises are willing to provide bribes to obtain preferential treatment from public officials. Citizens, perhaps not willingly, pay bribes to frontline bureaucrats to conduct administrative procedures smoothly. Citizens are sometimes willing to pay bribes to public officials (through middlemen) to obtain benefits, such as getting a driver’s license without skills testing (Bertrand et al. 2007) or evading high tax payments (Alm et al. 2016). If a firm is competing against private firms in a market and needs to obtain a license from the government to become competitive, that firm will be forced to pay bribes to obtain a license. Otherwise, the firm will exit the market.

People rarely report corrupt cases to the anti-corruption authority, because reporting usually has repercussions. The anti-corruption authority itself is often corrupt, powerless, or inefficient; hence, it does not remedy the reported case. Sometimes, the reported public officials take revenge against the actors who reported corruption cases. The former Minister of Finance of Nigeria, Okonjo-Iweala, who fought against corruption during her term, faced several threats of assault to her family and herself, including her mother’s actual kidnapping (Okonjo-Iweala 2018).

People close to public officials who have the oppotunity to take bribes from others expect such officials to take advantage of the opportunity. Public officials would even be despised by other people if they do not take advantage of such situations and enrich themselves. They are also expected to provide benefits to people close to them, who would criticize them for not doing so, and these officials could even be stigmatized (see, e.g., Persson et al. 2013).

As such, people engage in corrupt behavior, willingly or unwillingly, because corrupt behavior is expected to incur fewer costs or greater benefits. Persson et al. (2013) states:

…, we cannot assume the existence of ‘principled principals,’ willing to hold corrupt officials accountable, such as suggested by the principal-agent framework. Rather, the rewards of corruption – and hence the existence of actors willing to enforce reform – should be expected to depend critically on how many other individuals in the same society that are expected to be corrupt. To the extent that corruption is the expected behavior, at least the short-term benefits of corruption are likely to outweigh the costs.

Even if one is opposed to corruption, the fight against corruption is a futile endeavor, resulting in no remedy from public authorities, possible revenge from reported public officials, and ridicule from other people.

Corruption is induced by incentives formed by the structure of the interactions between actors in a society. In this sense, corruption is an outcome of social institutions (Teorell 2007; Persson et al. 2013). North (1990) defines an institution as “… the humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights).” Corrupt behaviors are a natural outcome of the incentives faced by actors in a certain social institutional setting. The choice of corrupt actions by actors represents an equilibrium in which unilateral deviation of action by an actor will lower net benefits accruing to the actor, given the choices of actions by the other actors in the equilibrium. Hence, no actor has an incentive to deviate from corrupt actions.

It is very difficult to escape from this equilibrium because no actor has an incentive to deviate from it (Blackburn et al. 2006, 2010). For a corrupt society to transform itself into a non-corrupt society, a strong force that would drive the sweeping transformation of the whole society is needed. Since a state, to a certain extent, monopolizes enforcement power in the present time, the will of the political elites of the state is expected to play a crucial role in social transformation (Brinkerhoff 2000; Quah 2018).

4 Successful Cases of Anti-Corruption Reforms

Although corruption is produced by social institutions, which cannot be transformed easily, some societies have successfully undertaken this transformation. Indeed, all societies were corrupt in the past based on current standards. However, some societies are presently regarded as non-corrupt. From their cases, we learn that there existed a strong political will to curb corruption, which enabled escaping from being trapped in the equilibrium of corruption.

4.1 Britain

There was abundant corruption in Britain by the end of the eighteenth century, when a group of economic-cum-political elites embarked on anti-corruption reform in the British parliament.Footnote 5 The extent of corruption had considerably declined by the 1820s through “an intraelite process that came about because of the parliamentary and executive decisions that transformed the administrative system and the nature of public office” (Popa 2015). The members of the British parliament at that time can be roughly classified into three categories: first, government officials, including military officers; second, economic agents who critically depended on the policy of the British government, including India bourgeoisie, West Indies bourgeoisie, and bankers of the Bank of England; and third, economic agents who are more independent from the government policy, including bankers (not associated with the Bank of England), merchants, manufacturers, and physicians. The members of parliament in the first category enjoyed the benefits obtained through corruption, while those in the second category depended on government officials. These two categories were opposed to the anti-corruption reforms. By contrast, the independent economic agents (the third category) did not benefit from corruption and belonged to the class who bore the burden of tax payment. These independent economic agents neither obtained salaries from the government budget nor relied on the government’s preferential treatment for their occupation. According to Popa’s (2015) argument, as government expenditure rose drastically toward the late eighteenth century because of the wars against the American colonies and the French, these independent economic agents found it intolerable to overlook the inefficiency in the British government and parliament resulting from corruption. Popa (2015) argues that these independent economic agents determined to initiate anti-corruption reform in the parliament in the late 1770s because they evaluated that the cost of a reform would be smaller than the benefits that can be obtained from such a reform. During this period, these independent economic agents comprised around 65% to 70% of the House of Commons, and they controlled the government and bureaucracy to a significant extent. A series of anti-corruption reforms were carried out over four decades until 1820, and a number of public office holders, including the most powerful figures, were impeached for corrupt actions. The success of the anti-corruption reform in Britain was achieved because there was a majority group composed of independent economic elites in the British parliament who had the incentive to fight against corruption.

4.2 The United States

In the United States, clientelism, which is a form of corruption, was conspicuous, as machine politics, especially in urban areas in the latter part of the nineteenth century, where a group of citizens (clients) offered votes for a patron, and the patron provided benefits to the clients upon winning the election.Footnote 6 Patron–client relationships were most visible among immigrants, who came massively from Southern and Eastern Europe to the United States in the nineteenth century and were a generally poor and less educated electorate.

The economic development of the United States in the latter part of nineteenth century generated the demand for civil service reform from new economic elites, including business communities and middle-class professionals. These reformers were furious about clientelism, whereby less educated politicians held political power by mobilizing uneducated, poor immigrants. They partly fought for their own material interests and partly for the recognition of their status and their dignity. Many of the reformers may have perceived clientelism to be ethically wrong and staged a fierce attack on such practices. This movement led to a large-scale political campaign against machine politics, eventually resulting in the enactment of the Pendleton Act in 1883, which established a requirement for civil service examinations and the principle of merit, making political appointments more difficult. The act was followed by subsequent reform efforts to eliminate clientelism until the 1920s.

In this case, it was not the political elites but the economic elites who held a genuine commitment to combating corruption. These elites faced the deprivation of benefits through clientelistic politics, which transferred benefits from them to relatively poor immigrants. They could mobilize social and political campaigns against clientelism using their financial resources. There existed actors who could exert strong political influence and were committed to the fight against corruption. This group’s influence affected the decision-making of political leadership.

4.3 Hong Kong

In Hong Kong, corruption was rampant until the early 1970s.Footnote 7 The bribery scandal involving the high-ranking commander of the Hong Kong Police Force aroused the anger of the public and induced the British government to strengthen anti-corruption measures in Hong Kong. The government established the Independent Commission Against Corruption (ICAC) in 1974. The ICAC has three departments. The Operations Department investigates corruption and the Corruption Prevention Department makes recommendations to remedy public sector systems to prevent corrupt behaviors. Meanwhile, the Community Relations Department educates the public and mobilizes their support for the fight against corruption. This three-pronged approach was considered to be an essential factor in the success of the anti-corruption fight in Hong Kong, and was imitated by other countries such as South Korea and Thailand, which ended up in failure (Hsieh 2017).

One of the reasons for the success of Hong Kong’s anti-corruption efforts was the will of the political leader, the Governor, who was appointed by the British government and was not entangled in the corrupt network, and did not benefit from corruption inside Hong Kong. The governor had strong control over the executive branch and the legislative council and could immediately fire civil servants (Mao et al. 2013). The British government expected the governor to cope with the prevalence of corruption in Hong Kong. This peculiar situation provided the governor with incentives to be earnestly committed to the fight against corruption.

With the support of the British government, the governor was determined to combat corruption in the early 1970s after the corruption scandal and gave the ICAC full strength. The ICAC was endowed with great autonomy, preventing political intervention, and sufficient financial and human resources. The ICAC comprised a large number of staff, which was 1358 in 2014, and the expenditure on ICAC relative to the total population was US$ 16.59 per capita, which is much larger than that in India (US$ 0.05) and the Philippines (US$ 0.39) (Quah 2018). Furthermore, ICAC staffs were required to respond promptly to all inquiries from the public regarding corruption, which in turn encouraged the participation of the public, as well as their support. All these effective implementation of the anti-corruption measures were possible because of the strong political will of the political leader of Hong Kong.

4.4 Singapore

Singapore suffered from the prevalence of corruption from the colonial period to the early 1970s.Footnote 8 The ruling People’s Action Party (PAP) revamped the Corrupt Practices Investigation Bureau (CPIB) so that it could more effectively investigate corrupt behaviors and provide evidence for prosecution. The PAP government gave the CPIB significant autonomy as well as sufficient financial and human resources to combat corruption.

As in Hong Kong, there was a strong political will to eradicate corruption in Singapore (Quah 1989, 2004, 2018). One of the reasons for such a political will is that the political leaders of the PAP, after expulsion from Malaysia in 1965, were committed to the future economic development of Singapore, because they faced severe economic conditions at that time, such as a high unemployment rate and a lack of natural resources, and the risk of re-merger into Malaysia under unfavorable conditions (Beng-Huat 1985). The legitimacy of the PAP would depend on the success of economic development, and had it failed in economic development, people would not have supported the PAP. To survive politically, the eradication of corruption was an urgent need for the PAP leaders, and they could not tolerate the corrupt behaviors of public officials. The threat to political survival forced the political elites of Singapore to be committed to the fight against corruption.

4.5 Strait Gate to a Fair and Transparent Society

As explained in Sect. 8.3, corruption can be understood as a kind of social institution that is not easy to escape from because it is an equilibrium from which nobody wants to deviate unilaterally. In the four cases wherein society successfully escaped from the equilibrium, there existed politically powerful actors who did not economically depend on the respective governments, and who were earnestly committed to fighting corruption. In the case of Britain and the United States, economic elites were furious about the corrupt behaviors taken by corrupt political elites. In Singapore, the fate of the political elites depended on the success or failure of economic development. The political elites of Singapore could not tolerate corruption among public officials and were committed to curbing corruption. In Hong Kong, the most powerful political figure, the governor, was appointed in the United Kingdom and was accountable to the British government, which was consistent with the anti-corruption orientation. The mere existence of anticorruption-oriented actors is not sufficient if they are not politically powerful enough. Powerful political leaders must be committed to the fight against corruption.

Unfortunately, these conditions are rarely encountered in developing countries. Most political elites make earnings from their government position; some of them embezzle huge amounts of public funds through corruption, and many of them are entangled in the nexus of corrupt networks. In many developing countries, there are very few powerful political elites who are earnestly willing to fight corruption. By contrast, in many cases, the most powerful political elite are the greatest beneficiaries of corruption.

Most political leaders face incentives to engage in corruption for their political survival. Political leaders need the support of political coalitions to keep their position. To maintain the loyalty of their supporters, political leaders must provide sufficient benefits to these supporters to prevent them from switching to the opposite camp. Here, the incentives to engage in corruption, such as favoritism, patronage, and cronyism, often emerge. Hence, many developing countries are not in a situation that induces political elites to take serious anti-corruption efforts, and we cannot expect powerful political actors to have a strong motivation to eradicate corruption.

5 Concluding Remarks

First, this chapter explained the consequences that corruption may have on the economy and society, in relation to other SDGs. It is emphasized that the alleviation of corruption is a fundamental prerequisite to achieving other SDGs, because governments play a critical role in achieving most SDGs. Second, the chapter discussed the traditional view on the causes of corruption and explained that the traditional view should be complemented by an institutional view. The institutional view of corruption suggests that it is extremely difficult for a corrupt society to transition to a non-corrupt society, because every actor has no incentive to stop their corrupt behaviors. By demonstrating four cases of a successful escape from the equilibrium of corruption, namely, of Britain, the United States, Hong Kong, and Singapore, we have shown that the strong political will of powerful elites is necessary for successful transitions. However, the analysis of these successful cases suggests that many developing countries do not meet such conditions, which is a strait gate for a fair and transparent society.