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Is There Such A Thing As Good Corruption?

From Russia to South Korea and Switzerland, thereis a different between kleptocrats and diligent greasers of wheels.

Can corruption be a lesser evil?
Can corruption be a lesser evil?
Aleksander Zotin

MOSCOW - What is the difference between “good” corruption and “bad” corruption?

First of all, the size. A 3% drain on the economy is not the same as a 25% one. But size is far from the only thing that matters. The structure is also important. Good corruption is often a way to grease the wheels of cumbersome regulations, where officials speed up the decision-making process, helping business. Often that means forced political support for regimes that are undertaking painful economic modernization.

One of the important signs of “good” corruption is that the money stays in the country, allowing for economic growth. The American political scientist John Nye even calls this the "Switzerland factor." The less that corrupt money leaves the country (often going to Swiss bank accounts), and the more it is reinvested in the home country’s economy, the less damaging the corruption. The aim of good corruption is to create a good investment climate and improve growth in private business.

One of the best examples of this good corruption was 20th century South Korea under dictator Park Chung-hee. He often forced large companies to take care of his party’s needs, and rewarded those companies’ loyalty with low-interest loans and business preferences. He used the money to secure his party’s hold on power rather than just for his own personal gain, and nearly all of the money stayed in the country. At the same time, he cracked down on middle-level corruption – investigating large numbers of mid-level officials and thus creating a good investment climate that forced the government to color inside the lines. Although he ruled as a dictator, Park held his government to strict standards, and didn’t use the corruption strictly for personal enrichment.

A kleptocracy

Neither Park nor his successors were completely able to get rid of the mid-level corruption. But the fight against it goes on. In fact, corruption investigations have ensnared dozens of high-level South Korean officials. Today South Korea is 45th on Transparency International’s corruption index. Russia is 133rd on that list, out of 174. But that index only measures corruption, and doesn’t take into account the fact that corruption can look very different in different countries.

In South Korea, the good corruption of the 1960s did not hamper economic growth, which increased more than tenfold. You can’t say that about countries that suffer from bad corruption. In the latter, the corruption is nothing but a kleptocracy where officials steal everything. One of the most striking examples of this bad corruption is the Democratic Republic of Congo, one of the richest countries in Africa when it comes to natural resources. It was actually richer than South Korea in the middle of the 20th century, in terms of GDP per person, but due to the culture of corruption encouraged by Joseph-Desiré Mobutu, which completely blurred the line between his personal expenses and the state budget, it is now one of the world’s poorest countries.

The historical examples are illuminating, but the real question is: which path will Russia choose? We can be optimistic and say that there is a chance that we will be closer to South Korea than to the Democratic Republic of Congo. Still, the large-scale flight of capital from Russia is disquieting.

It’s precisely that "Switzerland factor" that determines whether corruption is good or bad. But in order to get to good corruption, we need to see more than just theatrical scandals on TV, and face the real battle with corruption. Our fate is not yet determined – we could easily drift in the direction of Congo or South Korea. It depends on the political will and the public interest in shaping the country’s future.

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