Corruption Disruption

IMF Blog, December 8, 2017

Source details

Corruption impairs the ability of government to do its job by undermining the ability to raise needed revenue and by distorting spending decisions—governments might favor projects that generate kickbacks over projects that generate economic and social value.
Consequences for economic performance and equity:
- Bad for growth and bad for economic opportunity.
- Bad for equity and fairness, as the poor lose out most from diminished social spending and investments in sustainable development.
- Bad for economic stability: a low revenue take combined with wasteful spending lets deficits run too easily out of control.
Broader social effects:
- Broad-based corruption can degrade social norms and undermine civic virtues.
- When the wealthy do not pay their taxes, the entire tax system loses legitimacy.
- When elites are seen to play by different rules, trust gives way to cynicism and social cohesion fragments, potentially leading in a worst case to civil strife and conflict.
Metaphor: “if the foundation of your house is ‘rotting’—another meaning of ‘corruption’—then how can you build a strong and sustainable economy? You cannot.”

Corruption is especially debilitating for youth:
- Young people may find no prospects, no sense of purpose, and no ability to participate or make their mark.
- Corruption reduces motivation to pursue education when advancement depends on connections rather than ability.
- Outcomes include disillusionment, disengagement, disenchantment, and loss of hope.
At a visceral level, corruption can be “soul-destroying.”

Tackling corruption is central to the success of the Sustainable Development Goals (SDGs).
Goal 16 of the SDGs calls on the global community to: “Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.”
Goal 16 incorporates specific targets relating to reducing corruption, bribery, and illicit financial flows.
The success of all other SDGs depends crucially on addressing corruption: “you cannot build a house on a rotten foundation.”
Current contextual pressures that increase the urgency of addressing corruption:
- Pervasiveness of tax evasion, as documented by recent scandalous revelations.
- Rising skepticism toward traditional institutions perceived to favor insiders and elites.
- Need to prioritize challenges such as uncertain job prospects, rising inequality, and magnified environmental stress.

The IMF is undertaking a major review of its policy on dealing with corruption to make its policy more effective in the current global context.
Observations about existing IMF policy:
- The IMF has a policy for dealing with corruption dating from 1997.
- That policy could be applied more rigorously and consistently, backed up with concrete and specific policy advice.
- It is important to be evenhanded: corruption can be serious in rich and poor countries, big and small, stable and fragile countries.
- Wherever corruption is deemed a serious threat to inclusive growth and macroeconomic stability, the IMF will conduct careful analysis and discuss policy messages candidly with governments.
Corruption is a “two-handed” problem:
- “For every bribe taken, a bribe is given.”
- Untangling corruption requires officials to “follow the money.”
- This includes tackling impunity and malfeasance in the private sector, including large corporations engaged in bribery of officials in foreign countries.
- The IMF needs to engage with members whose citizens and corporations are frequently implicated in such bribery and whose institutions facilitate the laundering of proceeds from tax evasion, financial fraud, and corruption.
Normative assertion: this engagement is important to the legitimacy of a globalization that “can—and indeed must—work for all.”
Forward-looking note: “stay tuned—this is not our last word on this subject, I can promise you that!”

Author: Christine Lagarde
Date: December 8, 2017
Published as part of a World Anti-Corruption Day collaboration with the World Economic Forum’s Partnering Against Corruption Initiative (PACI).

IMF blog post: "Corruption Disruption" by Christine Lagarde, December 8, 2017.

腐败的破坏性 - IMF博客; 2017 年12 月8 日
- 腐败的破坏性 - IMF博客; 2017 年12 月8 日 (Markdown version)
- 腐败的破坏性 - IMF博客; 2017 年12 月8 日 (PDF)
政治的腐敗がもたらす混乱; クリスティーヌ・ラガルド, IMF ブログ 2017年12月8日掲載
- 政治的腐敗がもたらす混乱; クリスティーヌ・ラガルド, IMF ブログ 2017年12月8日掲載 (Markdown version)
- 政治的腐敗がもたらす混乱; クリスティーヌ・ラガルド, IMF ブログ 2017年12月8日掲載 (PDF)
Разрушительное влияние коррупции; Кристин Лагард; 8 декабря 2017 года
- Разрушительное влияние коррупции; Кристин Лагард; 8 декабря 2017 года (Markdown version)
- Разрушительное влияние коррупции; Кристин Лагард; 8 декабря 2017 года (PDF)