Concern over corruption has surged in India in recent months. Although corruption is nothing new to most Indians, a series of recent high-profile scandals have been particularly galling. These include a multi-billion dollar alleged telecoms scam, alleged financial malpractices in connection with the 2010 Commonwealth Games in Delhi, and allegations that funding of houses for war widows was diverted to civil servants.
Anna Hazare, an influential social activist, has launched a hunger strike to urge the government to pass a new law that would create an anti-corruption ombudsman. Meanwhile, 5th Pillar, an NGO, has been advancing a campaign to publicize the fight against corruption by distributing “zero rupee” notes, which are graced with the portrait of Mahatma Ghandi and resemble 1,000-rupee notes. The idea is that people or businesses can offer zero-rupee notes when solicited for bribes by local officials.
(As an aside, a friend and colleague has produced a short film which shows the zero-rupee note concept in action. It’s well worth viewing and you can find it on Youtube).
Will the anti-corruption efforts in India bring about change? If so, will change require a few years, or a few generations? Or is corruption so endemic that fighting it is counterproductive? Perhaps the best approach is to simply manage how it happens?
These are tough questions to answer, but I will offer a few suggestions, based on analysis of 10 years of data from Transparency International’s Corruption Perceptions Index (CPI).
The CPI is an amalgamation of annual surveys that ask local academics and businesspeople around the world how they feel about corruption in their countries. The surveys are comprehensive, addressing everything from petty street corruption to shadowy campaign-finance practices. Transparency International aggregates the survey data and ultimately grades countries on a score of 1 to 10, with “10” implying the least corruption.
Given the dramatic economic growth of emerging markets over the last 10 years, one might expect to see a decline in corruption in many countries. As countries become richer, they should be able to pay better salaries to officials, thereby reducing the need for extra-legal income (i.e., bribes). Also, it stands to reason that high-growth countries would owe some of their growth to achievement of greater transparency in their economies.
The data suggests this is true… except when it is not. Some countries have indeed become less corrupt (India is one of them, improving from 2.7 in 2001 to 3.3. in 2010). But corruption has worsened in many countries. And in others, there has been little change. Among these is China, which was graded at 3.3 in both 2001 and 2010.
Below is a chart showing the CPI scores over the last five years for ~30 of the largest emerging markets (I’ve also thrown in a few “developed” countries for comparison. These are highlighted in yellow). Also, the four “BRICs” are highlighted in blue.
The table shows only a few emerging markets figure among the transparency elite (congratulations to Chile and Qatar). The data also contain indications of which countries are becoming more or less corrupt (or neither). These numbers are very helpful for thinking about the future development of emerging markets. If a country is not improving its transparency, it will have more difficultly maintaining steady growth.
In my next post, I will review some of the key trends I observe in each of the emerging market regions (Eastern Europe, Africa, South Asia, East Asia, Latin America). The findings are interesting, suggesting different trends within countries in the same region. Some countries appear headed in different directions. The data also helps understand why some countries have responded better (or worse) to recent shocks such as the global recession of 2008-09 and the wave of uprisings in the Middle East.
Written by David Gates for Emerging Markets BlogFollow @davidegates