Does corruption help or hurt the economy?
This is an article from O Estado written by Maria Cristina Pinotti.
Here and there arguments arise that the fight against corruption ignores the way the economy works in the “real world”. After all, bribes to speed up authorizations for investments should be favorable to growth. The aim here is not to talk about the important discoveries about the phenomenon of corruption coming from sociology, political science, history or criminal law. Here I will address the question with economic arguments.
In the past 30 years, economists have entered this field, and it is salutary that they have started to discuss, also in Brazil, the costs and benefits of corruption. The analysis of its effects increases understanding of the mechanisms by which it operates and helps to ward off everything from outlandish ideas to the discomfort that the simple mention of the word corruption still triggers in many people.
Curiously, the first defense that corruption “greases the wheels” of the economy was inspired in Brazil by the observations of Nathaniel Leff, after a visit in the 1960s. He reported that Chile and Brazil had both imposed food price controls to fight inflation. In Chile, these had been obeyed, and the supply of food had fallen, leaving the people worse off, while in Brazil, corruption and inefficient government bureaucracy had made that control ineffective, so the supply of food had actually increased. Despite the fragility of the example, his ideas found resonance, leading other economists to search for more solid grounds. I will examine the main cases advocated by this former current – speedy money and auctions.
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