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Re: USA Africa Dialogue Series - Does fighting corruption really make business sense?

January 13, 2014, 9:46 am
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While it is true that fighting corruption makes business sense, one has to be careful to recognize the fact that some businesses do benefit from operating within a corrupt system. Where is there is no corruption or other forms of opportunism, the economy operates efficiently and businesses must then depend on managerial acumen, innovation, good customer service, and worker productivity to maximize profit. Within such an economy, only highly competitive businesses would be able to remain operational in the long run and wealth creation would be maximized. Poorly performing enterprises, of course,  would be forced into insolvency. However, within an economy characterized by high levels of corruption and other forms of opportunism (e.g., rent seeking and public financial malfeasance), a few inefficient firms are able to remain operational, even in the long run, because they have developed the wherewithal to purchase protection from the government through bribes and other forms of corrupt practices. Society, of course, is the loser--usually because of reduced national output, severe inequalities in the distribution of income and wealth, failure to innovate, extremely poor and capricious allocation of public goods and services, capital flight, and to a certain extent, brain drain. 

Hence, while highly competitive and innovative companies are likely to actively support efforts to eradicate corruption, poorly-performing enterprises would not support such activities, instead preferring to make sure that the economy is saddled with relatively weak and ineffective institutions so that they can continue to secure the state protection necessary for their survival. This attitude is similar to that taken by some companies against the break-up of monopolies and the opening up of national economies to foreign competition--highly competitive and innovative companies usually welcome the opportunity to compete globally while others, usually those which are poorly managed and depend on government protection to survive, are always against any form of competition. 


On Mon, Jan 13, 2014 at 8:30 AM, Yona Maro <oldmoshi@gmail.com> wrote:

No doubt, business plays a crucial role in countering corruption. So as attempts have increased to motivate companies to engage in the fight against corruption more, so have references to the so-called "business case against corruption".

It argues that corruption is not only morally wrong and damaging to societies, but also detrimental to the companies themselves. It thus concludes that countering corruption makes business sense; that companies that engage against corruption are better off economically than those that do not.

But is this true? Because if such a business case to counter corruption existed, why are companies still engaging in corrupt acts?

This is one of the main questions elaborated on at the Humboldt-Viadrina School of Governance in a project on anti-corruption incentives and sanctions for business, which looks at what it is that motivates companies to counter corruption. Are they doing so only if required to by law? Are they driven by a desire to do what is morally right? Or does countering corruption actually make good business sense? And what can different stakeholders do to strengthen these motivations?


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JOHN MUKUM MBAKU, ESQ.
J.D. (Law), Ph.D. (Economics)
Graduate Certificate in Environmental and Natural Resources Law
Nonresident Senior Fellow, The Brookings Institution
Attorney & Counselor at Law (Licensed in Utah)
Presidential Distinguished Professor of Economics & Willard L. Eccles Professor of Economics and John S. Hinckley Fellow
Department of Economics
Weber State University
3807 University Circle
Ogden, UT 84408-3807, USA
(801) 626-7442 Phone
(801) 626-7423 Fax

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You received this message because you are subscribed to the "USA-Africa Dialogue Series" moderated by Toyin Falola, University of Texas at Austin.
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