Corruption is seen as detrimental for economic development but many countries have developed in spite of it. Historically, today’s developed countries also faced corruption. Voting was rigged and many public offices were given for money rather than merit. It is surprising that regardless of this, countries were still able to develop. According to Ha-Joon Chang, in 1969 Indonesia was as corrupt and poorer than Zaire (Present day DRC) but the former was able to develop with more success than the latter. Both countries had military coups and were ravaged by corruption.
“Considering the corruption statistics, Indonesia should have performed even worse than Zaire. Yet where Zaire’s living standards fell by three times during Mobutu’s rule, Indonesia’s rose by more than three times during Suharto’s rule. Its HDI ranking in 1997 was 105th — not the score of a ‘miracle’ economy, but creditable nonetheless, especially considering where it had started.”
Bribes are shady transfers of money from one person to another but it does not necessarily lead to inefficiencies or low economic growth. Zaire and Indonesia’s development differed because in Indonesia, “dirty money” stayed in the country, creating jobs, but in Zaire, it went to other countries. Corruption can lead to an increase in economic activity and may even be beneficial if it contributes more to growth than if money had been sitting in a Swiss bank. Bureaucracy also makes things inefficient. In this case bribes make a more efficient and better society because people get demands and wants satisfied when bureaucracy makes it difficult, producers get revenue and government official gets income when salaries are low.
Governments in developing countries lack sufficient revenue to pay their officials a good salary so the officials have to resort to collecting bribes to make up for this. Neo-liberal economist try to alleviate corruption by promoting deregulation but this has only exacerbated corruption. It should also be pointed out that democracy and markets clash. Richer people have a bigger say than poorer people because they have more money. In democracy, every person’s vote has an equal say.