The downside of fighting corruption

December 5, 2012

I just heard a novel analysis of India, whose economy seems to be slowing down.  The question is why. The suggested answer: an overly aggressive anti-corruption campaign.

How can that be? Isn’t corruption bad for the economy? For the most part, that seems to be the case:  countries with the most corruption are also, on the whole, the least productive. But in India, perhaps the only way through its system of complex, overlapping, and mutually inconsistent regulations is to bribe someone. With the government now fighting corruption, a friend says, “government officials are asked to obey the letter of the law, and the whole thing grinds to a halt.”

In the long term, India would almost surely benefit from both less corruption and lighter regulation. In the meantime, reducing corruption on its own may cause its own problems.


2 Responses to “The downside of fighting corruption”

  1. Gian Luca Clementi Says:

    How does this make sense? Think of the reduction in bribes as a drop in prices for government services. How can this possibly hurt?

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