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Defeating Corruption with Economics

Corruption is plaguing our world. It prevents economic development, undermines the rule of law, distorts trade, confers economic advantages on a privileged few, prevents aid money from reaching disaster victims, topples buildings due to shoddy construction, and strangles business with the constant burden of bribes and payoffs (Fisman & Miguel, 2008). There is not a clear idea of how much corruption there truly is in the world due to the fact that when executed properly, it is undetectable. With more awareness of corruption taking place in our world there will be an increase in actions taken to stop it and prevent its occurrence.

One way to find corruption is to “Look for situations where incentives for crooked rewards somehow translate into actions that everyone can see” (Fisman & Miguel, 2008). A good way to measure this is by monitoring stock market prices which are an indicator of what people think a company is worth. Typically, there are dips in the price of a stock, a result of insider trading, before it tumbles downward due to the announcement of negative news. The Jakarta composite index fell noticeably when health scares of their former president were publicized. The stock of companies tied to President Suharto started falling prior to the announcement due to early selling by those that were privy to the knowledge. However, a disadvantage of looking at the stock market as a basis for corruption is that many other factors affect stock prices including quarterly earnings, the general economy, recalls, and news announcements. An advantage would be the ease of catching those conducting insider trading, such as Martha Stewart, and punishing them.

It seems like corruption is everywhere, “Close political-corporate ties exist in nearly every country” (Fisman & Miguel, 2008). Even in the United States it has been shown that how well a company does parallels the political fortunes of the connections they have. Corrupt ties are inescapable and an advantage if you happen to be in the right political party.

There are pros and cons to everything. Corruption is no different. The pros are: the connections that are established, the money that is made, and the power that is held. The cons are: the cheating, deceitful, and unethical actions going on in our world and the resulting fines, imprisonment, and seizure of goods. It seems as if the majority of corporations in the world are behaving unethically and profiting from it. If everyone acted unethically progress would not be made. Trust could not be built. Corporations would lookout for themselves and eventually everything would collapse. We need to snuff out corrupt behavior.

Ending corruption is not in our near future, but progress is being made. There are smuggling laws that make it beneficial to tell the truth on what you are importing into the U.S. due to fines & seizure of goods. It is beneficial to disclose what is being brought in, where in some countries it pays to lie about what is being exported. This is leaving a large gap between the value of antiques leaving other countries and those coming into American ports (Fisman & Miguel, 2008). This is benefiting the U.S. antiques market and costing the exporting country. One recommendation would be to ease the laws of exports in those countries where this lying is taking place.

There is a lot of switching of comparable items going on for China’s imports due to stricter laws. According to Fisman & Miguel (2008), “This sleight of hand will show up as lots of disappearing chickens on the Chinese side, with turkeys appearing in their place.” A recommendation to lessen this would be to make tariffs equal for goods that are similar in nature. The switching benefits the exporter who can pay fewer fees but it costs the consumer who still pays high prices and Chinese government in tariffs. It is time to rethink the ways in which we conduct exporting and importing so the truth is actually being told.

There is a frightening practice taking place along the U.S. boarder: corruption is compromising our country’s security. According to Raffaele (2010), “U.S. federal officials say corruption among some law enforcement officers is jeopardizing anti-drug and security patrols along the U.S.-Mexico border.” There seems to be an infiltration of drug dealers into our security official positions. A recommendation would be to do more extensive background checks.

Even something as simple as road-building is made corrupt. Contractors and public officials benefit from over budgeting and skimping on supplies. Citizens who drive on these roads and pay for them with their tax dollars are the ones who are hurt. It was determined from a study that those contractors that were forewarned about the possibility of an audit stole about a third less than those groups who were not warned or who engaged in “town hall” style meetings (Fisman & Miguel, 2008). This is a huge advantage as an easy way to combat corruption and should be continued.

Corruption needs to be reduced. New procedures need to be implemented in order to decrease the corrupt practices that go on when materials quality is compromised and public officials pocket some of the money for road-building projects. There needs to be random audits on half of all road projects. Also, severe consequences need to be made clear to those contractors and public officials working on the projects to deter them from acting corruptly. They will be fired, imprisoned, and fined if caught acting unethically. And finally, it needs to be made public just what is being done, by whom, and what materials are being used on the state’s website. Problems that might arise could be this would be expensive to implement and time consuming. However, these actions will help lessen the grave problem of corruption in today’s society.

References

Fisman, R., Miguel, E. (2008). How economics can defeat corruption. Foreign Policy, 168, 66- 74.

Raffaele, R. (2010, March 11). US officials: corruption still threatens border security.

Voice of America. Retrieved from http://www1.voanews.com/english/news/human-rights/US-Officials-Corruption-Still-Threatens-Border-Security-87413277.html

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