Widespread corruption may have roots in culture and history, but it is, nevertheless, an economic and political problem. Corruption causes inefficiency and inequity. It is a symptom that the political system is operating with little concern for the broader public interest. It indicates that the structure of government does not channel private interests effectively. The economic goals of growth, poverty alleviation, and efficient, fair markets are undermined by corruption. Corruption erodes political legitimacy and the protection of rights. Twenty years into the global fight against corruption, there has been progress in both policy and research, but much remains to be done. Attempts to measure corruption – imperfect as they are – have exposed especially corrupt governments and industries, spurring reform toward transparency and more ethical dealings in the public and private sectors, but most governments still receive failing grades on the control of corruption. Our goal is to further understand the circumstances that contribute to corruption and the policies that can help to combat corruption, but there is no one-size-fits-all anticorruption program.

The Causes of Corruption

The causes of corruption fall into three broad categories: institutions, incentives, and personal ethics. These interact to determine the levels and types of corruption in any given case. Corrupt practices such as bribery, nepotism, and influence peddling are informal institutions that frequently undermine formal institutions and are often pervasive and entrenched. Formal institutions, such as the political structure and the body of law and its enforcement, help shape culture and attitudes toward corruption. A strong kleptocratic state may suffer financial hemorrhaging at the top, but very little day-to-day petty corruption. Where the state pretends to be strong by implementing numerous strict regulations, but the rule of law is weak, petty corruption will be rampant.

Situation-specific incentives influence choices when an individual balances costs and benefits to decide whether to offer, accept, or demand a corrupt exchange. A strong organizational stance against corruption, coupled with monitoring and proportional penalties, creates very different incentives from an environment in which corruption is tolerated or even encouraged. Low pay may need to be supplemented in some circumstances, but even some well-paid public servants and CEOs engage in corruption if the risks of detection and punishment are low.