The Cost of Corruption

Senator Elizabeth Warren has made reduction of corruption a central plank of her 2020 presidential campaign. Whether or not we believe that she’s a girly reincarnation of Mark Twain, Albert Einstein, or Nelson Mandela, all of whom were avowed socialists, it’s hard to argue the point. The problem is that all but the corrupt agree that corruption is bad, but, apparently, it’s impossible to measure how bad.

We on The Other Side are inexorably drawn to unquantifiable problems. In this particular case, we decided to put one set of expert data side by side with another to see if we could find a groundbreaking, better-than-nothing solution.

The first dataset is published by Transparency International (TI), a not-for-profit organization devoted to the reduction of corruption worldwide. TI maintains an Anti-Corruption Hub that aggregates their research, authoritative studies, and statistically sound surveys on the topic of corruption. On an annual basis, they produce a Corruption Perception Index that ranks 170 nations around the world on a scale from 0 (purely corrupt) to 100 (breathtakingly honest).

In 2017, New Zealand was the world’s least corrupt country with a rating of 89. The US tied Austria and Belgium for 16th with a score of 75. Other notables: Canada and the United Kingdom were tied for 8th with a ranking of 82, China was 77th with a rating of 41, and our new pal Russia was 135th with a rating 29. (We can still trust Vladimir Putin more than the sum of our intelligence agencies, right?)

If you peruse the TI list from top to bottom, you’ll find that your wallet is less likely to be stolen in Chile than Mexico, your subsidiary’s managing director is less likely to be extorted by local police in Botswana than South Africa, and US envoys are less likely to be deceived by Iranian physicists than Russian oligarchs. But the problem remains: Using TI data alone, there’s still no way to estimate the cost of corruption.

When, however, TI’s corruption ratings are lined up with the World Bank’s per capita Gross National Product (GNP) data, a clear correlation jumps off the page. (See Note 1.)

The 10 nations with the lowest corruption (highest TI ratings) produced an average per capita GNP of $60,900 in 2016. The second 10 produced an average of $51,200, or 16% less than the top 10. Before we get too excited, let’s compare another 60 of the world’s 150 largest nations by TI rank, again in groups of 10 (Note 2):

  • Top 10: Average TI corruption rating: 85; average per capita GNP: $60,900
  • 11-20: Average TI rating: 77; average per capita GNP: $51,200 (includes the US)
  • 21-30: Average TI rating: 68; per capita GNP: $26,600
  • 31-40: Average TI rating: 60; per capita GNP: $19,000
  • 51-60: Average TI rating: 48; per capita GNP: $11,500
  • 71-80: Average TI rating: 41; per capita GNP: $7,200
  • 101-110: Average TI rating: 34; per capita GNP: $3,800
  • 131-140: Average TI rating: 29; per capita GNP: $4,600 (includes Russia)

If it waddles like a trend and quacks like a trend…

Okay, we give. We couldn’t find a way to estimate the cost of corruption. The trend, however, demonstrates that honesty and fair dealing are essential to the health and wealth of the nation. Accused socialist Elizabeth Warren already knew that. Vladimir Putin, whose nation sits on the largest reserves of natural resources on the planet, either doesn’t or doesn’t care. (You pick.)

Notes:

1) Gross National Product (GNP) is an estimate of the value of all final products and services turned out by a nation’s residents over a given period of time.

2) In the interest of brevity, we excluded the following groups of 10 by TI ranking:

  • 41-50: Average TI corruption rating: 55; per capita GNP: $14,500
  • 61-70: Average TI rating: 44; per capita GNP: $6,000
  • 91-100: Average rating: 37; per capita GNP: $5,600
  • 111-120: Average rating: 32; per capita GNP: $3,400
  • 121-130: Average TI rating: 30; per capita GNP: $2400
  • 141-150: Average corruption rating: 26; per capita GNP: $1,000

The numerate among you may detect a similar trend…

3) We urge you to visit the Transparency International website, especially if you’re planning to travel outside the US.

One thought on “The Cost of Corruption

  1. What metrics are used to determine correlation? Simply lowering the score cannot have a statistically significant impact on corruption score. It’s what goes into the mix, but i fail to see where a low GDP per capita, e.g.a change of only 4 points Avg CR corruption rating is the results of a GNP of
    $1,000.. I would posit a lower GDP/capita would have a signicant impact on corruption score rating. Need to determine source of input metrics aand what is being measured, specifically.
    .

    Like

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