Corruption: A Key Challenge for Development
Daniel Kaufmann and Phyllis Dininio
Not so long ago, corruption remained an issue on the fringe of international development. Development practitioners and leaders from developing countries avoided the issue because it was considered a matter of a country’s internal politics and not an impediment to development. Some academics even made the claim that corruption facilitated development by greasing the wheels of a rigid administration (Huntington 1968; Neff 1964).1 The “Washington Consensus” (or development paradigm) of the early 1990s made no mention of corruption control or governance in its list of 10 key reforms. To the extent that it was considered, the paradigm suggested that corruption control was a by-product of development (Nairn 1994; Kuczynski and Williamson 2003).
The 1996 Annual Meetings of the International Monetary Fund (IMF) and the World Bank, however, marked a turning point in the development community’s approach to corruption. On that occasion, the President of the World Bank placed the corruption issue center stage as a key challenge for development (Wolfensohn 2005). This speech prompted the launch or expansion of anti-corruption initiatives by the World Bank and other development agencies, complementing the work of the nongovernmental organization (NGO) in the anti-corruption arena, Transparency International (TI).
At the same time, new empirical research reshaped some of the thinking about corruption. New data refuted the corruption-as-grease claim and, instead, showed how corruption engenders more distortions and intrusions in the economy as public officials look for more ways to extract corrupt payments (World Bank 1997, 103; Kaufmann 1997). Moreover, this research showed little evidence of higher incomes in a country leading to better governance. By contrast, the data suggest a strong causal effect running from control of corruption to higher income levels (Mauro
1 In his seminal work on modernization, Huntington made the well-known claim: “In terms of economic growth, the only thing worse than a society with a rigid, overcentralized, dishonest bureaucracy is one with a rigid, overcentralized, honest bureaucracy. A society which is relatively uncorrupt… may find a certain amount of corruption a welcome lubricant easing the path to modernization.”