Economics and Business Forum

Economic consequences of corruption

Under what circumstances is corruption likely to flourish? Generally, where institutions are vague about what constitutes corruption, there will be many instances of people accused of corruption being acquitted in court on technicalities.

Among those currently having to respond to charges about corruption, there is a former official within the judicial system. This is not as unprecedented as some people might think.

In 1951, I and my friends sat before what was called a saucepan radio tuned to the British Broadcasting Corporation (BBC). The Nyasaland African Congress had sent a delegation of four men to a conference in London on the proposed Federation of Rhodesia and Nyasaland. We wanted to hear what was going on there. The first news to reach our ears was not about the Federation, but a high court judge in Kenya who had been arrested for corruption. The BBC said the charges arose out of his official duties in Nyasaland (Malawi) as Attorney General.

LHS was charged in court in Blantyre of having withdrawn a case against an Indian merchant who had smuggled merchandise into the country without paying customs duties. The Commissioner of Police had charged the Indian merchants, a Mr Mehta and handed the evidence to the Attorney General. Mehta’s lawyer visited the Attorney General, thereafter the Attorney General told the Commissioner of Police that there was not enough evidence against the accused and therefore he had dropped the case.

The Commissioner of Police was not convinced. He was aware that LHS had been obtaining goods from Mehtas shop on credit. He went TO Mehta and enquired about the status of LHS account. The accounts book revealed that Mehta had concealed LHS debt.

During trial, LHS was defended by one of the most famous lawyers in Britain who specialised in cases within the colonies. It was alleged that LHS had withdrawn the charge against Mehta in exchange for Mehta’s cancellation of the debt owed to him by LHS.

It was a sensational case. The Nyasaland Times covered the cased adequately. What came out of the case? LHS was acquitted and awarded damages. This was an example of where it is sometimes difficult to differentiate between a gift from graft.

In African culture, a person who becomes better off is expected to share his wealth with his extended family either directly or indirectly. He shares his wealth indirectly when he gives his employers’ job to a relatives in preference to better   qualified non-relative. This is called nepotism. The inefficiencies we encounter when dealing either with private firms or government departments are due to the fact that merit was not considered important in giving jobs to some people.

Sometimes a more deserving official has been denied promotion by the senior officer who prefers to be surrounded by mediocre people. These are not a threat to his position or they can be trusted not to be fussy about corruption.

Nepotism demoralises capable civil servants. It is not surprising, therefore, that even when the civil service has men and women with degrees but not very competent. Before the Public Accounts Committee (PAC) of Parliament sometimes audit reports concerning transactions which took place almost five years ago are tabled.

What can be done to minimise incidents of corruption? Four strategies have been identified by some scholars. These are society, legal, market and political.

By society reference to moral pressure when members of the public are asked through the media to inform the anti-corruption institution anyone they suspect to be indulging in corruption. This method has not worked wonders in Malawi in view of the fact that the Cashgate scandals were ransacked serendipitously.

The second method is judicial. The law must define the essence of corruption; police should arrest those indulging in corruption and take them to court. This method works best when both within the police force and judiciary, there are no corrupt elements.

The third is that the economy must be based on free markets and free competition. It is alleged that where the State gets too much involved in managing enterprises, fixing prices, restricting access to market this leads to corruption known as rent seeking. This is the type of corruption where some businesspeople seek to earn more from the public or private sector without rendering extra service. For example, they obtain exclusive licences.

The political methods advocated decentralisation of public services. It is said the less centralised public services are the less opportunities will be there for officials who want to earn extra through bribes.

None of these suggestions guarantee complete success in combating or reducing corruption all the same. In view of the Cashgate scandal, serious thoughts should be given to potential remedies.

 

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Economics and Business Forum

Economic consequences of corruption

Under what circumstance is corruption likely to flourish? Generally, where institutions are vague about what constitutes corruption there will be many instances of people accused of corruption being acquitted in court on technicalities.

Among those currently having to respond to charges about corruption there is a former official within the judicial system. This is not as unprecedented as some people might think.

In the year 1951, I and my friends sat before what was called a saucepan radio tuned to the British Broadcasting Corporation (BBC). The Nyasaland African Congress had sent a delegation of four men to the conference in London on the proposed Federation of Rhodesia and Nyasaland. We wanted to hear what was going on there. The first news to reach our ears was not about the Federation, but a high court judge in Kenya who had been arrested for corruption. The BBC said the charges arose out his official duties in Nyasaland (Malawi) as Attorney General.

LMS was charged in court in Blantyre of having withdrawn a case against an Indian merchant who had smuggled merchandise into the country without paying customs duties. The Commissioner of Police had charged the Indian merchant a Mr Mehta and handed evidence to the Attorney General, Mehta’s lawyer visited the Attorney General, thereafter the Attorney General told the Commissioner of Police that there was not enough evidence against the accused and therefore he had dropped the case.

The Commissioner of Police was not convinced. He was aware that LHS had been obtaining goods from Mehtas shop on credit. He went to Mehta and enquired about the status of LHS account. The accounts book revealed that Mehta had cancelled LHS debt.

During trial LHS was defended by in if the most famous lawyers in Britain at the time who specialized in cases within the colonies. It was alleged that LHS had withdrawn the charge against Mehta in exchange for Mehtas cancellation of the debt owed to him by LHS.

It was a sensational case. The Nyasaland Times covered the case adequately. What came out of the case? LHS was acquitted and awarded damages. This was an example of where it is sometimes difficult to differentiate between a gift from a graft.

In African culture a person who becomes better off is expected to share his wealth with his extended family either directly or indirectly. He shares his wealth indirectly when he gives his employers job to a relative in preference to a better qualified non-relative. This is called nepotism. The much inefficiency we encounter when dealing either with private firms or government departments are due to the fact that merit was not considered important in giving jobs to some people.

Sometimes, a more deserving official has been denied promotion by the senior officer who prefers to be surrounded by mediocre people. These are not a threat to his position or they can be trusted not to be fussy about corruption.

Nepotism demoralises capable civil servants. It is not surprising therefore that even when the civil service has men and women with degrees it is not very competent. Before the Public accounts Committee (PAC) of parliament sometimes audit reports concerning transactions which took place almost five years ago are tabled.

What can be done to minimise incidents of corruption? Four strategies have been identified by some scholars. These are society, legal, market and political.

By society reference to moral pressure when members of the public are asked through the media to inform the anti-corruption institution anyone they suspect to be indulging in corruption. This method has not worked wonders in Malawi in view of the fact that the cashgate scandals were ransacked serendipitously.

The second method is judicial. The law must define the essence of corruption, police should arrest those indulging in corruption and taken them to court. This method works best when both within the police force and the judiciary, there are no corrupt elements.

The third method is that the economy must be based on free markets and free competition. IT is alleged that where the State gets too involved in managing enterprises, fixing prices, restricting access to markets this leads to corruption known as rent seeking. This is the type of corruption where some business people seek to earn more from the public or private sector without rendering extra service. For example they obtain exclusive licenses.

Political methods advocate decentralisation of public services. It is said the less centralised public services are, the less opportunities will be there for officials who want to earn extra through bribes.

None of these suggestions guarantee complete success in combating or reducing corruption. All the same in view of the cashgate serious thoughts should be given to potential remedies.

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