Can Corruption Coexist with Economic Growth

Can Corruption Co-Exist with Economic Growth?

Although some researchers argued that minimal corruption may help economies grow by facilitating transactions hampered by bureaucratic delay or encourage corrupt officials to work harder, the great majority of scholars argue that government corruption hampers overall economic development (Klitgaard, 1991; Rose-Ackerman, 1978). The illegality and secrecy of corruption promotes much unpredictability and greater distortion than simply a costlier tax rate (Campos, Lien, & Pradhan, 1999; Fisman & Svensson, 2007; Shleifer & Vishny, 1993). Thus, numerous studies have shown that corruption lowers economic growth rates by increasing risks and uncertainty and deterring foreign investment (Knack & Keefer, 1995; Mauro, 1995; Wei, 2000: Wei, & Shleifer, A, 2000). However, the unprecedented economic development of China over the past three decades and its position at the top of global foreign direct investment rankings somewhat leads many to question the veracity of these supposed statistical relationships (Li & Wu, 2007).

One optimistic explanation is that the high levels of government corruption could merely be a transitory phase in China’s road to economic development. Economic growth and foreign investments could actually lead to increased corruption in the medium term, as increases in the level of economic transactions present greater opportunity for making money off corruption (Cuervo-Cazurra, A, 2006; Cuervo-Cazurra & Genc, 2008). The entry of foreigners could also promote greater awareness of the negative impact of corruption (Robertson & Watson, 2004; Kwok & Tadesse, 2006).Over time, as the economy develops, a growing Chinese middle class will seek greater political participation and accountability from their government, leading to the decrease in government corruption.

At the same time, Chinese corruption may be merely an offshoot – albeit a negative one – of a successful...