Impact Of Bribery And Corruption On Economic And Political Systems

Definition of Bribery and Corruption

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Bribery and corruption have become a major issue globally. In the past few years, a phenomenon corruption has attracted many people to deal with it. In developing as well as the developed countries, the governments have been affected by this phenomenon, which lead to their downfall. Where there is bribery, there is corruption. To define them individually, bribery is a particular offense that concerns the practice of gifting something to gain illicit advantages. On the other hand, corruption is abusing a position of trust to gain undue advantages (Belch, 2014). Bribery is often referred to as an accompaniment of conducts that are corrupt, and the procedure of corruption occurs in the entrepreneurial activities or public institutions. This particular essay deals with the impact of bribery and corruption on the economic and political system of different countries, especially the United States of America and the United Kingdom. This essay will also discuss about the legal structures of these two countries when they are affected by this phenomenon (Pacini, 2012).

Bribery and corruption have almost become endemic and unavoidable in the public sectors and every society. This particular research is based on the impact of corruption in a country’s legal system. The administrators, legislators and political elite are mostly influenced to take or receive bribes. The industrialists offer bribes to them to get work done smoothly. This affects the legal system of any country. Politicians and higher officials are being partial to the needs of the common people. This has a negative impact on the overall economy of the country. Bribes can have a positive impact as well. They can help in avoiding regulations and saving time. Bribes can also help to influence the allocation of monetary benefits such as favored prices, credit subsidies and exchange rates (Sloman et al. 2014) A consensus has grown that bribery and corruption are toxic to the economies of the state as well to the societies. The occurrence of corruption is very high in the transition and developing states, where bribery is pervasive and endemic, most importantly within a perfectly structured corruption system. A perfect framework could assure that the payments, which are not official, when paid by individuals or firms will be ultimately delivered. The receivers of bribe perform as combined suppliers lower the marginal revenue as compared to the marginal costs to exemplify higher demands for goods and ultimately meet their equilibrium. This indicates that the revenue received from the bribe is greater than that of the marginal revenue, and it is lowered in public institutions. In a disorganized corruption system, enterprises face a huge amount of uncertainties that lead to bribing of various functionaries for similar services and results in bribery costs that are unnecessary (Ala’i, 2014). The structured and hierarchical system of corruption hinders opportunistic behaviors by individual agents or subordinates. This results in anticipated bribe requirement as well as consecutive achievement of the services and leads the enterprises to pay more bribes and administer more business. This, in turn, makes the corrupt behaviors thrive, thereby, constituting the vicious circle between bribery and corruption within the regime of bureaucracy. Corruption also thrives in circumstances, which is characterized by strong administrative and legal frameworks. Poor enforcement, huge discretionary powers, complex regulations and fragile legal networks provide a productive condition for corruption. It is because, under these conditions, officials engage themselves in seeking rent by abusing their priorities related to politics. World Bank has shown in the recent survey that Cambodia had created huge spaces for the discretion of surplus and rent seeking by regulating overlying and excessive measures. To simplify, it can be said that regulations play an insignificant role in reducing bribery and corruption (Banerjee, 2014).

Impact on Legal Structures

The determinants promoting corruption are those things that create demand for corrupt administration as well as affect the supply in the act of corruption. A deal that is corrupt partners with supply and demand sides in case of international transactions. The demand sides reflect the exporters from foreign nations. They, in all probability, demand deals that are corrupt from the public servants of domestic states. More corruption may be lured in the importing nations at the time of exporters, inclined to make maximum use of the bribes than the others may. The nations that believe in conducting more transactions at the international level with the exporters, who aims at claiming bribes, are considered to be more corrupt. When a government acts as a purchasing institution (on the demand side) and the traders or agents act as a party for the seller (on the supply side) in the case of public obtainment, the public officials take advantages of the public authorities (Boles, 2014). They establish rules for obtainment or procurement and confer contracts that often offer them potential chances to conduct corrupt acts. This special relationship of trading between a company and the government agency provides the agent of government with better opportunities to increase and develop demand for services and commodities. Demand sides of the public institutions manipulate the process of distribution of the scarce resources to gain those services or commodities (Purcell, 2014).

The bribery and corruption degree is often measured by demographics, i.e., the geographic reach of the region as well as by the annual costs on corruption that were spent on the transactions globally. Recently, the World Bank Institute has done a survey on the bribery level worldwide. It has shown that within a single year, the bribery level has reached to about $1 trillion. Transparency International or TI has evaluated that the recurrence of corrupt deals within the government obtainment has led the corruption level to rise to $400 billion every year. Corruption at the global level is almost under control over the recent years (Cuervoâ€ÂCazurra, 2014). However, the Corruption Perceptions Index of 2013 shows that 177 countries that were surveyed in the index of 2013, score below fifty on a scale ranging from zero to hundred, where zero represented more corrupt, and hundred represented less corrupt. Both New Zealand and Denmark rank first with scores of ninety-one at the corruption perceptions index of 2013. It is also found that those countries that scored below fifty are the developing countries, and the top ten countries are notably the European and the developed countries. Due to the cultural, economic and political factors, wealthier and developed countries are more prone to administer bribery and corrupt acts while the developing nations believe in bribing and conducting corrupt deals that can partly or fully make up to the supplements or additives for their Gross Domestic Product or GDP. The European countries reveal relevantly small or fewer possibilities of processing corruption. According to the latest report related to graft in the European Union, €120 billion costs of corruption have occurred in Europe that constituted about one percent of the total economic output and forty-three percent of the deemed firms that faced corruption (Gal, 2014).

Determinants Promoting Corruption

The Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be. A country or territory’s score indicates the perceived level of public sector corruption on a scale of 0 – 100, where 0 means that a country is perceived as highly corrupt and 100 means it is perceived as very clean. A country’s rank indicates its position relative to the other countries and territories included in the index.

Rank	Country	Score	Surveys used				CI: lower	CI: upper	2012 score
1	Denmark	91	7	87	95	90
1	New Zealand	91	7	87	95	90
3	Finland	89	7	86	92	90
3	Sweden	89	7	85	93	88
5	Norway	86	7	82	90	85
5	Singapore	86	9	82	90	87
7	Switzerland	85	6	81	89	86
8	Netherlands	83	7	80	86	84
9	Australia	81	8	79	83	85
9	Canada	81	7	77	85	84
11	Luxembourg	80	6	75	85	80
12	Germany	78	8	74	82	79
12	Iceland	78	6	73	83	82
14	United Kingdom	76	8	74	78	74
15	Barbados	75	3	63	87	76
15	Belgium	75	7	71	79	75
15	Hong Kong	75	8	71	79	77

In the multinational companies, the corruption is occurring at an effectively high rate thus by undermining the global economy as well as ruining the common people’s confidence in the public sectors since there lies leadership issue in that company worsening the situation (Banerjee, Mullainathan & Hanna, 2012). In these specific situations, the presence of strong and effective regulations plays a vital role in blocking corrupt and bribable behavior. In a global context, the two main codes of conducts acting strongly against this bribery as well as corruption practices occurring in both public and private sectors are the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act of 1977(FCPA). This US Foreign Corrupt Practices Act (FCPA) deals definitely with the domestic as well as international firms preventing them from performing any corruption or bribery payment practices. The FCPA consist of two main parts including the anti-bribery provisions and records and internal control provisions (Newburn, 2015). The FCPA not only effects the bribery deals, but it also states that any company making any suspected payments through bank accounts are equally questionable and comes under the practice of crime and thus shall be penalized as well. Additionally, the strict penalty that has already been applied to the companies for these prohibited behaviors has restricted these illegal practices in a much effective way. In a more specific context, a company or any individual performing these illegal practices can be penalized with two million dollars for each infringement and can also be sent behind bars for five long years with a fine of 250000 dollars (Law, 2015). On the other hand, as compared to FCPA, the UK Bribery Act 2010 has a broader version of extra geographical authorities that goes much beyond the FCPA. The UK Bribery Act 2010 has an intense improvement in the field of anti-bribery dealings (Banerjee, Mullainathan & Hanna 2012). The UK Bribery Act that was first enacted on July 2011 helped the UK government in controlling these illegal practices in an enhanced way not only by criminalizing the domestic officials and company employees but also taking strict actions against the third party representing a firm or foreign trading enterprise. The UK Bribery Act thus offers a board-raging and stronger code of conduct as a complement for FCPA (Cheung, Rau & Stouraitis, 2012). Elaborately, it can be said that all the companies that perform bribery will be considered as criminal and in this case, under the Act, no discharge shall be made for the payment that has been made. In addition to this, the person would be fined with unlimited fines as well as an imprisonment of minimum ten years. Thus, when both the discussed codes of conduct are combined to form one, that will be further capable of dealing with the worldwide corruption and hence make the economic conditions nurture cleaner and stronger.

Bribery and Corruption Degree Measured by Demographics

The paper was started with an assumption that the practice of corruption and bribery is prevalent and omnipresent in all the existing societies (Johnsøn & Mason, 2013). It verifies the hypothesis with the example as well as the theories related to the clearing of these unfair practices. This is due to the reason that mostly under any well-structured organization, the business deals with some unauthorized payments which ends up being bribery. In the same way, it was also found out that more frequent corruptions occur in the excessive regulatory networks where one could provide a public administrator with the productive base of neglecting the administrations to build the pre-determined rules and regulations for extra rent seeking (Pearce, Segon & Booth, 2014). While the analysis was made on the impact of both the supply as well as demand side that led towards corruption and bribery practices, it was observed that when the government or the public institution particularly represents the demand portion of the public procurement or international transactions, more corrupt acts can be processed (Kassem & Higson, 2016). These corrupt include the creation of more opportunities to confer the trading contract to the traders through their privileged powers. Also, to this, while measuring the extent of bribery as well as corruption, it was also found that geographically the cost that was incurred in illegal deals in the developed nations are relevantly high and takes place annually (Pacini, 2012). Thus, it can be concluded that although UK Bribery Act is more efficient in removing these practices, the combination of both the UK Bribery Act and FCPA will turn out to be more effective in deterring the worldwide corruption and stop the international bribery (Arewa & Farrell, 2015).

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