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Two explanations of corruption by economists (1)

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Why do people steal? What makes corrupt practices attractive to public officers and their counterparts in the private and third sectors? One could turn to social scientists, who study human behaviour, for answers to these and similar posers about corruption. Among social scientists, economists occupy a vantage position in the study of production and exchange.

Their remit also covers the behaviour of rational human beings with respect to scarce resources. So, how do economists explain corrupt behaviour towards scarce resources? A limited survey of writings by economists on the subject points to two principal explanations of corruption. One is the Corruption Kutznets Curve (CKC) hypothesis and the other is the Property Rights Paradigm hypothesis.

Stylised facts
The public sector of most developing countries is usually large compared to other sectors. This feature of developing countries means that public sector decision makers exercise huge control over scarce resources. Another point worth noting is that since the oil boom of the mid-1970s, Nigeria’s economy has been dominated by hydrocarbons. For instance, between 1981 and 2011, oil accounted for an average of 96.68 percent of total export revenue and 76.26 percent of federal collected revenue. This trend has continued to this day and explains why a major shock to the petroleum industry is pregnant with danger for the entire economy. Thirdly, the Nigerian economy has come under severe attacks through the activities of economic agents, in and out of government, who steal from the common patrimony.

Pervasive corruption

How widespread are corrupt practices in Nigeria? Christopher Orubu, a professor of economics at the Delta State University, Abraka, provides some guidance in his inaugural lecture delivered on June 20, 2013. Speaking on the topic, “Rent-seeking Behaviour and the Development Process”, Orubu defined corruption as “the abuse of trusted office for personal or private gain”. According to him, one of the earliest instances of corrupt enrichment in Nigeria was brought to public glare in 1944 when a colonial report implicated a frontline political leader who purchased a bank through a firm belonging to his family. Prior to the attainment of flag independence, a well-known politician who later became senate president was caught up in a scholarship scam. In 1962, the press was awash with reports of the Coker Commission indicting a frontline politician from the Western Region for misappropriation of regional funds.
General Gowon’s tenure as Head of State witnessed corruption in high places. By the time he was over-thrown in a military coup in 1975, 10 of the 12 military governors he appointed were accused of stealing unknown amounts of money.

The numbers

Prior to the Babangida era, it was not customary to attach specific numbers to allegations of corrupt practices in Nigeria. However, under the watch of the self-styled evil genius, $12.4 billion Gulf War oil windfall disappeared without trace. The late Dr. Pius Okigbo blew the whistle. Other instances and allegations of mindless rape of the public treasury are summarised in the accompanying illustrations.

The CKC approach (Corruption will decline as incomes rise sustainably)
Orubu’s treatment of corruption centres on answering the question: “When will corruption begin to significantly abate in Nigeria?”His analytical framework extends what economists know as the “Kuznets curve” named after Simon Kuznets (1971 economics Nobel Prize winner). This is the proposition that there exists an historical inverted U-shape relationship between income inequality and economic growth which he explained by the changing structure of the economy. Orubu proposes a Corruption Kuznets Curve (CKC) hypothesis which states that an associative inverse non-linear relationship exists between economic growth (proxied by rising per capita income) and corruption. “Thus, it is expected that during the early stages of the development process that is characterised by primordial sentiments and hard-wearing common beliefs about the “invisible eyes” on the punishment of “sins”, the level of corruption will be relatively low. But as development progresses and transits into the modern phase of productive activities that are characterised by a high degree of individualism, and particularly when authorities exhibit multiple objectives that make it difficult to locate public interest, the level of corruption will continue to increase; but up to a threshold level of income, corruption might begin to abate”. In plain words, corruption will decline as incomes rise sustainably.

 

Weneso Orogun