Sat, Jan 25,2014

http://www.forbes.com/sites/mikepatton/2014/01/24/government-corruption-and-economic-growth-the-21-least-corrupt-nations/

In my last article, we examined the 21 most corrupt countries in the world. Most of them are small economies with Afghanistan, North Korea, and Somalia capturing the dubious honor of being the most corrupt. I suppose Captain Phillips would have no argument with Somalia topping the list. Now we’ll turn our attention to the 21 least corrupt nations and compare, in general terms, the economic climate of these groups.

It’s interesting to note that 12 of the 21 least corrupt nations are located in the Euro region. Denmark and New Zealand top the list once again. As mentioned in my last article, this annual corruption survey is created by Transparency International which examines over 175 countries. The 21 least corrupt nations from the 2013 survey are listed in the following table. The scores range from 0 (most corrupt) to 100 (least corrupt). The third and fourth columns contain the scores from 2013 and 2012 respectively.

Ethics and Economic Development

I suppose it’s not too much of a stretch to understand that a country with a great deal of corruption is less likely to have a flourishing economy. This exists for a few reasons. First of all, if a small, corrupt nation is run by a dictatorial regime, one which extracts much of the country’s wealth for personal gain, the private sector will be weak and unemployment will be high. Secondly, this type of environment is also unattractive to multinational corporations looking to expand. It’s also not conducive for local business development. Hence, the result is a dual-class citizenry (i.e.; the “haves” and the “have-nots”). High unemployment tends to cause a great deal of pain and suffering amongst the general population.

When corruption is low and government acts ethically, there is a perception, hence a reality, that it is safe to do business there. If you compare the most and least corrupt nations, you’ll find the least corrupt nations, in general, have larger economies. For example, of the 21 most corrupt countries, 19 of them have an annual GDP of less than $100 billion. What about the least corrupt nations? Only four countries have an annual GDP below this mark. The table above includes each country’s rank in terms of the size of its economy (See the column: “World Rank”).

Here’s another statistic in favor of ethical leadership. In the most corrupt countries, 13 of the 19 which publish unemployment data, have an unemployment rate greater than 10%. In the table above (the least corrupt nations), only two countries have unemployment above 10%. Yes, it’s clear that ethics are essential for economic development. However, change doesn’t come easy or quick.

Consider Iraq. We’ve been in Iraq for over a decade trying to install a democratic government. We’ve also lost a number of brave men and women who have given their lives in this effort. Unfortunately, a democratic system, and stability in general, in this region, tends to run counter to what has been the norm for eons. In fact, most countries in the region tend to have a supreme leader or family who governs the country. Moreover, women are typically treated as second-class citizens having fewer freedoms than men. This reminds me of America prior to the women’s movement. In fact, women weren’t granted the right to vote until the nineteenth amendment to the Constitution was ratified on August 18, 1920! Hard to believe, but true nonetheless.

Summary

In these two articles on public-sector corruption, we’ve learned that higher ethics translates into stronger economies. This is not a great mystery since the private sector is the engine of growth in any economy. It’s also true that government holds most if not all the cards. For instance, government creates and enforces the laws, regulates taxes, and in essence, creates an environment where the private sector will either flourish or flounder.

This battle between the public and private sector continues to rage. Ironically, the public sector cannot exist without proper funding and proper funding cannot occur without a vibrant private sector. Therefore, a strong private sector is a necessity. Also, when the private sector lobbies lawmakers on various issues, this ‘lobby’ is functioning very much like a union. A union is trying to make things better for its workers and a private sector lobby is supposed to do the same for the businesses it represents. However, as it occurs, the pendulum often swings too far in one direction which creates problems. Oh, where’s Honest Abe when you need him?