Corruption is a key factor in sustaining appallingly high levels of poverty in many developing countries, particularly in relation to the provision of basic services such as education and health. It is also a major reason why increases in the growth rate in Africa and South Asia have failed to benefit large segments of the population. Corruption drives the over-exploitation of natural resources, capturing their value for a small elite – whether timber from Indonesia or coltan from the Congo. In the developed world, corrupt party funding undermines political systems and lays policy open to heavy financial lobbying.
Corruption has to be seen as the result of the interplay between elite ‘embedded networks’, political finance, greed and organized crime. It has been facilitated by globalization, the integration of new and expanding markets into the world economy, and by the rapid expansion of ‘offshore’ financial facilities, which provide a home to largely unregulated pools of finance derived from personal fortunes, organized crime and pricing malpractice in international trade.
This analysis probes beneath the surface of the international initiatives to curb corruption which have evolved since the 1990s. It indicates that there remain key ‘roadblocks’ to real reform which have to be addressed before major progress can be made. These include recognizing that the huge ‘shadow’ unrecorded economy in many countries is a reservoir of corrupt payments, that organized crime is a critical factor in controlling many political systems, that the finance to fund political parties always requires a pay-off which endangers political stability, and that ‘mispricing’ by local and international companies continues to prevent a just return to lower income countries participating in world trade.