Bribery is largely considered as a strong constraint if growth and development in the modern economy. Bribery tends to reduce the economic performance from the nature of its activities. The economic reduction tendencies are propelled by the inefficient investments, misallocation n of resources, increase of transaction costs, and uncertainty increment. Bribery is responsible for weakening institutions and functions in many countries. It weakens the application of laws leading to inefficient provision of public services. Bribery has become rampant in the modern times of globalization due to the intensive aggression of business to grow their operations.
Bribery negatively affects an organization’s operations on four broad dimensions. First, the external business relations of the company are damaged. The entities’ interaction with regulators and public is ruined with bribery. Lastly, the phenomena tend to lower the employee morale. The extent of the negative effect caused by this vice would depend on the initiation of the act, its detection, and the firm’s response to the corruption scandal after its discovery. Data from PricewaterhouseCoopers provides evidence that employee morale drops when organization use bribery to buy their way into success. The company came up with this data after surveying thousands of its clients who had potential legal issues on bribery. The survey was carried on firms that are in countries considered to have high bribery incidences such as South Africa, Russia, and Ukraine. The study was almost taken on less common bribery economies such as the United States and United Kingdom (“How does corruption affect economic growth?” 2017).
Bribery reduces the government revenue of economies hence limiting the ability of these institutions in investing in productive initiatives. Countries that have high corruption incidences such as Syria and South Africa have their locals view the paying of taxes as a questionable proposition. The citizens will have low motivation to meet their tax obligations due to the tension between them and the governments function as a tax collector. The existence of rampant bribery in the economy will provide a creative platform for individuals and firms to evade taxes by becoming bribers (“How does corruption affect economic growth?” 2017). The undermining of government revenue by bribery limits countries’ efforts to eliminate poverty. Bribery interferes with the decision making process linked with public projects. Large capital investments towards the public such as those on education and health tend to attract bribery. Bribery makes countries to undertake big projects that are not of much help to the public. Taking these projects leaves the public with large debts.
Bribery is responsible in driving down the economic activity of a country. Countries infested with corruption such as Russia experience a fall in foreign direct investment. Investors prefer corruption free zones such as the United States than this region since bribery does not promote equity among all the players in the economy. The tax rate of a less corruption country such as Singapore is lower than that of a more corruption infested economy such as Mexico. This fact makes foreign investors prefer countries that have no tolerance to corruption (Gaviria, 2011).
Bribery creates uneven income distribution. Some individual and firms in the economy will be able to buy their way into success through corruption and leave the large masses left out. The wealthy in the economy will be able to use their powers to use the tax system to their advantage at the expense of the low income earners.
- Gaviria, A. (2011). Assessing the Effects of Corruption and Crime on Firm Performance. SSRN Electronic Journal.
- How does corruption affect economic growth? (2017). World Economic Forum.