Corruption is broadly defined as “the misuse of public power for private gain.” (Rose-
Ackerman 1999). Klitgaard’s widely-cited formula explains the demand side of
corruption: corruption equals monopoly plus discretion minus accountability (Klitgaard,
1988). According to this formula, corruption flourishes when (1) government officials
hold a monopoly over a good or service, (2) have discretion over how that good or
service can be allocated, and (3) oversight and accountabilities are absent (Klitgaard,
1988; Graycar & Sidebottom, 2012).
Corruption has been found to be both the cause and the consequence of the erosion of
trust in both other people and in government institutions. (Rose-Ackerman 1999). More
than $1 trillion, or about 3% of the world gross domestic product (GDP) goes to paying
bribes (Mazur and Aggarwal, 2015; World Bank, 2017). There is a virtual consensus
among economists that corruption is economically inefficient and associated with
negative over-all economic activity (Bose, 2010). Interestingly, corruption is both mostcommon and least inefficient in autocracies, the point being that an autocrat is usually in
the best position to deliver on the object of a corrupt payment (Alon, 2016). And while
corruption stunts economic growth in all societies, it is most harmful in societies with
weak governments transitioning from autocracy toward democracy, sometimes called
anocracies (Alon).
While it is impossible to determine the precise level of corruption, a 1997 World Bank
estimate placed the total corruption involved in international trade at $80 billion per year
(Walsh, 1998). A World Bank survey of 3600 firms in sixty-nine countries found that
40% of those businesses pay bribes. In industrial countries, 15% of businesses were
found to pay bribes, but in the former Soviet Union, this figure jumped to over 60%
(Omestad, 1998).