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Farhan Hyder Sahito

Institute for Software Technology Graz University of Technology Graz, Austria

Corruption as one of the oldest phenomenon in human society exists in every country, and probably no country is free of corruption. Though, the amount certainly differs by a large margin in different places or institutions (Tanzi, 1998). Corrupt peoples are considered to be parasites and evils who misuse their position for personal benefits in an ill-famed fashion. And yet, despite the stigma that it carries, it is a widespread phenomenon. The World Bank estimates that corruption amounts to 5 percent of the world GDP or around 200 billion dollars per year worldwide. However, Africa loses 25% of its GDP (Boris et al., 2008).

Common wisdom sights corruption as an obstacle to development and growth. Mauro (1995) also observed a negative relationship between corruption and investment. Various other scholars claim that it sands the wheel of economic growth and collapses political regimes (Gupta et al, 2002; Tanzi, 2002 & Wei, 2000). Corruption is also considered to be the single greatest obstacle to economic and social development around the world that links to underdevelopment (Gupta et al., 2002). Others believe that corruption hinders political development, instability and possible national disintegration (Hodess, 2004; and Schlesinger & Kenneth, 2002). Various international organizations: for example, the International Monetary Fund (IMF), the World Bank, the United Nations (UN), the Organization for Economic Cooperation and Development (OECD), different (Non Governmental Organizations) NGOs and Transparency International (TI) are also active in fighting against this barrier on many fronts (El-Sharkawy, 2006).

Is corruption ever a good thing? According to Gupta and others, at first sight the question seems ironic and even provocative, because this is a question in which the opinion and interests of the economist and scholars are likely to conflict (Gupta et al.,

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2002). So, given corruption's complex nature, this question is still controversial among scholars and economists (Gupta et al., 2002). But needless to say, corruption and its effects can be seen from a large number of viewpoints and it can be argued that corruption certainly does have two sides to it (Hislope, 2005).

This article will attempt to answer above question and will advance reverse thesis of propaganda of international community about corruption. It will argue that corruption is a good thing and it has many advantages. These arguments will be supported by various evidences and examples. It will further discuss that corruption is a good thing because some form of corruption may allow us to achieve required objectives within ineffective and inefficient environments with better outputs; these outputs are unachievable, if we are strictly honest and ethical (Lui, 1996). It is also good in a sense that, it compensates the consequences of a defective bureaucracy and bad policies and may helpful in economic growth, political development and national integration.

The main thrust of the article will be centred on the above arguments. However, the paper will be divided into three parts with an analysis and a discussion. The analysis will deal with the definition of the concept corruption. An attempt will be made to look at positive relation of corruption with economic growth, political development and national integration with underdeveloped countries. That will provide us better perspective as to why corruption is beneficial. The first part will look at the positive relation of corruption with economic development. It will be argued that corruption greases the wheel of the economy that speeds up the process of investment and boost economic growth. Furthermore, Luis (1996) queuing model will be discussed, that may decrease administrative delay, improves the quality of bureaucracy and made the wheels of administration turn more efficiently. The second part will discuss that, corruption is a form of political machine. This machine can increase the political development by supporting and strengthens political parties. This notion also used to hold a country together, stabilizing democracy and creates unity that may further flourish development of the country.

The third part will argue that corruption may play its effective roles in maintaining legitimacy by integration among minorities and elites of the country. In this part, the
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concept of corrupt exchange will also be explored. It will be argued that this exchange reduces the possibility of interethnic violence and creates multiethnic coalition that may foster interethnic peace and nationalism. Finally, a discussion will be made that will identify that corruption brings many advantages and benefits, especially for the developing countries. However, these benefits have some limitations. Furthermore, it will be discussed that, international community has to understand the complexity of this issue rather than only promoting propaganda against this survival strategy (corruption) of developing countries.

There is usually the difficulty to explain the definition of corruption. Because of its complexity it is hard to put forward a dogmatic definition of this concept. According to the Transparency International, corruption is the use of public office for personal gain or misuse of entrusted power for private benefits. However, these definitions of corruption are not agreeable and satisfactory, because there are also evidences of corruption in private sectors (Thomas & Meagher, 2004). Therefore, the most influential definition of corruption can be defined as behaviour that deviates from formal duties because of private gains (Mishra, 2006). Yet, some scholars also raise the question about that particular behaviour. In sum up, we defined corruption in many different ways, but each definition lacking in some aspect. So, it can be argued that, this complex concept manifests itself in various ways. As Tanzi (1998) argues that, like an elephant, while it may be difficult to describe, corruption is generally not difficult to recognize when observed.

Yet these definitions mention above did not justify that corruption is a bad thing. Transparency internationals definition (use of public office for private gains) is also not clearly mentioned that corruption is bad for overall welfare of the country (Miranov, 2005). However, number of empirical researches was initiated by various scholars in different time periods tried to address above concerns. They attempted to see the relation of corruption with investment, growth and political development. Mauro (1995) and Shleifer and Wei (2000) in their different researches found negative relation between corruption and growth. However, Egger and Winnerb (2005)

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in his research for a sample of 73 countries found positive relation between corruption and economic growth in developing countries.

In relation with Egger and Winnerbs (2005) research, it can be argued that corruption may be ethically unsavoury, but, according to many economists and scholars the spectrum of corruption is very wide and there are indeed some types of corruption that can benefit the rich and poor alike (Bardhan, 1997). This notion is common in underdeveloped economies where legitimate transactions take a long time to process because of bureaucratic inefficiencies (Bardhan, 1997 & Hisolpe, 2005). However, numbers of scholars are agreeing that corruption is more prominent in developing countries. There are various grounds that support this argument. Such as: inequality in distribution of wealth, high taxes, low salaries, strict regulations, less accountability and the weakness of the legitimacy of governmental institutions that would have a more immediate impact on the behaviour of civil servants and public (Egger and Winnerb, 2005 & Gupta et al., 2002) and lead them towards corruption.

In above situation, corruption may seem to work well and a little grease can speed up the transaction in developing countries rather than obstacle to economic growth. These circumstances may become suitable for those who dont want to lose time waiting in queue for simply getting a passport or licence, or when there is limited supply of goods and services such as health, education or natural resources (Lui, 1996). Specially, when inefficient bureaucracy makes it hard to start companies, import or export goods (where every day of delay causes a huge loss to the businessman). In these situations, corruption can cut through the red tape and motivate bureaucrats who would otherwise shirk their duties (Tanzi & Davoodi, 2000).

Proponents agree that, bribes make it expensive to start a new business, but if bribes don't work, it is impossible to start a new business, which is clearly even worse. Furthermore, the actors involved in this scenario, such as corrupt officials, businessman and the national economy are better off because of these bribes. Economists argue that, this behaviour that benefit to different actors is called functional corruption (Gould, 1999). This corruption may allow achieving different objectives in highly inefficient bureaucratic environment and both parties receive a benefit from the transaction. Similarly, the first impulse of the economist is that, such
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a mutually beneficial trade cannot be bad and the reason is: in corruption nobody is forced into anything and both sides make a gain, so it can not be called poor or even evil? These analyses proved that, the corruption may help defeat the damaging effects of bad corruption associated with poor institutions and significantly promotes development and growth in underdeveloping countries (Lui, 1996 & Nye, 1967). Subsequent paragraphs will also discuss this advancement in relation with economic growth, political development and national integration.

Leff (1964) and Huntington (1968) argued that, the corruption has positive relation with economic growth. Hisolpe (2005) further defined this relation as ersatz mechanism. This mechanism may allocate resource more efficiently when markets are not perfectly developed or state distorts prices. It may also encourage the rise of risk-taking corporations, who are otherwise hindered by state regulations (Hisolpe, 2005). Leff (1964) and Huntington (1968) also suggest that under rigid regulation and inefficient bureaucracy, corruption might foster economic growth. Lui (1968) further calls it as second best principle. According to her, in existing policy distortion, corruption may offer additional twist that may in fact encourage economic efficiency and welfare. Beck and Maher (1986) and Lien (1986) also believe that this corruption may raise efficiency and growth by this principle. Huntington (1968) further believes that in these circumstances, corruption oils the mechanism and enhance the efficiency to the South East countries. Evidences also proved that, the growth rates are very high in India and China due to the corruption. And the reason is: corruption eliminates the government-imposed rigidities that slow down the investment and impede with those economic conditions that are favourable to growth (Nye, 1967 & Huntington, 1968).

Among the possible economic benefits of corruption, the important benefit is an equilibrium queuing model. Lui (1996) defines this model as a cooperative game OR an illegal mutual agreement where both parties involved will benefit . According to her, bribes can minimize the waiting cost that spent in queues. This model can be considered a good relief for whom the time has the greatest value. They get decisions

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quickly because bribe reduces administrative delays. This reduction further speeds up the process of investment when agents use speed money to get around bad laws and institutions (Lui, 1985). In sum up, some kinds of government corruption can not be considered as bad, because corruption promote efficiency in a sense that it inform us how regulations are administered, and how to counterbalance the poor investment decisions made by bureaucracies (Lui, 1985, 1996).

Joel Waldfogel (2006) further defined the usefulness of queue model by summarizing a recent study in Delhi, India. This study was done with 800 people who needed drivers licenses. He discussed the benefits of corruption by saying that, if you need a license than by offering bribes you can save your time if you are in a big hurry. This corruption is beneficial in a sense that, one has to spend about few minutes in waiting line, as opposed to five hours for those who did not hire an agent. This example shows that, in some countries, the offer of a bribe in exchange for quicker processing reducing the social cost of waiting in line. Sometime, offering bribes also ease the pressure on public, if supply and access provided by the government is limited. Similarly, those who need to access within limited supply and would be willing to pay the bribes, they can get higher access in what government is providing.

Beck & Maher (1986) and Lien (1986) further define above phenomenon by arguing that, this queue model also promotes efficiency in corporations. However, efficient firms are often those who can afford the highest bribe. Though, those firms that adopt an honest approach are more likely to fail in its attempt to procure contracts and terms as inefficient (Kaufmann & Wei, 1999). For instance, in bidding competitions or in limited supply the most efficient corporations, those who are well organised can offer the highest bribes to win that competition. The grounds are: secret information about evaluation criteria or competitors bids reduces economic risks, and improved economic framework (Kaufmann & Wei, 1999). According to Tanzi (1998) corruption may also improve the allocation of resources in these circumstances. These arguments illustrate that, the limited supply is reachable and the massive amount of time spent by the citizens or business firm in a queue can be reduced through the payments of bribes. However, these bribes could also give bureaucrats an incentive to speed up the process, in an otherwise lethargic administration (Leys, 1964).

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Moreover, above benefits can also promote efficiency and growth or in other words it greases the wheels of development. Bardhan (1997) reminds history of US and Europe, where entrepreneur get favoured to grow out of bribes-so called grease the wheels hypothesis. Huntington (1968) further states that, in 1870s and 1880s in the United States, utility, railroad and industrial corporations grew faster because of corruption. This hypothesis suggests that this corruption may be advantageous in a second best principle. This happens especially when distortions emerge by illfunctioning institutions (Leff, 1964 & Huntington, 1968). Different scholars and economist also consider grease the wheels hypothesis as a trouble-saving device. According to them, this device raises efficiency, investment and ultimately growth. However, these scholars also suggest that, this hypothesis may be only beneficial in those developing countries where governance is ineffective, and remains harmful (Lui, 1996; Mirnov, 2005; & Egger and Winnerb, 2005).

In less developed countries, from the point of view of public, corruption appears as an elegant and comparatively cheap solution for an individual. From the point of view of the corrupt bureaucrat, the bribe just appears as an additional opportunity to make some income (Tanzi & Davoodi, 2000). Tanzi (1998) also supports these arguments. He says that, those countries, where public sector wages are low, such as India; it is not practical or realistic to increase the wages without reducing the size of the employees. This reduction is politically difficult and creates more problems in poor countries. However, corruption plays a vital role in this situation and may counterbalance the needs of both government and the public employees, and could beneficial in the short run for both directly involved (Tanzi, 1998).

Moreover, Bailey (1966) argues that, this corruption is not only beneficial but it can also improve bureaucracy by expanding the quality of its civil servants, especially in developing countries. As Lui (1996) and Beck & Maher (1986) believe that, in nearly all Asian countries, officials are not well paid to meet the ends. In those circumstances, when wages in government service are insufficient, then bribe is almost a conventional fee that made the wheels of administration turn more efficiently (Wint, 1955). This may also attract able civil servants who would have otherwise opted for another line of business. Nye (1967) goes further and argues that, the bureaucratic corruption is also an important source of capital formation, especially when state
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lacks a capacity to tax a surplus out of workers openly or when private capital is limited. However, this notion raises a question here that whether this capital uses to grow economy or winds up in Swiss bank?

The less political resources are a big problem in less developed countries, such as India, because politicians rely on material incentives to get enough power to govern (Shleifer & Vishny, 1991). However, Hislope (2005) suggests that, in deeply divided societies, where political consensus is weak and the state is fragile, corruption can offer a much-needed adhesive policy for political stability. Susan Rose-Ackerman (1997, p. 40) also believes that, the Democracy gives citizens a role in choosing their political leaders. In this sense, corrupt material can make democracy possible by strengthening parties. This can be a profitable political glue by allowing political parties to get funds, that can be used to hold a country together and under certain condition corruption actually benefits society (Tanzi, 1998).

Nye (1970) believes that, this corruption may further increase government capacity by financing the political parties. And can also be beneficial to the continuation of the political system in the same way that reforms are (Huntington, 1970: 3). Theobold advanced further and said that, many political parties in the western experience were also initially relied on corruption to unite their disparate groups, once established they endorsed a vision of the public interest that opposed the private exploitation of the state (1990: 122). However, it is also evident that, state actors adopt this strategic approach in those conditions when the tools of approval and force are not politically viable (Theobold, 1990). On the other side, Huntington (1968:196) suggests that, utilizing of government and public funds to illegally develop stronger political party is only a mild form of corruption if it all. Because the later outcomes of these public and state funds will be beneficial for growth and development of the country (Graziano, 1980). For instance, the Nineteenth century experience of England and USA is a positive example in the use of state and public funds. Both countries used these funds properly to assemble the strengths of their political parties (Perkins, 2000).

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Robert Hislope (2005) further defines the benefits of the political corruption by saying that corruption is a form of political machine. It works, when political and administrative system unable to address certain social necessities. Political machine may play a vital role in managing disparate and conflict interests of civil society. This machine not only gives access to the urban poor, new immigrants and ethnic minorities to state resources, but, it also facilitates business elites for different privileges (Hislope, 2005). Perkins (2000) suggests that, regimes in less developed societies should encourage this political machine as they support hatchling business organizations, because development and consolidation benefit from them. According to him this machine may also build up the strong political staff. This staff will have capability to defend, stabilize and unite the democratic rule. Moreover, society will receive the benefit of this unity that may promote assistance in stabilizing democracy and thriving economy (Perkins, 2000). Besides these arguments, Tanzi (1998) feels that, this party financing may allow the state to maintain a lower tax burden, which can also favour growth in a country. However, Tullock (1996) raises a question here and asks that, whether this lower burden is more profitable to growth than a lower degree of corruption?

Many scholars, including Voskanyan (2000) and Junichi Kwata (2006) also criticize the relation of corruption and political development. According to them corruption undermines the legitimacy of government and has harmful effects on political development. They also demand for strict regulation and zero tolerance policy for eroding corruption. However, in response, Hisolpe (2005) condemns this policy of reducing corruption. He argues that, in this policy, the international community and the developed countries undermines the only political mechanism of developing countries that lies between politics-as-bargaining and politics-as-war. In short, corruption is capable of fostering social forces that undermine its own existence (Hisolpe, 2005).


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Society grows better if the political structure of the country maintains its legitimacy and the members of the society share their sense of community (Hislope, 2005). In the 1960s and 1970s, different revisionists, such as Joseph Nye (1967) Samuel Huntington (1968) and others argued that, under certain circumstances, corruption could have positive and beneficial effects in maintaining legitimacy and development in a society. It is basically a survival strategy for ethnic minorities, dispossessed and subaltern in a society (Hislope, 2005). On the other side, it also facilitates elites into their networks of self-interests. These both benefits make the bridge between the minorities and the elite class that create unity and integration (Nye, 1967 & Hislope, 2005).

Different proponents of corruption also advanced the view that, corruption may helpful in reducing discrimination among minority groups. This factor is also helpful in economic growth of that country by utilising their skills (Lipset & Lenz, 2000). This corruption may make a bridge among different groups that might otherwise end in clash and conflict (Hislope, 2005). Similarly, Nye (1967) argues that, it is possible, if there is more corruption in developing country. In this sense, entrepreneurs from minorities ultimately get access to political decision making process that leads to less discrimination and integration among different actors of the society. Corruption may further allow these groups to assimilate each other and integrate their leaders into the existing upper class (Nye, 1967).

Nye (1967) further states that, in early nationalist period, in the West Africa and the Central America, corruption played vital role in the integration of their elite leaders. Integration of millions of immigrants in the 19th century was also based on corruption. Moreover, this integration may comfort the transition from traditional life to modern, because integration maintains soft relation between literate official and illiterate country person (Lipset & Lenz, 2000). The traditional life of country man will improve, if he approaches the corrupt official with some money or gift (Nye, 1967). As Shils' argues that, corruption humanizes government and makes it less awesome" (Dike, 2003). Above arguments shows that, the corruption works as inclusion for the dispossessed, a furnishing additional instruments for the promotion of elite unity and national

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integration (Holmes, 2005). However, some scholars criticize on the philosophy of this theme and argue that, integration for one group may be disintegrative for another (Voskanyan, 2000). In response, Holmes (2005) replies that the corrupt exchange might be the remedy of this issue, because it may tame nationalism and foster multiethnic coalitions.

According to Lipset & Lenz (2000), states are unable to resolve the contradictory interests that occur in ethnically divided societies. This incapability produces disintegrative violence and numerous external challenges. In this way, the corruption exchange is a mechanism that may reduce the possibility of interethnic violence and creates multiethnic coalition in rapidly changing societies (Holmes, 2005). Furthermore, corruption tames nationalism that strengthens the regime stability and moves towards disunity to consensual unity. Corruption may also provide a political system to cope with the above issues with a rate of social change, which blocks the political influence and coalitions among members (Holmes 2005). According to Scott (1967: 508) this political system further leads to politics-as-war to politics-asbargaining. According to Gagnon (2004), in the concept of corrupt exchange, the coalitions among members are based on reciprocity. On these grounds, corrupt multiethnic coalitions will likely create de-mobilizing regimes (Gagnon, 2004). This regime is feasible, as no participant has concern in troubling and mobilizing its group against the other. Such regimes may avoid interethnic disputes and violence and move towards peace and unity (Horowitz, 1985). This unity can purchase peace by giving each side a stake and a personal interest in the system. However, due to the elements of reciprocity this coalition can move towards disintegration with in a year (Gagnon, 2004). Though, Holmes (2005) states that, long term coalition is possible, if these ethnic party elites regularly interacts each other. This interaction may develop an overarching network of influence and communication among elites. Furthermore, this relation will dispel the hostile stereotypes and may discover the common norms. These rules may further foster the mutual friendship and unity that tames the sense of nationalism (Holmes 2005).

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Holmes (2005) further notifies the case study of Macedonia. In 2001, the state of Macedonia successfully maintained interethnic peace with corrupt exchange. After independence this state had numerous internal ethnic cleavages and challenges by neighbouring countries. However, corrupt exchange facilitated effective elite unity and made Macedonia enabled to survive its regional and domestic crises. Finally, the Macedonian and Albanian party elites created robust coalition government. As in the words of Holmes (2005) corrupt exchange served as both glue and dissolvent in Macedonias post-communist trajectory. Servet Avziu, a state minister, once argued in public that, people are in peace today, because we handled the situation and maintained the peace in the state of Macedonia. However, Hugh Pope1 argued in his response that The people in power know what peace means and the price of peace.


In the current era, many scholars and international community frame corruption as cancerous, and consider its impacts as `negative on economic, social and political development (Larsson, 2006). However, this article elaborates that this complex issue can be seen as positive and beneficial for many. Argument and evidences in the article also illustrates that corruption is a good thing. For instance, it was argued that corruption greases-the-wheels of commerce, strengthens political development and brings integration in the society. It was also argued that corrupt exchange reduces the possibility of interethnic violence and creates multiethnic coalition in ethnically divided societies. In this sense, corruption can not be considered as negative, because all forms of corruptions are not similar, and that some corruption might actually be good (see, for example, Leff, Huntigton, and Lui).

Recent economic literature presents a good and a romantic view of corruption (Tanzi & Davoodi, 2000). However, this concept may also contain some limitations. For instances, these benefits may hold negative effects on progress and growth in the developed countries. In another point of view, Lui (1996: 28) found that, corruption

Hugh Pope, A Nation Clinging to Peace, Los Angeles Times, (March 29, 1994): 2.

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has two effects: short term and long term. In short term, corruption produces allocative efficiency and works as second best solution to m arket distortions, these distortions may be created by government strict policies and regulations. On the other hand, in long term, corruption itself produces market distortions and decreases its efficiency. In sum up, even if corruption can be a useful means of bypassing inefficiencies in the short term, in the long term it tends to create inefficiencies of its own (Lui, 1996).

Moreover, Nye (1967) further defines the limitations of the corruption. He argues that, corruption is only beneficial in favourable conditions, because in un-favourable conditions, neither type of corruption is useful and may create various problems detrimental to one another. Unfavourable conditions are defined by Nye as: Economic development, national integration, more accountability, intolerant culture and secure elites. On the other side, he described favourable conditions as: tolerant culture, corrupted elites, dominance of more tolerant groups, less resources and less accountability. Nye further argues that, corruption will be beneficial, if the government will have some intervening problems or obstacles to development. For instance, if the country is unable to make capitals by legal means, or ethnic hatred issues threaten the legal activities in society. In this way, despite the high risk and cost, corruption will be useful for the development. However, Hirschman (1965) indicates the dangers in measuring the obstacle to development. He says that, corruption in this situation may be beneficial to some one but might be harmful for others. So, there is a need to understand different types of corruption in relation with different types of problem.

On the other side of the mirror, some authors argue that, developed countries do not recognize corruption as a useful concept. The reason is: with high resources and strict regulation, they can afford the luxury of wasting some of its wealth (Frisch, 1996). On the other side, corruption in developing countries plays an efficient role in low resources, rigid regulations, inefficient bureaucracy and bad laws. This role further provides the solutions that how to utilize financial resources in the best way possible (Frisch, 1996). Andreas (2004) further argues that, such clandestine commerce is also an essential survival strategy for many people in the face of dire economic conditions. He believes that, rather than only condemning and promoting agenda
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against this act by the international community and developed countries, there is a need for the deeper understanding of this issue. As Cirtautas (1999) believes that, This global anti-corruption agenda has been promoted with such a missionary zeal that some call it the new ethical infrastructure of capitalism. According to her, corruption reflects the changing balance of power between the government and capitalism in current international scenario.

As discussed in the article that, corruption brings lot of benefits and advantages. On the other hand, this is also true that, if there are some people who can benefit by paying bribes, this means that many other people will bear the costs. However, if governments and international community want to win the fight against corruption, they should know that: this fight can not be won with only creating an anticorruption office and increasing penalties and then to expect quick and positive results from it. Practically speaking, corruption without changing the policy of the state and without improving the institutions would have a negative effect on economic and political development of transition countries (Mauro, 1998 & Klitgaard, 1988).

Corruption is a complex phenomenon. Some consider it, as an obstacle to economic and political development and believe that it creates disintegration. However, this article advanced reverse thesis of this concept. It was argued by various evidences and instances that corruption has a positive relation with economic growth, political development and national integration in underdeveloped countries. It was further argued that corruption is a political machine, that may strengthens the political parties and stabilize democracy. This notion can also reduce interethnic violence and may tame nationalism. It was also discussed that, these benefits have some limitations. However, it was argued that whatever the limitations are, international community has to understand that, corruption is basically a survival strategy for many countries. So rather than promoting agenda against it they should understand the complexity of this issue. Furthermore, if they really want to curb corruption they must improve the institutions of the state. Without progressing these institutions this propaganda would have a negative effect on economic and political development of the developing

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countries. They also should know that corruption is not an existential evil, it is the desire for justice distorted by fear (Bond, 2000, p.8).


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