ESSAY OF THE MASSIVE DANGER OF CORRUPTION

FROM THE SOCIAL AND ECONOMICAL POINT OF VIEW

Lecturer : Indah Sri Utari, S.H., M.H.

Name : Vidiya Indriani Idris

ID : 8111417187

FAKULTAS HUKUM UNIVERSITAS NEGERI SEMARANG

2020
 A. Preliminary

Corruption at all levels of all societies is a behavioural consequence of power

and greed. With no rulebook, corruption is covert, opportunistic, repetitive and powerful,
reliant upon dominance, fear and unspoken codes: a significant component of the ‘quiet
violence’. Descriptions of financial corruption in China, Italy and Africa lead into a
discussion of ‘grand’, ‘political’ and ‘petty’ corruption. Social consequences are given
emphasis but elude analysis; those in Bangladesh and the Philippines are considered
against prerequisites for resilience. People most dependent upon self-reliance are most
prone to its erosion by exploitation, ubiquitous impediments to prerequisites of resilience
– latent abilities to ‘accommodate and recover’ and to ‘change in order to survive’.
Rarely spoken of to those it does not dominate, for long-term effectiveness,
sustainability and reliability, eradication of corrupt practices should be prerequisite to
initiatives for climate change, poverty reduction, disaster risk reduction and resilience.

So far, corruption in Indonesia has become a serious problem. This is shown

through Indonesia's ranking of corruption is relatively high compared to other countries.
Budget leaks and disallocations in various government sectors hamper the development
and growth of Indonesia's economy. Therefore, in the success of eradicating corruption,
it is very necessary that government policies support maximum efforts to eradicate
corruption. Corruption eradication is needed because corruption has a very bad impact
on the life of the nation and state; even in the social life of the affected communities.
Many found various effects of corruption on the field of community life both in the
economic, social, and cultural fields. Public understanding of the various effects of
corruption on human life is expected to create anti-corruption norms and culture in
Indonesian society in particular.
 Public rejection of corruption that occurs in a country can increase the level of
detection of corruption. Conversely, neglect or acceptance of corruption will make
corruption more rampant and become very harmful patterns of behavior in the life of the
nation and state. Public rejection of corruptors and acts of corruption causes social
sanctions against corruption to be high, thereby reducing corruptors' intention to commit
corruption. Therefore this module is designed to provide understanding and knowledge
about corruption, the factors that cause corruption and the very adverse effects of
corruption on society in the life of the nation and state.

Corruption was defined as an abuse of public power for personal gain (World
Bank, 1997), corruption is frequently considered disruptive and damaging. However, in
order to understand it, one should understand its causes,. which constitute one of the
most debated areas for researchers (Gounev, Dzhekova, & Bezlov, 2012). This is not
surprising as reviews of the literature found that the causes of corruptions vary,
although the multiple understandings of these causes appear to be based on the
national level of development, economic stability and political influence. Mollah and
Uddin (2000), for example, highlight the factors causing corruption as related to
respective countries’ policies, bureaucracy, society, political growth and societal history.
In this paper, the causes of corruption are discussed from four perspectives: 1)
accountability; 2) legal systems; 3) political factors; and 4) economic factors.

B. Discussion
Political parties are often associated with corruption practices, in both developing
and developed countries. There are studies that point out politicians as being the prime
actors, who in many cases misuse the opportunities of political positions to extract
bribes, provide their followers with profitable positions in the government body and
associated companies, form economic and political organizations for the benefit of allied
interest groups, or place the control of public wealth in the hands of party members,
supporters, or mafia.
There is also empirical evidence associating political factors with low income and
the tendency of public officials to perform corrupt acts. According to Salifu (2008), for
example, low income is linked with the likelihood that public officials will surrender to
corruption. Jetter, Agudelo and Hassan (2015) investigated the relationship between
corruption and democracy, their results indicating that democracy increases corruption
in poorer nations where relative poverty prevails. Democracy only reduces corruption if
a society’s per capita income is above $2,000; below that level, democracy has no
effect on corruption. Blechinger (2005) suggests that poorly paid civil servants, for
example, may generally be induced to take bribes.
Perpetrators of corruption are divided into two types, namely corruption
committed by corruptors who occupy high positions or known as white collar. Corruptors
who occupy a low level or position are known as the term blue collar. Corruption is
usually carried out jointly between one public employee and another employee. This is
because they work together in an effort to manipulate the system and / or to hide their
corrupt behavior and results. The weakness of a system and the lack of transparency
give ample opportunities for corruption. In a cost-benefit analysis, broad opportunities
for corruption lead to lower costs of corruption so that corruption is feasible. Some
things that can motivate corruption include: an income or salary gap between the public
and private sectors, an income or salary gap between the public sector, excessive
lifestyle or consumption patterns, inadequate government spending standards, and
factors systemic or structural.
Inadequate government spending standards can motivate government
employees to commit corruption in order to meet the government expenditure standards
that they want to achieve. In this module, what is meant by structural factors is when
structures and systems in government are still not ideal and allow corruption to occur.
Systemic factors are in the form of a system that can cause corruption to occur so that
corruption continues / is rampant in a system. With a variety of motivations for
corruption, several studies have sought to identify the factors that cause corruption.

Factors that cause corruption include historical, economic, cultural and

institutional factors:
1) Historical Factors: History related to a country's colonial occupation is
one of the factors that can determine the level of corruption. Colonialism in a
country has the effect of forming an institutional system in that country.
 2) Economic Factors: Countries with high levels of corruption have
characteristics as developing countries and transition countries, countries with
low income levels, and countries that have a system closed economy. According
to Ades and Tella (1999), countries that are open to foreign trade tend to be less
corrupt. However, there are also claims that government intervention in a
controlled economy through provision of subsidies, such as the oil subsidy, can
result in corrupt practices and harm the economy.
Some studies suggested that while governments intervene and influence
economic conditions, they also create opportunities for officials who have
privileges of allocating such aid or appropriation to exploit economic resources
(Treisman, 2000). Pellegrini and Gerlagh (2011), in support of this scenario,
argue that there is an adverse relationship between the stage of economic
development and the level of corruption, as rich nations are more likely to afford
stricter organizations that will not condone corruption, reducing tolerance towards
fraud. Some studies revealed that income also influences the exposure to
corruption, where a good salary implies higher costs especially when the job of
that individual is lost, and a cost benefit analysis implies that better salaries thus
give a motivation to avoid corruption.
Moreover, low wages and the chance of corruption may in turn be a
reason or impetus for corruption. It may therefore be necessary for governments
to consider reasonable payment of civil servants so as to reduce the level of
corruption (Lambsdorff, 1998). Jetter et al. (2015) similarly indicated that in low-
income countries, employees are more likely to engage in corrupt activities to
enhance their limited income.
3) Culture: A country's perspective on the masculine culture can influence
the level of corruption of a country (Swamy, Knack and Azfar, 2001).
4) Institutional Factors: Countries that have a high level of press freedom
and the good institutional system tends to have a high level of corruption low.
 There is much empirical data indicating that corruption damages economic
development because it is harmful either direct or indirectly to international
investors and foreign donors, planning, taxation, local private investment,
entrepreneurship, etc. (Amundsen, 1999). Ata and Arvas (2011) found negative
relationships between levels of corruption and aspects of economic development.
Thus, it is apparent that countries with poor economic performance have a higher
level of corruption (Ksenia, 2008; Transparency International, 2011, 2012, 2013,
2014, 2015). Moreover, Othman et al. (2014) argue that there is a correlation
between the level of corruption and economic growth, as evidence has shown
that developing countries often experience higher levels of corruption and
developed countries lower levels.
Corruption also has a negative influence on the economic growth and
development of any nation, according to Nwabuzor (2005). One obstacle that
Nwabuzor highlights is the reduction in investment, since investors regard
corruption as an unnecessary cost, bearing negatively on the business bottom
line (Barro, 2000; Lipset & Lenz, 2000). In addition, much empirical evidence
links economic growth and corruption, indicating the relationship between slower
economic growth and higher levels of corruption (Ahmadi & Homauni, 2011;
Atuilik, 2013; Othman et al., 2014). In addition, Tanzi (1998) maintained that
corruption causes distortion and hampers efficiency in allocating resources
through free market forces, thereby, resulting in poor economic growth and
development. Mauro (1998) also explained that corruption reduces growth in the
economy by discouraging the impetus for investment in the country and by
distorting the composition of government expenditure, and reducing the quality of
public services, infrastructure and tax revenue.
The impact of corruption on the economy. Corruption has a Negative
Impact on Economic Growth In addition to the identification of the factors that
cause corruption, research on the impact of corruption has also been carried out.
Some experts try to identify the impact of corruption on the economy. In research
related to the impact of corruption on the economy there are two opposing
parties namely those who support the grease the wheel hypothesis (GWH) and
those who support the sand the wheel hypothesis (SWH).
Grease the wheel hypothesis (GWH) states that corruption can function as
a lubricant (oil) for the economy, in other words corruption can have a positive
impact on the economy. GWH's opinion is analogous in an effort to obtain a
company establishment permit. A bad condition of the institutional system, the
management and granting of a company establishment permit would take a long
time and be convoluted. To reduce waiting time for obtaining company permits,
individuals give bribes to public employees in order to obtain convenience in
obtaining these permits. This analogy then raises the opinion that corruption can
have a positive impact on the economy.
Corruption can facilitate the entry of companies into the market in a high
level of regulation. The Sand the Wheel Hypothesis (SWH) believes that
corruption has a negative impact on the economy. Several cross-country studies
show that corruption has a negative impact on the economy which is proxied as
economic growth. From the conflict between GWH and SWH, economists agree
more about SWH, namely corruption has a bad impact on the economy. This is
proven by the amount of propaganda and the establishment of anti-corruption
institutions in various countries, including in Indonesia.
In addition, GWH adherents only analogize the positive effects of
corruption on the economy when the system institution is not good, namely the
old and convoluted bureaucratic system. However, in a good institutional system
GWH still believes that the impact of corruption is negative on the economy.
GWH was not proven in Indonesia based on empirical data. Thus, the impact of
corruption, especially in Indonesia is hampering economic growth and
detrimental to the national economy.
Corruption Adds Burden to Economic Transactions and Creates a Poor
Institutional System. In the presence of bribes, extortion in an economy causes
the transaction costs of the economy to be higher. High transaction costs cause
inefficiencies in the economy. In this module, transaction costs are defined as the
costs required in the use of resources for creation, maintenance, use, change
and forth in an institution and organization (Furubotn and Richter, 1998).
Furthermore, Furubotn and Richter (1998) view transaction costs as costs that
arise in the management of an institution or institution in achieving its goals. The
higher the transaction costs the more inefficient the designed institutional system.
An institution will be more effective if the transaction costs required are lower.
Analysis of transaction costs focuses on efficiency. Low transaction costs are a
good institutional feature.
Corruption Causes Low-Quality Facilities and Infrastructure. Corruption
creates mis-allocation of resources. Corruption in the form of embezzlement,
bribery, and extortion can cause infrastructure in a corrupt country to be of poor
quality. Bribery and extortion in the implementation of the infrastructure
development budget led to a reduction in the infrastructure and infrastructure
development budget. Likewise, embezzlement of infrastructure development
budgets has caused infrastructure development budgets to be reduced, resulting
in poor quality built infrastructure. Low quality infrastructure can disrupt people's
access to the economic center and the center of growth. Thus, low quality
infrastructure can negatively impact a region's economic growth. Even Mauro
(1998) states that corruption can reduce government spending in the education
sector.
Corruption creates income inequality. The level of people's income
influences corrupt behavior. Rich people have more power and opportunity to
make bribes than poor people. In general, corruption activities consist of three
types, namely bribery, extortion and embezzlement. The act of corruption is able
to move public resources into the hands of corruptors. Corruption causes corrupt
government spending money to be less. As a result, income inequality will occur
between the corrupt elite and the public due to the transfer of public resources to
corruptors.
Some countries try to reduce corruption in the hope that it can reduce
income inequality. Empirically, corruption can increase income inequality; and the
existence of a policy to reduce corruption has a positive impact on reducing the
level of income inequality. income inequality can lead to corruption. This
indicates that there is a reciprocal relationship between income inequality and
corruption. The impact of corruption on income inequality is reciprocal, namely
corruption causes income inequality and income inequality also causes
corruption. That it can be concluded also in this case that corruption is the root of
corruption itself.
The policy of reducing the level of corruption can reduce inequality
income and poverty. In addition to having a direct effect, corruption also
has an indirect effect on poverty. Channeling derived from the impact of
corruption is negative on economic growth, where low economic growth can
increase poverty levels. Channeling corruption against poverty through economic
growth is more focused on absolute poverty. While channeling corruption to
poverty through income inequality is more focused on relative poverty. From the
impact of corruption on culture, channeling corruption on poverty will be obtained
through culture which is more focused on cultural poverty and structural poverty.
By knowing the negative impact of corruption on poverty, corruption must be
eradicated by its roots.
There is a significant negative correlation between corruption and per
capita income and public health spending. This means that the higher the level of
corruption in Indonesia, the lower per capita income and lower public health
spending. Correlation of corruption with poverty and poverty gap is significantly
positive. This shows that the higher the corruption in Indonesia, the higher the
poverty rate and poverty gap in Indonesia.
The correlation between the level of corruption in Indonesia and economic
growth is moderate negative. Correlation of the level of corruption in Indonesia
with negative investment, per capita income and public health expenditure is very
strong. Correlation of the level of corruption in Indonesia with poverty, poverty
gap (poverty gap) shows a very strong positive correlation that ranges from 70%
to 90%. Thus, it is certain that corruption in Indonesia in general has a negative
impact on the nation's economy.
 C. Conclusion

Literature on the social impacts of corruption is limited, a definitive

analysis of corruption and its social consequences being not, as yet, a
practicable undertaking. This short contribution reflects some preliminary
investigation of the social impacts of corrupt practices upon the poorer sectors of
societies, where and when accessible literature has ensued.
Corrupt practices amongst high level political, commercial and industrial
dealings, rightly receiving media attention, may become the commencement of
long-term trickle-down consequences for the poor which, at society’s lower
levels, are unlikely to attract either scientific or media notice. Whilst the scale of
corruption on China, Italy and Africa here receive mention, the impacts of
corruption upon the poor of these and other societies in Africa, Bangladesh and
the Philippines, for example, reveal social consequences which are here
examined and considered against required prerequisites for resilience. Those
societies and communities most reliant upon their own resilience to crises of any
kind are also the most prone to its erosion by consequences of opportunistic
control and exploitation.
Corruption has a negative impact on the areas of community life both in
the economic, social and cultural fields. The impact of corruption in the economic
sector are: slowing down the rate of economic growth, reducing the level of
investment, adding to the burden on economic transactions and creating a bad
institutional system, causing low quality facilities and infrastructure, increasing
income inequality and poverty. The impact of corruption in the economic field
also applies in Indonesia. The impact of corruption on culture is to have a bad
influence on behavior. Corrupt state societies tend to be undisciplined and not
compliant with applicable regulations. Other studies prove that corruption can
also reduce the level of people's happiness.
 References

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Halimahton Borhan , Azhana Othman, The Impact of Corruption on Environmental
Quality in the Developing Countries of ASEAN-3: The Application of the Bound Test,
2019.
Lewis James, Social Impacts Of Corruption Upon Community Resilience And
Poverty, May 2017.
Komisi Pemberantasan Korupsi, Modul – 3 Dampak Sosial Korupsi, Direktorat
Pendidikan dan Pelayanan Masyarakat, Gedung Dwiwarna KPK, Jakarta Selatan :
2016.