Corruption

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Corruption as a form of economic crime and government effectiveness
Conference Paper · May 2018
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3rd International Conference of Development and Economy I.CO.D.ECON. Kalamata, Greece, 3-6 May, pp. 100–
111. This is a preprint version with minor editing changes.
Corruption as a form of economic crime
and government effectiveness

Nikolaos Deniozos,1, 2 Charis Michael Vlados,1 Dimos Chatzinikolaou3
1 Department of Economics, Democritus University of Thrace, Greece
2 Department of Turkish Studies and Modern Asian Studies, National and Kapodistrian University of Greece,
Greece
3 School of Law, Postgraduate Courses in Southeastern Europe Studies, Specialization in Economics,
Democritus University of Thrace, Greece
Abstract
As a form of economic crime, corruption is a global security issue recognized as a
first-tier international challenge closely related to economic and social development.
Many view corruption as a “victimless” crime and bribery only as a different way of
doing business, but today there is wide acknowledgment that corruption infringes the
fundamental human right to equal treatment. Current studies yield insights on the
nexus of transnational organized crime and corruption as significant threats to
political stability, human security, democracy, and economic development.
Keywords: corruption, organized crime, socioeconomic development
1. Introduction
Corruption as a form of economic crime is a global security issue and has finally been
recognized as a first-tier international security challenge closely related to economic
and social development. Many view corruption as a “victimless” crime and bribery
only as a different way of doing business. However, today there is a wide
acknowledgment that corruption infringes on the fundamental human right to equal
1
treatment. Current studies yield insights on the nexus of Transnational Organized
Crime (TOC) and corruption as significant threats to political stability, human
security, democracy, and economic development.
Among its manifestations are money laundering, bribery, embezzlement, fraud,
extortion, nepotism, cronyism, and monopoly. Research shows a powerful nexus
between corruption and organized crime, typical situations in post-communist and
post-conflict countries where power vacuums and the weak rule of law have created
opportunities for criminal activities and unlawful actions. Any comprehensive
analysis of the growing threat of TOC must consider the role of corruption in its role
as an enabler for these activities. Today, TOC networks are much more sophisticated
and challenging to fight. New TOC groups are continually diversifying their methods
and structures and, enabled by the forces of globalization such as technology and
innovation, have increased their impact on society. By adopting new technologies and
methodologies, organized criminal networks have dramatically increased their reach
into the lives and affairs of ordinary people, governments, and private companies.
Globally, institutions such as the EU, the Council of Europe, the Organization of
American States, Transparency International, the World Bank, and the G20, the group
of countries accounting for 85% of the world economy, have recognized corruption as
a global problem and are engaging in producing solutions.
Furthermore, the matter in question highlights its tremendous impact on the
geopolitical dimension as the fundamental pillars of the latter—economic, political,
and the pillars of defense and security—are influenced considerably. In other words,
the geopolitical factor of “corruption,” according to the systemic geopolitical analysis,
2
constitutes an essential component concerning both the investigation and monitoring
of power distribution among actors in the geopolitical game.
2. What is corruption?
Corruption refers to the misuse of public power (by elected politicians or appointed
civil servants) for private gain. By ensuring that the exact simple definition can cover
public and private corruption between individuals and businesses, this notion is also
approached as the misuse of entrusted power (by heritage, education, marriage,
election, appointment, or whatever else) for private gain. This broader definition
covers not only the politician and the public servant but also the CEO and CFO of a
company, the notary public, the team leader at a workplace, the administrator or
admissions officer to a private school or hospital, the coach of a soccer team, and so
forth.
P. van Duyne (1996) has developed a much more comprehensive definition,
contending that corruption is an improbity or decay in decision-making. In this
process, a decision-maker demands deviating from the criterion that should rule
decision-making in exchange for rewards, promises, or expectations, while these
influencing motives cannot be part of the justification of the decision. Major
corruption occurs whenever significant events involving large sums of money,
multiple “players,” or vast quantities of products (e.g., food and pharmaceuticals) are
at stake, especially in disaster conditions.
Preferably, corruption flourishes in situations involving high technology—when
the parties involved might not understand the actual quality and value of products—or
in chaotic situations. For instance, purchasing a technologically far-advanced aircraft
where the sums of money involved are primarily huge. Alternatively, specific betting
3
stations for Olympic Games or international soccer tournaments results can easily be
manipulated.
Corruption can be the means toward very different ends, and each may have a
different impact on society. While, in some communities, corruption may correctly be
seen to be the “cause” of forms of social disorganization, in other situations,
corruption may be the “result” of more extensive changes. Understanding the
processes within a specific context allows one to understand the nature of corruption.
Corruption rhetoric may too quickly become a political platform for ranking and
evaluating nations as to their worth based on criteria that lose meaning when applied
across jurisdictions (Beare, 2000). The following points present specific clauses to
better understand the phenomenon and how different jurisdictions define it:
➢ According to Palermo’s Convention (Article 8) on the criminalization
of corruption: “Each State Party shall adopt such legislative and other
measures as may be necessary to establish as criminal offences, when
committed intentionally:
(a) The promise, offering or giving to a public official, directly or
indirectly, of an undue advantage, for the official himself or herself or
another person or entity, in order that the official act or refrain from
acting in the exercise of his or her official duties;
(b) The solicitation or acceptance by a public official, directly or
indirectly, of an undue advantage, for the official himself or herself or
another person or entity, in order that the official act or refrain from
acting in the exercise of his or her official duties.”
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➢ Also, the definition at the legislative level of the European Civil
Convention Against Corruption (Strasbourg 1999, Article 2), incorporated
into the Greek jurisdiction with Law 2957/2001 (“Ratification of the
Council of Europe Convention on Civil Law on Corruption, Government
Gazette 260 A”) illuminates similar aspects. In particular, it declares
corruption as any pursuit, supply, or acceptance, directly or indirectly, of
an unlawful collection or other undue benefit affecting the regular exercise
of a function or the expected behavior of the person benefiting from this
illicit supply.
➢ According to the definition by International Transparency, corruption
means the abuse of power that people have entrusted to others for private
gain.
3. Impact of corruption on economic development
Although some scholars have argued that corruption (and in some cases even fraud) is
a natural stage of development or a means of transferring resources from wealthy
individuals or entities to those of more modest means, it is widely accepted that both
fraud and corruption hinder economic development, inter-alia, for the following
reasons:
a. They are anomalies that degrade the system’s performance and harm a
country’s or region’s long-term economic efficiencies.
b. They cause mistrust among communities hence hindering economic
cooperation and development.
c. They increase the cost of the development process.
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d. They diverge the allocation of scarce resources into unnecessary,
uneconomic, or illicit uses.
e. They create economic instability and divert foreign investment to more
stable economies.
f. They diminish asset life as resources are directed away from maintenance
toward new equipment and projects.
g. The costs of fraud and corruption often derive disproportionately from the
poor, while the “gains” are skewed towards the rich, the powerful, and the
politically well connected
h. Corruption and fraud undermine laws, create disrespect for values and
rules, and ignite perceptions of unfairness—e.g., “the other person did it,
why not me?”
In economic terms, corruption increases transaction costs in an economy by
augmenting real and perceived risks for undertaking an economic activity, generating
a “deadweight loss” that reinforces inefficiency. According to Lambsdorff (2003),
there is empirically solid support for the adverse impact of corruption on investment
ratio to GDP (Mauro 1995, 1997).
Equally, there is substantial evidence of a negative impact of corruption on foreign
direct investment, capital inflows, and growth (Leite and Weidmann 1999; Mo, 2001).
However, this evidence is still ambiguous because other researchers provide
inconclusive results. Mauro’s (1995) conclusions are insignificant once the
regressions are controlled for the ratio of investment to GDP. Wedeman (1997) uses
simple cross-tabulation to argue that many corrupt countries experience high growth
6
rates. It is arduous, it seems, to reliably relate growth to corruption. However, even
when assuming this impact, this does not allow conclusions concerning productivity.
If corruption diminishes productivity, there might still be no effect on growth. We
might regard its absence as a factor of production comparable to human capital. While
a new investment project produces higher output for corruption-free countries, there is
not necessarily an increase in growth. However, both values, changing GDP and its
absolute level, will equally gain from a corruption-free environment so that their ratio
may remain constant. Therefore, as determined in neoclassical growth models, steady-
state growth rates are unaffected by singular productivity shifts.
According to World Bank data, the cost of corruption accounts for 5% of global
GDP and the amount of money paid annually for bribes is over 1 trillion US dollars.
In addition, it is estimated that corruption increases the total cost of business activities
by an average of 10% (World Economic Forum data); At the European Union level,
the estimations account for 120 billion euros per year, equivalent to 76% of the
Union’s annual budget (157.9 billion euros in 2017) and 0.8% of GDP (14.824 billion
euros in 2016).
Figure 1 shows the relationship between corruption scores in the Corruption
Perceptions Index (CPI) and the degree of social exclusion as measured by the Social
Inclusion Index for OECD countries (from the Bertelsmann Foundation’s Sustainable
Governance Indicators) and by the Welfare Regime indicator for the rest of the world
(from the Bertelsmann Foundation’s Transformation Index). The higher scores signify
less corruption/exclusion. The data show a strong correlation between corruption and
social exclusion.
7
Figure 1. Source: Transparency International, Bertelsmann Foundation
4. Causes of corruption
Corruption within an organization arises due to various factors, including:
❖ The lack of a competent, ethical, and control awareness culture.
❖ Ineffective corporate governance, policies, procedures, and inappropriate,
ambiguous, or overly complicated internal controls.
❖ Lack of transparency and inadequate communication channels.
❖ Low staff wages, limited job satisfaction, an unfair remuneration/benefits
system, and perceptions of unfair treatment.
5. Different levels of relationship between organized crime and
corruption
1. First level: Bribery.
2. Second level: Continuous Acts of Bribery (“on a payroll”). Bribe
payments are ongoing. Ensures a continuous flow of information and
8
protection from police intrusion into criminal activities. Organized crime
groups obtain constant access to confidential information, allowing them
to maintain patterns of illegal activity. Organized crime groups remain
“one step ahead” of law enforcement authorities.
3. Third level: Infiltration into government agencies. Infiltration is sporadic
within lower-ranking official positions. Organized crime members and
friends gain employment in law enforcement agencies, judiciary
prosecutor’s offices, and other operations.
4. Fourth level: Infiltrating the government (higher level). This infiltration
can encompass entire branches or higher-ranking officers. Top officials in
law enforcement, the prosecutor’s office, and other sensitive government
offices are organized crime members. Some of the methods used to
infiltrate the higher levels of government are the placement of corrupted
officers into higher office and the control of the chief of section/region. In
the first case, the organized crime group uses bribery and blackmail to
support officers previously corrupted by their organization to higher ranks
with broader access to information. This “support” is repaid to organized
crime with increased protection and access to more useful secret police
information. In the second case, bribery, blackmail, and coercion are used
to control the chief decision-maker of an entire branch of government.
Organized crime can continue operating with minimal risk of discovery or
successful prosecution.
5. Fifth level: Infiltrating the political arena. Participating in political
campaigns (giving money, media support, and others). Buying votes for
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candidates and corrupting the democratic election process, lobbying other
politicians for support using bribery and blackmail, exploiting organized
crime members’ family links, and creating “debts” for politicians to
“repay” later by using blackmail and extortion.
6. A brief overview of theories of corruption as a component of
economic crime
❖ The behavioral school: Theories of social learning /differential learning,
self-control, exchange, social bonding, politically exposed individuals, and
fraud (pressures, opportunities, attitudes and behaviors, rationalization).
❖ The organizational school: Theories of rational choice, learning, social
networking, and game theory.
❖ The administrative school. Theories of representation, alliance
(personalized confidence, reputation and brand name, generalized
confidence, confidence through perception), and network theory (Beare,
2000).
7. Corruption formula and the case of Greece
Klitgaard (19888), who has contributed significantly to anti-corruption research, sums
up the causes in a formula: C=M+D–A, meaning that corruption equals monopoly
plus discretion minus accountability. This model suggests that crime will tend to
emerge when an organization or person has monopoly power over a good or service
which generates rent, has the discretion to decide who will receive it (thus on how
rents will be allocated), and is not accountable.
10
Whether private or public, the monopoly provides the power to charge the highest
rather than the optimal price for a service, which is provided at a lower rate.
Discretionary means that the public officer has the influent to say yes or no, or how
much, without any legal measure to delimit power. Moreover, the lack of
accountability means that these transactions become opaque.
As far as Greece is concerned, according to the Corruption Perception Index 2016
(Figure 2), the country occupied the 69th position among 176 countries in 2016,
retreating 11 places in the ranking compared to 2015. The relative index for Greece
stood at 44 points, marginally higher than the total average (42.9 points). It is noted
that among the European Union member states, only Bulgaria was in a lower position
in 2016. These data suggest a “middle-class” corruption situation in the country. Also,
between 2012 and 2015, a gradual improvement in the ranking of Greece occurred,
rising from the 94th position to 58th. Therefore, this negative development in the last
year highlights that efforts to combat corruption must be continuous and that there
should be no rest, as year-on-year changes may be intense.
11
Figure 2: Corruption Perception Index 2016. Source: Transparency International.
8. Models, data, and methodology
Saha and Gounder (2013, pp. 71-72) formed a comprehensive methodology that must
be mentioned. The following paragraphs quote this research (excluding in-text
citations and footnotes):
“To explore the non-linear relationship we examine the three models of linear,
quadratic and cubic specifications, using recent data covering 100 countries
and by regions and income classification for the period 1995 to 2008. The
linear model predicts a straight forward negative association between income
and corruption. The quadratic equation hypothesizes that as development
process progresses corruption level first increases and then decreases. The
cubic model anticipates that as development progresses corruption levels first
decrease, then increase and then decrease. Hence, if corruption levels

12
increase or decrease at the early- to medium-stages of development at the
mature stages of development the consolidation of advanced institutions
eventually reduces corruption. Similar to most past empirical corruption
literature the dependent variable corruption used is Transparency
International’s corruption perceptions index (CPI). The empirical strategy,
results and robustness checks for the country-level analysis are undertaken.
The linear base model takes the following form:
CPIi,t=β0+β1logRGDPPCi,t+β2GINIi,t+β3UNEMi,t+β4ALRi,t+β5DEMOi,t
+β6EFi,t+εi,t (1)
where CPI is corruption perceptions index, RGDPPC is real per capita
income, GINI is gini coefficient, UNEM is unemployment rate, ALR is adult
literacy rate, DEMO is democracy index, EF is economic freedom index, ε is
error term, i is country and t is time. The sign and significance of β1 is of
interest; RGDPPC coefficient is expected to be negative to reflect that a high
level of per capita real GDP reduces corruption. β2 is expected to be positive
as income inequality may lead to an increase in corruption as rich people
have a greater ability to pay bribes to buy public services, both legally and
illegally. Likewise, the unemployment β3 coefficient is expected to be positive
since in many developing countries unemployment/underemployment rates are
usually high. The demand for stable sources of income is high and, therefore,
to secure an earning position with stability and reasonable income
opportunity, people are willing to make huge investments.
13
On the other hand, a high literacy rate often also fosters a sense of patriotism
and civic duty in the citizenry. It also raises the public’s awareness of their
rights, responsibilities and duties. Whilst most citizens in developing countries
are not fully aware of their public entitlements and as a consequence the
general public’s ignorance provides opportunities for a large scale
corruption, it is expected that corruption levels will fall where the population
become more educated and literate, so β4 is expected to be negative. The β5
coefficient is expected to be negative as several studies find that democracy
tends to reduce corruption where democratic values, freedom of expression,
association and press lead to closer monitoring which in turn increase the risk
of exposure of unjust activities. In addition to political liberalisation many
nations have stimulated economic liberalisation. However, in many nations an
environment of regulation provides opportunities and incentives for rent
seeking behaviour. In this case more regulation means firms enjoy higher
rents and the bureaucrats have higher incentives to engage in corrupt
behaviour. It is expected that more competition reduces corruption and so β6
is expected to be negative.
In the next step the base model is extended to incorporate the effects by region
(i.e. model 2) which is further estimated by income classifications of the
countries. These hypotheses allow us to ascertain whether the estimated linear
relationships are robust across the alternative specifications, and whether the
negative linear relationship does not appear across the regions and by
income-groupings. Hypothesis expressed in Eq. (2) takes the following form:
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CPIi,t=β0+β1logRGDPPCi,t+β2GINIi,t+β3UNEMi,t+β4ALRi,t+β5DEMOi,t
+β6EFi,t+β7Asia+β8LatinAmerica+β9Africa+β10MiddleEast+β11EasternE
urope+μi,t (2)
where μ is the error term. The regions are Asia, Latin America, Africa, Middle
East and Eastern Europe. The countries by income-classification include the
Middle-income countries' with the income level range between $976 and
$11,905 and the High-income countries that have income greater than
$11,906 in 2008.
Eq. (3) examines if there is an existence of a non-linear nexus between
corruption and economic development, the specific form is as follows:
CPIi,t=δ0+δ1logRGDPPCi,t+δ2(logRGDPPCi,t)2+δ3GINIi,t+δ4UNEMi,t+δ
5ALRi,t+δ6DEMOi,t+δ7EFi,t+ζi,t (3)
where δ1, and δ3 to δ7 are the base model variables’ coefficient (Eq. (1)) and
ζ is the error term. The non-linear relationship of income per capita is
reflected by the coefficients δ1 and δ2, where the expected sign for δ1 is
positive and δ2 as negative. These expected signs of δ1 and δ2 represent a
parabolic relationship between income per capita and corruption. It reflects
that at a certain value of per capita income the effect of income on corruption
is 0. Therefore, before this threshold income level the effect on corruption is
positive which becomes negative after certain income level. Hence, at the
early stages of economic development an increase in per capita income
increases corruption and reaches a maximum level, i.e. the threshold point,
and thereafter with improved economic performance it has a dampening
(decreasing) effect on corruption.
15
To measure at what level of economic development the level of corruption
begins to decline we estimate the threshold (turning) point of this parabolic
relationship as follows:
logRGDPPC*=|δ1/2δ2|(4)
where log RGDPPC⁎ is log income per capita at the turning point level.
The major obstacles of comparative studies of corruption have been the lack
of a general definition of corruption and the absence of objective cross-
national data on corrupt behaviour given its illegal and secret nature. The
subjective measure of corruption based on the perceptions of corruption is
used as a principal measure, sourced from Transparency International. For
simplicity and ease of exposition, the CPI has been converted into a scale from
0 (least corrupt) to 10 (most corrupt).
The level of economic development is measured in terms of natural logarithm
of real GDP per capita. For the inter-country comparison the purchasing
power parity (PPP) adjusted real GDP per capita is used and the benchmark
year is 1990. The logarithmic transformation stabilises the variance of real
GDP per capita values and with an expectation of a positive effect of
economic development on corruption it assumes a form of marginally
declining returns with increasing economic development.
The other socio-economic explanatory variables, viz. GINI, UNEM and ALR
reflect the links between reducing and/or increasing corruption. The GINI and
UNEM variables account for the level of corrupt actions which attenuates the
link between effort and rewards. On the other side ALR emphasises that
education is likely to discourage rent seeking activities. Institutional variables,
16
i.e. democracy and economic freedom, indicate law and order and the degree
of regulations that encourage political rights, civil liberty and ease of doing
business that yield predictions of discouraging corruption. Like CPI, the
democracy and economic freedom indices are re-scaled from 0 to 10, and a
higher value represents greater freedom.”
9. Some proposals for implementing anti-corruption policies and
practices
✓ Extending the computerization of administrative procedures to minimize
the contact between civil servants and citizens.
✓ Empowering and consolidating the legal framework for reporting
whistleblowing.
✓ Implementing targeted educational actions for public officials.
✓ Showing zero tolerance for corruption and using tracking tools.
✓ Providing efficiency incentives to public officials and evaluating them
based on achieved goals.
✓ Reinforcing the principle of “good legislation.”
✓ Strengthening the status of public officials with fair and competitive
salaries.
✓ Enforcing substantial penalties for the breaching of public duties.
✓ Training and assigning integrity officials to corruption-prone government
operations.
✓ Reducing individual discretion.
✓ Enhancing transparency in the hiring process, including public notification
of potential candidates.
17
✓ Strengthening promotional testing and strict secrecy of test questions.
✓ Increasing the State’s financial support for political parties and campaigns.
✓ Consolidating the laws of media concentrations and combating
monopolies.
10. Concluding remarks
This paper approached in introductory terms the problematics of corruption. Based on
this critical and elliptical examination of the related literature and best practices, it
arrives at the following concluding remarks:
a) Corruption renders governments incapable or unwilling to achieve public
welfare because of x-inefficiency, wasteful rent-seeking, or distorted public
decisions (Bardhan, 1997; Rose-Ackerman, 1999; Lambsdorff, 2002a). The
allocation of capital goods will not be optimal when affected by corruption
because the projects that promise large side payments and exhibit low risks of
detection are preferred to those that benefit the public at large.
b) The best-connected contractors and those most willing to offer bribes are
preferred over those offering the best product. The investment quality will
suffer from corruption because control mechanisms required to guarantee the
contracted quality level can be circumvented.
c) Organized crime and corruption levels in the public sector are determined
primarily by the quality of core state institutions, such as the police,
prosecution, and courts. This relationship seems to hold for countries at all
levels of development. The institutional forces must be held accountable for
introducing improvements in the legal fight against corruption and organized
crime. These conditions foster the “right” institutional environment within

18
which criminal justice can be offered in an unbiased and transparent fashion.
Independently from these institutional determinants, high levels of organized
crime and corruption are also linked to low levels of human development. This
result points to the vicious circle of poverty exploited and compounded by
organized crime and grand corruption. In extreme cases, dysfunctional state
agencies are “captured” by organized crime.
d) Corruption arises because of an opportunity for bureaucrats to appropriate
public funds by misinforming the government about the cost and quality of
public goods provision. The incentive for each bureaucrat depends on
economy-wide outcomes that, in turn, rely on the behavior of all involved state
actors.
References
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issues for enforcement”, paper presented at the Transnational Crime Conference convened by
the Australian Institute of Criminology in Association with the Australian Federal Police and
Australian Customs Service, Canberra, March 9-10.
Klitgaard, R. (1988). Controlling corruption. University of California Press.
Lambsdorff, Johann Graf (2002a). Corruption and Rent-Seeking, Public Choice. 113: 1– 29.
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Leite, Carlos and Jens Weidmann (1999). Does Mother Nature Corrupt? Natural Resources,
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Mauro, Paolo (1997). The Effects of Corruption on Growth, Investment, and Government Expenditure:
A Cross-Country Analysis, Corruption and the Global Economy. Washington D. C.: Institute
for International Economics: 83–107.
Mo, Pak Hung (2001). Corruption and Economic Growth, Journal of Comparative Economics. 29: 66–
79.
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income levels in a non-linear framework. Economic Modelling, 31, 70–79.
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Additional reading
Abadinsky, H. (2007), Organised Crime, 8th ed., Thomson Wadsworth, Belmont, CA.
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Results.” Political Studies, 45(Special Issue), 496-515.
Ades, A. and Tella, R. D. (1999). “Rents, Competition, and Corruption.” The American Economic
Review, 89(4), 982-993.
Ali, A. M. and Isse, H. S. (2003). “Determinants of Economic Corruption: A Cross-Country
Comparison.” Cato Journal, 22(3), 449-466.
Artz, K.W. and Brush, T.H. (2000), “Asset specificity, uncertainty and relational norms: an
examination of coordination costs in collaborative strategic alliances”, Journal of Economic
Behavior & Organization, Vol. 41, pp. 337-362.
Bruinsma, G. and Bernasco, W. (2004), “Criminal groups and transnational illegal markets”, Crime,
Law and Social Change, Vol. 41 No. 1, pp. 79-94.
Cain, M. (2009), “Is crime Giffen?”, Journal of Financial Crime, Vol. 16 No. 1, pp. 80-85.
Casson, M. (2008), The Entrepreneur – An Economic Theory, 2nd ed., Edward Elgar, Cheltenham.
20
Chang, J.J., Lu, H.C. and Chen, M. (2005), “Organized crime or individual crime? Endogenous size of
a criminal organization and the optimal law enforcement”, Economic Inquiry, Vol. 43 No. 3,
pp. 661-75.
Lambsdorff, Johann Graf (2002b). How Confidence Facilitates Illegal Transactions – An Empirical
Approach, American Journal of Economics and Sociology. 61: 829–53.
Lambsdorff, Johann Graf (2002c). Making Corrupt Deals – Contracting in the Shadow of the Law,
Journal of Economic Behavior and Organization. 48: 221–241.
Paldam, Martin (2001). Corruption and Religion. Adding to the Economic Model, Kyklos. 54: 383–
414.
Poirson, Helene (1998). Economic Security, Private Investment, and Growth in Developing Countries,
International Monetary Fund Working Paper, 98/4.
Savona, E.U. (1995), Beyond Criminal Law in Devising Anticorruption Policies: Lessons from the
Italian Experience. Research Group on Transnational Crime, School of Law, University of
Trento, Italy.
Appendix 1: Corruption-populism-social inequality. Source:
Transparency International
21
Appendix 2: Corruption aspects
22
Appendix 3: Cases involving corruption, industries with the highest
proportion of corruption cases, and corruption cases perpetrated by
someone in authority worldwide.
Source: Report to the Nations, 2018 Global Study on Occupational Fraud and Abuse, ACF.
23
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Corruption as a form of economic crime and government effectiveness

Conference Paper · May 2018

Nikos Deniozos Charis M. Vlados

Business innovation, knowledge, and change management View project

Economic geography, geo-economics and geopolitical analysis View project

The user has requested enhancement of the downloaded file.

111. This is a preprint version with minor editing changes.

Corruption as a form of economic crime

and government effectiveness

1 Department of Economics, Democritus University of Thrace, Greece

3 School of Law, Postgraduate Courses in Southeastern Europe Studies, Specialization in Economics,

Democritus University of Thrace, Greece

As a form of economic crime, corruption is a global security issue recognized as a

first-tier international challenge closely related to economic and social development.

nexus of transnational organized crime and corruption as significant threats to

political stability, human security, democracy, and economic development.

Keywords: corruption, organized crime, socioeconomic development

recognized as a first-tier international security challenge closely related to economic

only as a different way of doing business. However, today there is a wide

acknowledgment that corruption infringes on the fundamental human right to equal

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treatment. Current studies yield insights on the nexus of Transnational Organized

Crime (TOC) and corruption as significant threats to political stability, human

security, democracy, and economic development.

Among its manifestations are money laundering, bribery, embezzlement, fraud,

extortion, nepotism, cronyism, and monopoly. Research shows a powerful nexus

between corruption and organized crime, typical situations in post-communist and

opportunities for criminal activities and unlawful actions. Any comprehensive

methodologies, organized criminal networks have dramatically increased their reach

a global problem and are engaging in producing solutions.

Furthermore, the matter in question highlights its tremendous impact on the

geopolitical dimension as the fundamental pillars of the latter—economic, political,

the geopolitical factor of “corruption,” according to the systemic geopolitical analysis,

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constitutes an essential component concerning both the investigation and monitoring

of power distribution among actors in the geopolitical game.

approached as the misuse of entrusted power (by heritage, education, marriage,

P. van Duyne (1996) has developed a much more comprehensive definition,

contending that corruption is an improbity or decay in decision-making. In this

decision-making in exchange for rewards, promises, or expectations, while these

influencing motives cannot be part of the justification of the decision. Major

corruption occurs whenever significant events involving large sums of money,

at stake, especially in disaster conditions.

Preferably, corruption flourishes in situations involving high technology—when

in chaotic situations. For instance, purchasing a technologically far-advanced aircraft

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different impact on society. While, in some communities, corruption may correctly be

seen to be the “cause” of forms of social disorganization, in other situations,

corruption may be the “result” of more extensive changes. Understanding the

➢ According to Palermo’s Convention (Article 8) on the criminalization

measures as may be necessary to establish as criminal offences, when

(a) The promise, offering or giving to a public official, directly or

indirectly, of an undue advantage, for the official himself or herself or

acting in the exercise of his or her official duties;

(b) The solicitation or acceptance by a public official, directly or

indirectly, of an undue advantage, for the official himself or herself or

acting in the exercise of his or her official duties.”

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➢ Also, the definition at the legislative level of the European Civil

Convention Against Corruption (Strasbourg 1999, Article 2), incorporated

into the Greek jurisdiction with Law 2957/2001 (“Ratification of the

Council of Europe Convention on Civil Law on Corruption, Government