Dr. Jennifer Morse, a senior fellow in economics for the Acton Institute, argues in this week’s Acton commentary that the key road-block to successful economic development in impoverished nations is the lack of good “moral qualities, like the even-handed enforcement of law, and the transparency of government.” Dr. Morse cites a report from the World Bank Institute detailing the extensive bribery that occurs in developing countries, a practice that is considered “normal” by just about everyone. While this may seem to be a small thing (a few bucks here and there), the economic impact on the poor is very significant.
Another impact of the poor moral quality displayed by the governments of developing nations is the over regulation of business. Over regulation of business, argues Morse, discourages would-be business owners from pursuing their dreams and breaks the entrepreneurial spirit. According to the Harvard Institute of Economic Research, some nations may take up to 112 days to comply with all of the legal requirements before opening a business. In Canada, you can legally open a business in 2 days. Faced with four months of bribes, permits, and fees, many shrink away from even considering starting up a new business. Opening up a business outside of the law (about 30 percent of Mexico’s economy) requires even more bribes, and can be shut down at any time. The Harvard Institute report states in its abstract that “Countries with heavier regulation of entry have higher corruption and larger unofficial economies.”
Morse proposes that the solutions to these problems are simply holding these nations accountable, encouraging transparency, and reducing semi-legal corruption.
Without a legal system that protects those who take bribes, those who produce jobs are at a serious disadvantage. Reforming the legal system in underdeveloped countries is a necessary part of any strategy for economic advancement.
Put another way, sin is not cost-effective.
Read her full commentary here.
Also see Transparency International’s just-released 2005 Corruption Perceptions Index (CPI). More than two-thirds of the 159 nations surveyed scored less than 5 out of a clean score of 10, indicating serious levels of corruption in a majority of the countries surveyed.
The 2005 Index bears witness to the double burden of poverty and corruption borne by the world’s least developed countries, TI said.
“Corruption is a major cause of poverty as well as a barrier to overcoming it,” said Transparency International Chairman Peter Eigen. “The two scourges feed off each other, locking their populations in a cycle of misery. Corruption must be vigorously addressed if aid is to make a real difference in freeing people from poverty.”