Financial Transparency Coalition

Over the last year, from the symbolic to the substantive, leaders in China have shown an interest in seriously tackling the issue of corruption. These changes have included charging Bo Xilai, the powerful former Communist Party chief in Chongqing, with corruption, bribery and abuse of power and, the relatively symbolic gesture, of banning the construction of new government buildings, which are often ostentatious relative to the communities they inhabit. Yet these changes have raised questions over the daily reality that citizens of China (and every other nation) confront as they interact with policemen, building inspectors, and customs officials—but also as they watch news. Indeed, citizens of the world confront two different, yet highly related forms of corruption; these exist both on the large-scale and on the small-scale. And these types of corruption interact with each other, but also and with citizens’ perceptions of their nations.

On a large-scale corruption undermines development and democracy, exacerbates poverty, erodes civil society, stifles social services, and worsens public health. When it involves cross-border flow of money, it is damaging to economies not just because of the underlying corrupt acts, but also because it deprives the country of both public and private resources—including financial capital—that might otherwise be diverted to productive activities.

Corruption on a small scale, sometimes called “petty corruption,” occurs in thousands of contexts daily. Every day people, usually in developing countries, make thousands of routine payments to building inspectors, customs officials, and other bureaucrats for the services that those employees are obligated to perform, but don’t without a little extra. This type of corruption has a much different effect than its large-scale counterpart. When a person pays a bribe, the venal official need not necessarily transfer it abroad. In fact, they are more than likely to just spend the cash.

Small-scale corruption directly leads to increases in the cost of living for poor families. As U4 Anti-Corruption Resource Centre points out, petty corruption can impose “a heavy financial burden on individuals, especially the poor [and can] facilitate illicit activities such as smuggling and trafficking and ultimately foster the development of informal activities and shadow economy.” Moreover, by increasing the cost of doing business, particularly on routine matters, small-scale corruption can dampen the pursuits of microenterprises and small businesses, further hurting a developing economy.

Both types of corruption affect our subjective measures of the extent of corruption in a given nation. However, the degree to which large-scale versus small-scale corruption contributes to those measures, and therefore Transparency International’s Corruption Perceptions Index, is not necessarily obvious or simple. Citizens of developed, and especially developing, nations likely interact with small-scale corruption on a more regular basis, which perhaps would make them more likely to recall these instances when answering a survey. On the other hand, with media attention and public discourse, many citizens are equally aware of large-scale corruption, particularly in the wake of a natural disaster or a political scandal.

In addition to thinking about their effect on corruption perceptions, we might also consider the relationship between large-scale and small-scale corruption with each other. These types of corruption are not necessarily always perfectly correlated. A nation with a great deal of large-scale (or grand) corruption need not also have a great deal of small-scale corruption. Rising large-scale corruption does not always indicate rising small-scale corruption (and vice versa). Likewise, a nation can tackle large-scale corruption or small-scale corruption. While these concepts are related and do contain a great deal of interdependency, addressing one does not necessarily take care of the other.

Back to China. As David Eldon recently wrote in Forbes, this dynamic is particularly relevant there, where the leadership is acutely aware of the problems the nation faces with respect to corruption and has made tackling it a priority. Eldon comments, rightly so, that “while the tone from the top has been set and implemented it seems to be taking a much longer time to filter down to the lower ranks.” He goes on to say that he is has been told by many citizens that “corruption at party, municipal, and village level has never been higher” and that China should deal with corruption at the more widespread levels first.

While I disagree with Eldon that an improvement in large-scale corruption will follow if the nation takes care of small-scale corruption, I do agree with his sentiment on the importance of tackling both sides of the issue, and the distinction between the two. Ultimately, any effective effort to reduce corruption, both in China and for other nations tackling similar problems, should address both the large and the small. Without such a holistic view, China’s efforts—or any other nation’s—would be inherently one-sided. And, as a result, likely doomed to fail.