Observed Differences in Corruption between Asia and Africa: The Industrial Organization of Corruption and Its Cure

Abstract

The paper presents a nonconforming view about corruption and an approach to its 'cure'. It seeks to explain the situation that despite pervasive corruption and weak institutions, emerging economies in Asia attracted foreign investment and achieved a remarkable economic growth and reduction in poverty. Fragile countries in Africa have done less well. The paper posits that the main difference in the corruption characteristics between the two regions is that in Asia corruption is part of the fixed cost and in Africa it is in the variable costs. Consequently corruption has had less distortionary effect on investment and economic growth in Asia. Corruption becomes part of the fixed costs when it has a governance structure based on relationships. Although corruption and violent criminality are often correlated, many involved in corrupt governance structures are not evil. The theoretical concept of this paper was presented ten years ago under a different title. The paper has been updated. There has been progress in both continents and the broad-brush theoretical generalization applies to countries that are stuck in fragility, not to those that are making sustained efforts to bring stability and reforms. The regions are nonetheless good proxies for calling attention to the two kinds of corruption and their associated dysfunctions: distorting investment decisions, crime, violence and political instability. The leaders are implicated as enablers of corruption. Corruption is an emotional disorder and difficult to cure. The paper outlines modern group-psychoanalytic process to governance and to reorient corruption based on the hypothesis that the human drives, both positive and negative, that bring into being 'good enough' government and a cohesive country are the same forces that act as agents of corruption and as a safeguard against it. (C) 2017 The Authors. Published by Elsevier B.V.