The Economic Costs of Corruption

Transparency International, a global coalition against corruption, offers this interesting piece about the economic costs of corruption.

According to economist Sanjeev Gupta, national corruption lowers economic growth and per-capital income, despite the argument that a certain amount of corruption can “grease the wheels” of the economy by circumventing bureaucratic regulations.

“Corruption increases the cost of investment for entrepreneurs who need to devote their scarce time and resources to fulfilling government regulations and bribing officials,” Gupta writes. “This cost can be high for small and medium-sized enterprises.”

“Second, corruption acts as a barrier to foreign investment and results in the flight of capital out of a country. The use of public funds to acquire assets abroad shrinks the economy’s savings pool that could otherwise be used for investment. This has repercussions for future generations, particularly in resource-based economies.”

This look at the costs of corruption is timely, as Cleveland remains mired in a 1-year-plus federal corruption probe centered around County Commissioner Jimmy Dimora and County Auditor Frank Russo. I think many of these lessons translate on the local level.

frank-russo-called-to-resignjpg-0822c6b6e56e6520_medium

Frank Russo, center of corruption scandal, still serving as Cuyahoga County Auditor.

For a case study in the high costs of corruption simply tour Youngstown, Detroit or Cleveland. You can see the signs of neglect and waste.

The Plain Dealer ran an article today about the lavish lifestyles enjoyed by recipients of corruption in the county. The two public officials at the center of this corruption ring–Dimora and Russo–are still in office.

Why do we tolerate corruption in the Cleveland area and does this tolerance permeate the region?

-AS

4 Comments

Filed under Featured, Politics

4 responses to “The Economic Costs of Corruption

  1. Sean Posey

    I’v been following this case for awhile and there is indeed quite a twisted web there. One of the top people in Russo’s appraisal office is Fred Papalardo. Fred also runs a realty service called “Carriage Hill Realty.” Papalardo’s brother and business associate, (also a neighbor of Russo) Russell, is reportedly the key organized crime figure in Cleveland.

    “Why do we tolerate corruption in the Cleveland area and does this tolerance permeate the region?”

    Corruption in Northeast Ohio, but also in Detroit, has a long history. Once corruption becomes deeply ingrained in an area it’s very difficult to purge. Chicago is probably the classic American example. A far as Youngstown goes, it’s hard to underestimate the history of corruption. At one time the FBI suspected the Mayor, the chief of the YPD, and of much of the vice squad as acting as part of a criminal enterprise. Two Mahoning County’s sheriffs were convicted on corruption based charges in twenty years, along with a former head of the department’s vice squad. Corruption came to be seen as a normal part of “doing business” in the valley.

  2. Excuse me for not spelling or editing properly (research..ugh.) The last comment should read “it’s hard to overestimate the history of corruption.”

  3. I get mad just thinking about it. I think maybe in the past in these cities there was a symbiotic relationship between the government and the mafia and the labor unions. Many of the older generation have been indoctrinated into that mindset and have benefited from it financially or professionally.

    I would like to see our generation end the cycle. We are too well educated to put up with this. They have kind of broken the cycle in Youngstown, I would like to see us do the same in Cleveland.

  4. Pingback: Posey County Auditors Office | Indiana | County Auditors

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