Measuring and Comparing Corruption
Scientists can always learn a lot, and give better advice, when the phenomena about which they theorize can be quantified. This also applies to the nexus between economic growth, economic freedom and corruption.
The measurement of national incomes and products (GDP/GNP) can rely on a well-established methodology and accepted standards, which have been refined by international organizations over many decades. International comparisons of per-capita incomes may be based on exchange rates or estimates of purchasing power parities, which for most purposes reflect reality more realistically. Of course, national accounts statistics come with a margin of error, but they have proven sturdy and are widely accepted.
The quality of the institutions that make for economic freedom is more difficult to measure and compare internationally, for of necessity it involves subjective judgments and relies on small samples. As more economists became aware during the 1980s that the institutions of economic freedom were of great importance, several efforts were initiated to estimate the quality of property rights and governance, the freedom of labour, capital and product markets and their openness to international competition. Since 1986, the Fraser Institute in Vancouver, Canada has coordinated a major international effort to develop an agreed methodology and gather relevant information about standards of economic freedom. The data has found wide acceptance and furnished valuable insights in support of free markets and personal choice. A similar effort has been carried out by the Heritage Foundation in Washington, DC in conjunction with the Wall Street Journal. Although the methodologies differ, the results of both undertakings tell virtually the same story: Economic freedom is good for growth and high living standards.
For a long time the degree of corruption in rule enforcement did not receive the same attention. This gap has been filled over the past decade by a project, the Corruption Perceptions Index (CorrPI), to estimate annually the levels of dishonest dealings in politics and administration. It is being compiled – in cooperation with Transparency International, a think tank which publishes annual Global Corruption Reports – at the University of Passau in Germany under the direction of Prof. Johann Graf Lambsdorff. The Index –– in conjunction with the analyses and case studies in the annual Global Corruption Reports –– is intended to strengthen the resolve of the electorate and its political, judicial and administrative agents to fight corruption.
As of 2005, the information covers 159 countries, albeit on a rather uneven basis of primary surveys. For a considerable number of countries, the CorrPI scores go back to the early 1980s, so that some long-term trends can be gleaned from the database, as long as one keeps in mind that there have been changes in coverage and the quality of information over that time.
Because actual corruption is impossible to know and measure, the estimates of corruption are based on the perceptions of experienced businessmen and local analysts. Legal statistics, for example convictions for graft, cannot be used, because they may reflect standards of probity, the quality of surveillance or the commitment of courts to enforce the law. The \'Corruption Project\' has found, time and again that foreign and domestic business leaders and analysts tend to have an accurate perception of the standards of probity in a country\'s governance.
The Incidence of Corruption around the World
The 2005 Corruption Perception Index (CorrPI), published in late October, makes for most interesting reading and will offer policy makers numerous relevant insights. It certainly puts quantitative substance to the introductory considerations touched upon in the opening paragraphs of this paper.
The 2005 estimates of the CorrPI compared with averages for 1980-1985 highlight a number of issues: