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Inequality has a strong bearing on corruption

An essential aspect of the history of every society is linked to the manner in which it produces and distributes wealth and the role of the government to correct inequalities. In unequal societies, where the political and economic power is concentrated, the powerful have more opportunities to break the law as they have diverse resources to prevent justice from punishing them. The bad example takes over and the idea of snatching public funds and avoiding justice is a personal privilege or a sign of cleverness, recognized by society at large.

As opposed to relatively egalitarian societies, where becoming wealthy at the expense of public funds is condemned; and the person who does it is exposed to strong social censorship. Lacking the funds to obstruct the action of justice, it is most probable that the corrupt person ends up paying for his/her crimes.

Checking the phenomenon with the Palma Inequality Ratio, several analysts have shown that the inequality key dynamic is at the end of the income distribution; 40% are poorer and 10% are wealthier. As opposed to the Gini Coefficient –usually used to measure inequality– the Palma Ratio is very clear and much more effective in capturing inequality dynamics that are low or intense.

In relatively egalitarian societies, becoming wealthy at the expense of public funds is condemned; and the person who does it is exposed to strong social censorship.

The corruption measurement used is the International Transparency’s Corruption Perceptions Index and the World Justice Project´s Rule of Law Index which of all the indices used, is probably the most accurate.

In both cases, the relationship between inequality and corruption is very strong. It is convenient to say that this relationship is non-linear, in other words, the principle does not always act in the same manner, and therefore less corruption does not always mean less inequality.

Experience in other parts of the world

The story of reducing inequality in Europe is fairly known. In most countries, the labor movement obtained great success in the democratic battle context, including better salaries and universal access to healthcare and education. However, several scholars including French Economist and inequality expert Thomas Piketty agree in saying that the devastation caused by the First and Second World Wars was decisive for the emergence of reduction of historical inequalities.

This does not mean that wars are the only pathway for reducing inequality and hence corruption. The Indian State of Kerala has a regional GDP below the other states, but one of the lowest inequality ratios.

Its human development achievements have been highlighted by numerous economists, including Economy Nobel Laureate Amartya K. Sen. Therefore it is no surprise that Kerala is the least corrupt state in India and where the economic and political power is not consolidated and corruption has little or no chances of emerging.

However, former communist countries such as Russia, Ukraine or Bulgaria show that the least inequality – less corruption principle is satisfied. After its transit into capitalism, they all increased inequality, although in some more than others. Several countries saw the appearance of powerful oligarchies which took over many government assets. Although some of these countries are, on average, much more egalitarian than many Latin-American countries, however, some are equally or more corrupt.

Where the economic and political power is not consolidated and corruption has little or no chances of emerging.

The explanation of this situation is related to the distortions created by a state-centralized economy, controlled by bureaucrats who distribute personal favors, coexisting with black markets where the exchange of goods and services is carried out far from legal circles. Therefore, corruption turned into a relatively normal practice of doing things and whose impact is still felt today. Definitely, corruption has a direct relationship with the aforementioned emergence of powerful oligarchies for which the rule of law is not a barrier.

As a fact, many Colombians would prefer to live with corruption the ratios of Denmark (very low) but inequality ratios of the Colombian Province of Cundinamarca (very high), therefore being a more honest country but with high inequality.

For corruption to diminish in Colombia it is necessary to reduce inequality. This goal could be achieved with political reforms which reversed the current concentration of economic and political power. The Colombian political regime is a competitive oligarchy where access to a high government position is a privilege for a chosen few and where elected parties serve large economic conglomerates but not the country.

Just as the left needs to be convinced that redistribution policies need the rule of law and strengthening personal trust, the right needs to get convinced that reducing corruption necessarily implies diminishing concentration of wealth and political power.


Consejo Editorial