NATIONAL INSTITUTE OF ADVANCED STUDIES

A Why of Corruption
An Essay
By Murali Murti
PhD Scholar
November 10, 2011

This paper examines the nature of corruption from the economic and anthropological
perspectives. It concludes that inequality is not the driving force behind corruption, and that
cultural factors are more likely to be the reasons. It examines the nature of envy in relation to its
possible effect on the decision to perform a corrupt act. Through correlating the extent of
corruption in different countries with their cultural indices, it identifies some possible cultural
factors that could facilitate the corruption phenomenon.
 TABLE OF CONTENTS

Introduction....................................................................................................................................3

The nature of corruption...............................................................................................................4

Is inequality a cause of corruption?.............................................................................................5

The role of envy..............................................................................................................................6

Corruption and cultural dimensions............................................................................................7

Corruption and values...................................................................................................................9

Discussion and conclusions..........................................................................................................11

References.....................................................................................................................................12

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Introduction

“Everybody is a scumbag”

(From a conversation with Raj Rajaratnam, the billionaire founder of the Galleon Group hedge
fund, as recorded in an FBI wiretap, August 2008.)

The last quarter of 2011 looks set to be a bad time for the corrupt and a great time for journalists.
In Greece, the world watched in awe as a government slowly unraveled after admitting it had
lied wholesale for more than a decade. In Italy, Silvio Berlusconi looks finally to be on the path
to his exit from the prime ministership – whatever his other sterling qualities, integrity was
certainly not one of them.1. In India, the 2G scam, as it has come to be called, appeared to get
murkier and murkier, with the possibility that at least one more of the Union Cabinet’s most
visible ministers could be involved in perhaps the largest corruption scandal, ever, in
independent India. No place in the world, it seemed, was immune to the problem.

Over in the US, the arrest of Rajat Gupta, the high profile member on the board of Goldman
Sachs and ex-CEO of McKinsey and Co, the world’s most respected management consulting
company, sent shock waves through the non-resident Indian (NRI) community. “A Stunning Fall
from Grace for a Star Executive” was how the New York Times headlined it. Gupta was the
latest and the most prominent of the many Indians who had been indicted in the insider trading
scandal involving the Galleon Group; the largest such crime committed, ever, on Wall Street.

Till then, NRI’s had gazed condescendingly down at the swampland of Indian corruption from
the Olympian heights of the home of efficient free markets, secure in the belief that they were
literally out of it all. Indians were supposed to be, at least, easily corruptible, but not so the non-
resident variety; or so went the popular assumption. Now, suddenly, it seemed that the expression
“you can take Indians out of India, but not India out of Indians” had acquired a new, unsavory
connotation.

Clearly Indians – to the extent that one billion human beings can be clubbed together in a single
category – were not alone in this. If not, and as we increasingly understand, there are no
countries on this planet that are free of the presence of corruption, then what is it that drives
people to corruption, that most widespread of white collar crimes? Why do people do it?

This paper takes two approaches to answering this question. First, an approach drawn from
economics will be used to attempt an explanation. Next, we will use anthropological insights to
find some understanding. Finally, we will discuss whether a combination of approaches would be
the most effective.

1
The Guardian, November 7, 2011

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The nature of corruption
Corruption is nature’s way of restoring our faith in democracy.

(Peter Ustinov)

There are various definitions of corruption, testimony to the many ways in which the
phenomenon manifests itself. The Commonwealth Secretariat defines it as “the abuse of public
office for private gain”. Another definition is “corruption is a behavior that deviates from the
normal duties of a public role because of private pecuniary or status gain, or which violates rules
against the exercise of influence”2. A wide-ranging definition, encompassing both the public and
private sectors, is also available from Transparency International, which states simply that
“corruption is the misuse of entrusted power for private benefit”.

Whatever the definition, the nature of corruption is well understood everywhere. George
Orwell’s Animal Farm examines the nature of corruption through symbolic animals. A more
recent study analyzes the dimensions of corruption as “pervasiveness” and “arbitrariness” (Pillay,
2010). More elaborate studies have gone into the nature of the “corruption network” and the role
of the operating environment and institutional capacity (Herrera, 2007).

Not all corruption is seen as negative, surprisingly. A commonly held belief is that corruption –
of the “speed money” variety – actually increases efficiency in bureaucratic processes. The
cause, therefore, is seen as embedded in restrictive government regulation. A telling and
involuntary example of this occurred in Mumbai in the late ‘70s – a strike by the clerical staff of
the octroi tax department actually resulted in an increase in the total tax deposited. Unfortunately
for this argument, there is also enough evidence to show – again from India for example – that
removal of regulations can lead to an increase, not a decrease, in corruption. The liberalization of
the Indian economy began in 1991; but two decades later, corruption, far from disappearing, is
higher than ever.

Pervasive and arbitrary as it is, corruption has unsurprisingly generated a vast amount of research
aimed at identifying its causes. As corruption usually involves money exchanging hands, many
researchers have focused on the economic aspect of the act of corruption and attempted to find
an explanation based on economic theory. Concepts such as the “cost of doing business” have
been advanced to explain corruption in different countries and the variations that occur, and that
the level of public corruption in a country is a broad barometer for a variety of contracting costs
(Lee, 2004). But for all the amount of literature that has been produced by the academic
community, no economics-based theory has yet emerged that explains to any degree of
completenss the causes of corrupt behaviour.

2
Corruption and Political Development: A Cost-Benefit Analysis, by Joseph Nye. American political science review,
Vol 61, No2, June 1967

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Is inequality a cause of corruption?
“Where corruption runs rampant, the rich and powerful are rarely charged with crimes and even
more rarely convicted.” (Anonymous)
This paper does not intend to go into all the various economics-based theories of corruption. It
focuses, instead, on one popular view of corruption – that it is due to inequality. This view holds
that the corrupted – usually public officials – are forced, because of the low salaries they earn, to
resort to corruption in order to maintain standards of living commensurate with their positions,
which in turn are influenced by other high income groups, usually in the private sector.
Consequently, if inequality is indeed the cause of corruption, then it should manifest itself in a
fairly universal manner – countries with low inequality should experience lower levels of
corruption, and vice versa.

Does this theory hold good? This paper examines this possibility through a simple statistical test
– by calculating the coefficient of correlation (Pearson’s “r”) between the corruption level as
given in the Transparency International data, and the level of inequality as given by the UN
Rich-Poor Index. The UN RPI gives the ratio of the average income of the top 10% earners to the
bottom 10% in a country. The sample chosen is from the Transparency International list of 176
countries. Of these, 20 countries have been selected, spread evenly across the range, on the basis
of approximately 1 in every 8. The results are shown below.

S.N Country Transparency Index Rich-Poor Ratio

1 Denmark (low corruption) 9.3 8.1

2 Switzerland 8.7 9
3 Germany 7.9 6.9
4 Uruguay 6.9 20.1
5 Portugal 6 15
6 South Korea 5.4 7.8
7 Hungary 4.7 5.5
8 Malaysia 4.4 22.1
9 Italy 3.9 11.6
10 Bulgaria 3.6 7
11 Thailand 3.5 12.6
12 India 3.3 8.6
13 Egypt 3.1 8
14 Zambia 3 32.3
15 Indonesia 2.8 7.8
16 Tanzania 2.7 9.2
17 Belarus 2.5 6.9
18 Philippines 2.4 15.5
19 Pakistan 2.3 6.5
20 Russia (high corruption) 2.1 12.7

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 Pearson's 'r' -0.0845
There is no correlation, as demonstrated by the almost zero value of “r”, between inequality and
corruption, even if the data is not the most rigorous for such a comparison. So inequality clearly
cannot be the cause, even if it is associated in some way with the final decision of a person to
commit a corrupt act. This, and other similar investigations into the economic theory of corrupt
behavior, leads inevitably to the possibility that the roots of corruption lie somewhere else – in
cultural factors specifically.

The role of envy

“My analysis of the situation is he’s enamored with Kravis, and I think he wants to be in that
circle. That’s a billionaire circle, right? Goldman is like the hundreds of millions circle, right?”

(Raj Rajaratnam, as recorded in an FBI wiretap, August 2008)

For a trait of human nature that is obviously so universal, envy has received surprisingly little
attention in the literature of anthropology. It is, let us not forget, one of the seven deadly sins in
the Catholic tradition; the others being pride, wrath, sloth, greed, gluttony and of course, lust.
Envy is unique among the seven in that it has none of the desirable hedonistic attributes that
make people cleave naturally to the other six. “It is no fun” (Silver, 1978).

Enjoyable or not, there is a deep-seated belief in the connection between corruption and envy
that surely merits serious investigation. Whether this is merely an associative rather than causal
connection is not immediately evident. Immanuel Kant argued that it is the comparison of
oneself to the superior person that causes envy (Kant, 1780/1997). The more a person feels “it
could have been me” after being outperformed in an important domain, the more that person
feels envious.

But envy is not all gloom and doom. In “The Bright Side of a Deadly Sin”, Niels van der Ven
distinguishes between two types of envy: benign envy and malicious envy (van der Ven, 2009).
Benign envy has a positive “leveling up” motivational effect, leading the person to aspire to
higher level in some sphere of achievement. Malicious envy, on the other hand, has a negative
“leveling down” effect, leading a person to try and degrade or pull down the other perceived at a
higher level of some achievement. The perpetrators of corruption, paradoxically, would appear to
be associated with the benign variety, while the prosecutors of corruption are frequent associated
with the negative effects of malicious envy i.e. they are seen as driven by jealousy in their efforts
to bring to justice the guilty corrupt.

To what extent does envy cause corruption? In a fascinating experiment, Kebede and Zizzo
(2010) conducted a survey in Ethiopia on the effects of envy on agricultural innovation. The
technique they used was a “money burning” experimental game which required participants to
risk a sum of money in a (proxy) lottery (Kebede, March 2010). The sum of money given to
participants was varied to induce inequality, and the lottery was a proxy for investing in

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agricultural innovations that carried some risk. Most interestingly, participants were also allowed
to decrease the money held by others at their own cost - “money burning”. Money burning
comes at a cost i.e. to “burn” another’s 10 units, a participant had to spend one unit. However,
the decision to burn money is taken through a “dictator” design, which is used to select the
participant – only one per cycle – whose money is to be burnt.

The results showed that at the individual level, envy was correlated to a willingness to try out
higher levels of innovation, and was thus a positive motivator. At the group level, on the other
hand, envy became a destructive force when there was a high level of group envy as manifested
in money burning behavior among a large number of participants. Thus it would seem, at least in
the rural setting of Ethiopia, that envy can have an inimical effect and constrain upward
aspiration because of the pressure to conform to societal norms, or as a participant expressed it,
“using better technology might be good in terms of increasing yields, but it also increases the
number of enemies one might have and ….the power of the evil eye.”

Corruption and cultural dimensions

Money is truthful. If a man speaks of his honor, make him pay cash.

(Robert A Heinlein)

Our brief overview of the literature of envy shows that it is a broad based phenomenon which is
difficult to define. Therefore, to correlate envy as a singular phenomenon to corruption would be
a difficult exercise, because envy itself seems to lead to different kinds of behavior in different
cultural contexts. To explain this varying behavior of envy, it would become necessary to
deconstruct envy into its constituent cultural elements, to figure out which element would be
dominant in which context. This itself is such an ambitious exercise that it does not seem to have
been attempted at all anywhere as yet.

However, this is not a constraint in investigating the cultural bases of corruption. Geert
Hofstede’s five cultural dimensions are widely accepted today as accurate descriptors of culture3.
We can therefore assume with some plausibility that envy, since it is universal, will also correlate
in some way to Hofstede’s cultural dimensions. Therefore, by examining the associations, if any,
between corruption and Hofstede’s five dimensions, we can come closer to understanding the
cultural nature of corruption.

Hofstede’s five dimensions are:

1. Power Distance Index (PDI)

2. Individualism vs. Collectivism Index (IDV)
3. Uncertainty Avoidance Index (UAI)
4. Masculinity vs. Femininity Index (MAS)
5. Long Term Orientation (LTO)

3
http://www.geert-hofstede.com/

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Extensive research has been carried out across the globe using Hofstede’s concepts, and as a
consequence, data is available for Hofstede’s dimensions as measured in virtually every country.

This paper attempts to understand the association between corruption and Hofstede’s indices
using the same method as explained earlier to investigate inequality i.e. to perform a correlation
test on the same data set of 20 countries as listed earlier. Due to the fact that the LTO data was
not available for every country, only the first four indices, namely, PDI, IDV, UAI and MAS
were tested for. For these also, data for only 18 countries was available.

The results of the statistical test for Pearson’s coefficient of correlation ‘r’ are shown below:

Corruption Perception Index & Hofstede's

Cultural Dimensions

Pearson's 'r' correlation coefficient calculation

Country Transparency Index PDI IDV MAS UAI

Denmark (low corruption ) 9.3 18 74 16 23

Switzerland 8.7 34 68 74 58
Germany 7.9 35 67 66 65
Uruguay 6.9 61 36 68 100
Portugal 6 63 27 31 104
South Korea 5.4 60 18 39 85
Hungary 4.7 46 88 80 82
Malaysia 4.4 104 26 36 50
Italy 3.9 50 76 75 70
Bulgaria 3.6 70 30 40 85
Thailand 3.5 64 20 34 64
India 3.3 77 48 56 40
Indonesia 2.8 78 14 46 48
Tanzania 2.7 64 27 62 41
Philippines 2.4 94 32 44 64
Pakistan 2.3 55 14 70 50
Russia (high corruption) 2.1 93 39 36 95

Pearson's 'r' -0.2952 0.6106 0.2341 0.2328

Although none of the four results above can be classified as “strong”, nevertheless it is
noteworthy that the Individualism vs. Collectivism index seems to offer some insight, namely,
that the more individualistic a culture, the less likely we are to find corruption. This seems to

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lend credence to the idea that a “corruption network” can play a role in fostering its growth.
Interestingly, the Power Distance Index is negatively correlated, although weakly, with
corruption. Does this imply that authoritarian regimes using fear can keep corruption down?

Corruption and values

Surprised by such candid responses, the U.S. Consulate-General officials asked Mr. Owaisi if
donations like wells or marriage fees were not illegal. “Of, course,” came the reply, “but that's
the great thing about democracy.”

(The Hindu, March 16, 2011)

Hofstede’s cultural dimensions bring us closer to understanding the “why” of corruption, but not
by much. As with envy, it might be that a combination of cultural attributes, when tested together
against the TPI, might lead to intuitively more obvious results. One such combination approach
to examine cultural patterns in a country is the World Values Survey4 .

The World Values Surveys were designed to measure all major areas of human concern, from
religion to politics to economic and social life. It turns out, according to the Survey, that two
dimensions dominate the picture: (1) Traditional vs. Secular-rational values and (2) Survival vs.
Self-expression values. These two dimensions explain more than 70 percent of the cross-cultural
variance on scores of more specific values.

Secular-rational values dimension reflects the contrast between societies in which religion is very
important and those in which it is not. A wide range of other orientations are closely linked with
this dimension. Societies near the traditional pole emphasize the importance of parent-child ties
and deference to authority, along with absolute standards and traditional family values, and reject
divorce, abortion, euthanasia, and suicide. These societies have high levels of national pride, and
a nationalistic outlook. Societies with secular-rational values have the opposite preferences on all
of these topics.

The second major dimension of cross-cultural variation is linked with the transition from
industrial society to post-industrial societies, which brings a polarization between Survival and
Self-expression values. The unprecedented wealth that has accumulated in advanced societies
during the past generation means that an unprecedented share of the population has grown up
taking survival for granted. Thus, priorities have shifted from an emphasis on economic and
physical security above all, toward increasing emphasis on subjective well-being, self-expression
and the quality of life.

This paper examines next the association, if any, between corruption levels as measured by the
Transparency International Index, and the two dominant values from the WVS, namely the
Tradional / Rational Vales (TRV) and the Survival / Self-Expression Values (SSV). Again, the

4
http://www.worldvaluessurvey.org/

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same data set of 20 countries from the Rich-Poor comparison was used. The results are shown
below:

Corruption Perception Index vs. WVS Indices

Pearson's 'r' correlation coefficient calculation

Country TPI TRV SSV

Denmark (low corruption) 9.3 1.16 1.87

Switzerland 8.7 0.74 1.9
Germany 7.9 1.31 0.74
Uruguay 6.9 -0.37 0.99
Portugal 6 -0.9 0.49
South Korea 5.4 0.61 -1.37
Hungary 4.7 0.4 -1.22
Malaysia 4.4 -0.73 0.09
Italy 3.9 0.13 0.6
Bulgaria 3.6 1.13 -1.01
Thailand 3.5 -0.64 0.01
India 3.3 -0.36 -0.21
Egypt 3.1 -1.64 -0.54
Zambia 3 -0.77 -0.62
Indonesia 2.8 -0.47 -0.8
Tanzania 2.7 -1.84 -0.15
Belarus 2.5 0.89 -1.23
Philippines 2.4 -1.21 -0.11
Pakistan 2.3 -1.42 -1.25
Russia (high corruption) 2.1 0.49 -1.42

Pearson's 'r' 0.4595 0.7049

Finally, it seems, we are within sight of some intuitively clear reasons for corruption. Corruption
levels, according to the above table, have a moderately strong correlation with Survival vs. Self-
Expression values i.e. cultures which exhibit a high degree of “survivalist” tendencies in its
populace are more likely to be corrupt. Similarly, traditional cultures with a strong religious and/
or nationalistic orientation are more likely to exhibit corruption in its populace, although to not
the same degree of predictability.

Perhaps that is indicative of why corrupt people make statements such as “I did what I had to do
in order to survive. I am a devout person and I am sure the Almighty will forgive me!”

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Discussion and conclusions
As stated above, the WVS data makes intuitive sense from the perspective of understanding
corruption. Countries going through high degrees of instability, for example Russia after the
collapse of the Soviet Union, will have a populace who have no option but to adopt a survivalist
approach to their daily life. In such a milieu, corruption will flourish, and so it has in Russia,
according to the Transparency International data. We can extrapolate these findings to Nigeria
and Somalia also, for example. Closer home, India too, offers ample evidence of the validity of
this conclusion.

“Every man for himself” is a statement made by the discerning about Indians. Whether caused by
succeeding waves of colonization, or by the sheer magnitude of population pressures, this
statement accurately sums up one aspect of the cultural phenomenon of Indian willingness to
indulge in corruption, evidenced so widely today. Knowing what we now do about the link
between corruption and Survival / Self-Expression data, it is possible to put such remarks in
perspective.

Not only this, India is also known as a place where there is a religious route to absolution from
worldly sins. This is illustrated repeatedly and dramatically by the spectacle of the known corrupt
depositing huge sums of money, in the form of cash or gold bullion, in the Tirupati temple hundi.
Such behavior is exactly what is predicted by the medium-strength correlation between
corruption levels and Traditional / Secular values.

Which brings us back to Raj Rajaratnam and Rajat Gupta, where we began. In the light of the
foregoing, it is no surprise that Raj Rajaratnam felt himself to be immune from any danger,
because his favored ola-leaf reader back in Sri Lanka had assured him of this. It was also no
surprise that Rajat Gupta chose Diwali as the day to surrender himself to the FBI – it is after all
one of the most auspicious days for Hindus. For both of them, wealth to the tune of nearly $ 5
billion at its peak in the case of Rajaratnam, and over $100 million in the case of Gupta, were not
seemingly sufficient to assuage their existential anxieties about the perils of survival in a hostile
world.

What can the academic community do to understand such phenomena? The foregoing analysis of
corruption, which is by no means complete, shows that there is no one discipline which can
provide a complete explanation. Qualitative research, in the form of unstructured participant
observation or case studies, will always be the starting point to provide insights. Economics
alone, or anthropology alone, may not suffice as the method. For such complex phenomena, a
combination of approaches will frequently be required. The glue that can bind these different
strands together is quantitative analysis, which makes possible critical verification of a
hypothesis.

As the German proverb goes : Der Teufel steckt im Detail. The devil’s in the details.

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References
Herrera, A. M. (2007). Bribery and the Nature of Corruption. HLR .

Kant, I. (1780/1997). Lectures on ethics. Cambridge University Press.

Kebede, B. a. (March 2010). Envy and Agricultural Innovation: A Case Study from Ethiopia.
Annual Conference of the Centre for Study of African Economies. Oxford.

Lee, C. a. (2004). Corruption and International Valuation - Does Virtue Pay? Cornell University.

Pillay, S. a. (2010). Linking cultural dimensions with the nature of corruption: An institutional
theory perspective. International Jornal of Cross-Cultural Management , 10: 363.

Silver, M. a. (1978). The perception of envy. Social Psychology 41 , pp. 105-117.

van der Ven, N. (2009). The Bright Side of Envy. Ridderprint BV.

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