Prevention of corruption as a factor in ensuring the socio-economic stability of the state

Annotation

To study the basic prerequisites of the impact of the corruption on socio-economic indicators. Methods: economic- statistical analysis, extrapolation method, structural and monographic analysis, expert evaluation method. Conclusions: there is a clear correlation between the level of the perception of corruption and the level of competitiveness of the country. The influence of corruption on the level of inflation has been studied. The relationship between corruption and indicators of social development, such as the quality of life of the population and the quality of the services provided, is examined and identified. It is proved that one of the causes of poverty and social inequality is a high level of corruption. Application / Improvements: The obtained research results can be used by governments as a recommendation in the establishment of anti-corruption policy.

Introduction

Corruption has a detrimental effect on all spheres of society: the economy, the social sphere, politics. The negative consequences of the corruption include not only prevention the progressive gradual development of the society, but also pose a serious threat to the interests of the country's national security. The types of the negative impact of corruption on the socio-economic development of the country are summarized in Table 1. 

Table 1. The impact of corruption on socio-economic development 

The socio-economic nature of corruption is demonstrated in a way that it is a reason for a decline in the quality of human capital, inefficient functioning of political institutions, undermining macroeconomic stability, etc. For example, corruption is an important factor in the socio-economic downturn in many near and far abroad countries, in particular, such as Russia, Kyrgyzstan, Ukraine, Uzbekistan, as well as Afghanistan, Venezuela, India, Paraguay and others. 

Main points

In order to clarify the relationship and interdependence between the level of perception of corruption and certain socio-economic parameters of the country's development, we consider the following hypotheses.

Hypothesis №1. The impact of corruption on the economic sphere, in particular on the level of competitiveness, inflation and investment.

In order to understand exactly how corruption affects economic development, it is necessary to analyze the relationship between the main macroeconomic indicators correlating with the level of corruption. The initial data were taken: "Corruption Perceptions Index 2016" by Transparency International, "Global Competitiveness Index 2016-2017" of the World Economic Forum (hereinafter - GCI) and inflation indicators of the world. By means of the correlation analysis, the correlation between the Corruption Perception Index and such indicators as Global Competitiveness Index and inflation level (data used for 2015-2016) is examined.

In order to ensure a complete correspondence of the data obtained during the research and the actual situation, a representative sample was made of the general number of countries with different levels of perception of corruption. 

Table 2. Basic macroeconomic indicators correlating with the level of corruption 

Source: composed by the authors on the basis of [1, 2, 3] 

Corruption and competitiveness

In order to determine the relationship between the indices, figures were constructed based on the data in Table 2. Each point in the figure corresponds to one country. The trend line in the picture shows the tendency of the competitiveness index change depending on the corruption perception index calculated from statistical data (the larger the index, the lower the level of corruption).

Figure 1. Corruption and competitiveness Source: composed by the authors on the basis of [1, 2]

From the analysis of the data shown in Table 2 and Figure 1, it follows that in the world there is no country with a very high level of corruption and, at the same time, a high level of competitiveness, as well as no countries with low levels of corruption and low competitiveness. The correlation coefficient between the level of corruption and competitiveness is very high, and is equal to 0.91 (the maximum possible value is 1). The presented results confirm the fact that corruption is a key factor in reducing the competitiveness of the state.

Countries with low perceptions of corruption, such as Denmark, Finland, Sweden, Norway and Singapore, traditionally are ranked high among the most competitive countries in the world in accordance with the GCI. It should be noted that among the countries of the post-Soviet space and Eastern Europe, Kazakhstan demonstrates one of the stable positions in the global ranking of competitiveness, positioned on the 53rd place. Nevertheless, corruption is one of the main obstacles to the further growth of competitiveness of Kazakhstani enterprises and the economy as a whole.

Dependence of the level of inflation on corruption

The following figure shows the dependence of the inflation rate of the countries of the world on the index of perception of corruption. It should be noted that practically in all countries of the world with a low level of corruption the level of inflation is also very low.

It should also be emphasized that there are both direct and indirect links between inflation and corruption. Corruption affects all types of inflation - administrative, inflation of costs, inflation of price and salary growth and demand inflation. So, for example, natural monopolies by bribing government officials can lobby for higher tariffs for their services, thereby creating administrative inflation. In turn, the significant costs of bribing government officials are reflected in the growth of production costs, which consequently leads to an increase in prices for many types of goods and services.

A certain correlation between the level of corruption and inflation is also traced in Kazakhstan. In particular, according to international organizations, corruption increases the cost of goods and services in Kazakhstan by almost 50% [4], which affects the entire population of the country. Despite the economic crisis, this figure is constantly rising, which leads to a high level of inflation. Therefore, in 2015, the inflation rate for the past 10 years reached its maximum, and amounted to 13.6%, in 2016 the inflation rate varied at 8.5% [3].

In the current situation, it is necessary to strengthen work on eliminating administrative barriers, establishing effective state control and stimulating a competitive business environment.

Figure 2. Dependence of the level of inflation on corruption Source: composed by the authors on the basis of [1, 3]

Hypothesis №2. The impact of corruption on the social sphere, in particular on the quality of services provided and the level of social inequality and poverty.

The main manifestation softhe negative social impact of corruptionis a deterioration in the quality of life of the population, which is visible in poor socially important services and in strengthening property inequality. As a consequence of the above, the social tension of the population is growing, which is a threat not only to the economy, but also to the political stability of the country.

Reduced quality of services (education, health).

The negative impact of corruption on education and health is expressed in three main trends.

1. Corruption increases the costs of providing education and health services. In spite of the fact that formally many types of these services are fully or largely financed by the state, in reality, consumers of these services very often have to pay for them Thus, according to the organization CIET (Community Information, Empowerment, Transparency International), in various countries of the world, the number of students who are forced independently and illegally to pay for their education varies from 10% to 86% [5]. The illegal increase in the cost of public services reduces the demand for them, which leads to a decline in education and health of the population.
2. Corruption can directly reduce the amount of services provided by the state: plundering and selling medicines, medical equipment, various kinds of materials and equipment necessary for organizing the educational process is a common practice in most countries of the In addition, budget funds allocated for education and health can be misused by the government officials.
3. Corruption worsens the situation with the quality of services provided. For example, when school teacher position is given to an insufficiently competent person for the appropriate payment (a situation quite common in some developing countries), the quality of educational services is

Corruption, inequality and poverty

Corruption contributes to the increasing public inequality and increase in the number of people living below the poverty line. There is the list of explanations for this.

First, corruption negatively affects the indicators of economic growth, and the smaller the growth, the higher the poverty level.

Secondly, corrupt government officials may not use the budget funds allocated for the implementation of social programs that society really needs. For example, funds allocated for improving the health care system can be invested in another project, since such use of budget funds is more attractive for corrupt civil servants.

Thirdly, a high level of inequality in income distribution, in fact, is a self-sustaining phenomenon: a relatively small proportion of rich people in the society can significantly influence the decision-making process of public authorities (both legislative and executive), and thus contribute to further strengthening of inequality.

Fourth, corruption has a negative impact on public education programs, therefore, people with low incomes are do not have sufficient opportunities to increase their capital, and, accordingly, the prospects for future income growth [6].

The experts’ research confirms the conclusions presented above, they show that corruption affects the incomes of the poorest part of society to a greater extent. The increase in corruption by one standard deviation reduces the income growth of 20% of the poorest members of society by 7.8% per year [7].

The most known statistical indicator of the uneven distribution of income in society, the wages of various population groups is the Gini coefficient. The Gini coefficient varies from 0 to 1 (or 0-100%), The closer its value to zero, the more evenly the income is distributed. The adjusted Gini coefficient for the regions of the world is shown in Fig. 6th.

Figure 6. Gini coefficient, % Source: composed by the authors on the basis of [8]

From the data presented, it can be concluded that countries with the lowest level of perception of corruption (EU countries) have the lowest Gini coefficient, and accordingly the even distribution of income among the population. To a society with high inequality, the Gini coefficient was determined by countries with a high level of corruption - mostly in Africa. Kazakhstan in this rating takes a fairly good position, better than the CIS countries, Asia and Africa. 

Conclusion

Summing up the results of the conducted research, it can be concluded that there are stable interconnection and interdependence between the examined socio-economic indicators and the level of perception of corruption in various countries of the world. However, there are countries, where this dependence is not clearly traced.

For example, despite the high level of corruption perception (according to Transparency International estimates), Kazakhstan demonstrates good results in social and economic development, it is sustainable economic growth, increased inflow of foreign investment, improvement of the quality of education and health, and improvement of the people's well-being. These results are confirmed by high positions in the ratings of international organizations, such as theWorld Bank, theWorld EconomicForum, theLegatum Institute and others.

Obviously, this is not the limit point, and there is a huge unrealized potential in socio-economic development in the country. In this regard, further fight against corruption and simultaneously improving the country's position in the rating of the Corruption Perceptions Index may become an additional step that is necessary for the country's further economic growth.

References:

1. Transparency International (2016) Corruption Perceptions Index 2016. URL:https://transparency.org/news/ feature/corruption_perceptions_index_2016 (data obrashhenija: 30.08.2017).
2. World Economic Forum (2016) The Global Competitiveness Report 2016-2017. URL:http://reports.weforum.org/pdf/gci-2016-2017-scorecard/WEF_GCI_2016_2017_Scorecard_GCI.pdf (data obrashhenija: 15.09.2017).
3. Kak s dobrom dobrat'sja (2015) Infljacija v stranah mira. Spisok. URL:http://kakdobratsyado.ru/inflyatsiya-v- stranah-mira-spisok/ (data obrashhenija: 09.2017).
4. Abed, George and Hamid R. Davoodi «Corruption, Structure Reform, and Economic Performance in the Transition Economies», International Monetary Fund Working Paper, WP/00/132.
5. Corruption: The Invisible Price Tag on Education, CIET Media Release, October 12, - Y.: CIET International.
6. Seisen Modernization and values: national questions / Kazahskij nacional'nyj pedagogicheskij universitet imeni Abaja: vestnik, Serija «Sociologicheskie i politicheskie nauki», №2(58), 2017, - S. 21-26.
7. Gupta, Sanjeev, Hamid Davoodi, and Erwin Tiongson, «Corruption and the Provision of Health Care and Education Services», International Monetary Fund Working Paper, 2000, WP/00/116.
8. The World Only (2016). Neravenstvo v Indikatory sostojanija mira. Kojefficient Dzhini. URL: http://theworldonly.org/neravenstvo-v-tsifrah-indikatory-sostoyaniya-mira-koeffitsient-dzhini (data obrashhenija: 02.09.2017).