1 Czasopismo poświęcone potrzebom nauki i praktyki 2011 Nr 1 (49) OPTIMUM STUDIA EKONOMICZNE SPIS TREŚCI STUDIA I ROZPRAWY... 3 István Takács, Pál Csapodi, Katalin Takács-György Corruption as a deviant attitude of inter-sector cooperation... 3 Andrzej F. Bocian Makroekonomia wzrostu uwarunkowania globalne Anna Chmielak Wyzwania wobec państwa jako podmiotu stosunków międzynarodowych Adam Oleksiuk Innowacje jako czynnik rozwoju gospodarki światowej w świetle strategii innowacyjności OECD Anna Wierciszewska, Mirosława Lasek Dynamika systemów jako narzędzie modelowania procesów rozwoju gospodarczego Ewa Roszkowska Procedury podejmowania decyzji społecznych a optimum społeczne Dorota Mierzyńska Pomiar dobrobytu w świetle hierarchicznej teorii potrzeb w Polsce
2 MISCELLANEA Jacek Marcinkiewicz Analiza porównawcza poziomu rozwoju europejskich giełd Elżbieta Szymańska Korzyści i koszty współpracy międzysektorowej dla przedsiębiorstw Katarzyna Lewkowicz-Grzegorczyk Realizacja zasady sprawiedliwości na przykładzie podatku dochodowego od osób fizycznych Mariusz Chudak Czynniki lokalizacji aptek Paweł Jamróz Weryfikacja słabej formy efektywności GPW za pomocą testu autokorelacji oraz testu serii Bogna Gawrońska-Nowak Reżim kursowy a presja kryzysowa w wybranych gospodarkach nowych krajów członkowskich Unii Europejskiej Łukasz Siemieniuk System SYMFONIA jako przykład zintegrowanego systemu informatycznego w rachunkowości Ewa Tokajuk Możliwości inwestycyjne gospodarstw domowych na polskim rynku finansowym INFORMACJE Katarzyna Poskrobko Projekt Badania i rozwój w gospodarce opartej na wiedzy
3 STUDIA I ROZPRAWY István TAKÁCS 1, Pál CSAPODI 2, Katalin TAKÁCS-GYÖRGY 1 CORRUPTION AS A DEVIANT ATTITUDE OF INTER-SECTOR COOPERATION Summary Corruption is a specific field of cooperation between social sectors. It is a deviant behavior which hampers and deteriorates the efficiency of normal cooperation. Corruption can be led back to a lot of reasons: the nature of economic and social regime as well as cultural aspects. The aim of corruption is to obtain advantages. Private advantages, however, are usually paired with significant social disadvantages, they decrease the efficiency of utilizing public sources, thus reducing the amount of public goods which could be obtained from them. The corrupt behavior often becomes a social norm, thus operating as a social trap because the citizen basically wants to follow the norms, but the norm itself is the corruption. The paper analyzes corruption as deviant social attitude within the framework of cooperation among institutions. Examining the countries of the Central Eastern European region, it can be stated that they are moderately infected with corruption which requires national strategy against corruption and the establishment of institutional conditions for the implementation of the strategy. The paper emphasizes that corruption should be addressed not only within national framework, it is also necessary to build up close cooperation among countries belonging to the same economic and social system. Keywords: corrupion, public sector, inter-sector cooperation KORUPCJA JAKO DEWIACYJNE PODEJŚCIE DO MIĘDZYSEKTOROWEJ WSPÓŁPRACY Streszczenie Korupcja jest specyficzną dziedziną współpracy pomiędzy sektorami. Jest to dewiacyjne zachowanie się, które hamuje i pogarsza efektywność normalnej współpracy. Korupcja może mieć szereg przyczyn: natura rządów ekonomicznych i społecznych, jak również aspekty kulturowe. Celem korupcji jest osiągnięcie korzyści. Jednak korzyści osobiste idą zazwyczaj w parze ze znacznymi stratami społecznymi, zmniejszeniem efektywności wykorzystania zasobów publicznych, a co za tym idzie redukcją dóbr publicznych, które mogą być z tych zasobów uzyskane. Korupcyjne działania stają się często normą społeczną działającą jak pułapka, ponieważ obywatel zasadniczo chce postępować według norm, ale norma już sama w sobie jest korupcją. Autorzy analizują problem korupcji jako dewiacyją postawę społeczną w ramach współpracy między instytucjami. Analizując kraje regionu Środkowo-Wschodniej Europy mozna stwierdzić, że są one w sposób umiarkowany skażone korupcją, co wymaga odpowiedniej strategii narodowej wymierzonej przeciwko korupcji i stworzenia instytucjonalnych uwarunkowań dla realizacji takiej strategii. W artykule podkreśla się, że korupcją należy zajmować się nie tylko w aspekcie narodowym. Należy również budować ścisłą współpracę między krajami należącymi do tego samego systemu społeczno-ekonomicznego. Słowa kluczowe: korupcja, sektor publiczny, współpraca międzysektorowa 1 Dr hab. István Takács Szent István University, Gödöllő, Hungary. 2 Dr Pál Csapodi State Audit Office, Budapest, Hungary.
4 4 István Takács, Pál Csapodi, Katalin Takács-György Audire necesse est, corrumpare non est necesse [Csapodi 2010] 1. Introduction The inter-sector cooperation (public administration economy non-profit sector) is the vital condition of sustainable social development. Those social models, which do not intend to form and sustain balanced relationships, will be sooner or later torn apart by inner tensions. The operation of socio-economic interrelations is realized through interest mechanisms, the key element of which is the man who basically follows own interests and it affects the quality of cooperation, too. The present article examines that specific feature of inter-sector cooperation which hit all the countries of the Central Eastern European region: corruption. According to several international comparative analyses, the countries of the region are similarly infected, which enables them to understand the problem and following the exploration of reasons utilize each other s experiences connected with the treatment of the issues. In a sense, corruption is as old as human civilization. Corruption can be found all over the world, in all the political and economic regimes, to different degrees. [Blackburn et al., 2006] Its social precondition is the hierarchic relations in the disposal of goods, the division of labor within the society, the limited available resources and the privileges of some social groups in obtaining and distributing the related gains. The word comes from the Latin corruptio which means moral decay (wicked behavior, putridity, rottenness). [Osipian, 2009] The nuances of the expression indicate that corruption has a more wider meaning than simply offering bribe to obtain some advantages, it also includes e.g. patronage or influence. One of the possible definitions of corruption, that is behaviour that deviates from formal duties because of private gain suggests that the corrupt acts are deviations from implicit and explicit norms of behavior (in legal and ethical sense). In many societies, the expansion of corruption in so wide ranges indicates that the corrupt behavior is the norm itself, in spite of the fact that it is generally condemned and not efficient. [Mishra, 2005] The first articles about the reasons and consequences of corruption were published in the 1960s. [Clarke Xu, 2004] During the last few decades the number of publications about corruption has considerably soared. [Reinikka Svensson, 2005] A large group of publications consists of country cross analyses and analyses of corruption perception indices, as well as studies about corruption, as function of state policies and institutional environment. Corruption is a complex social phenomenon which has besides political and economic factors deep rooted cultural reasons, and the social traditions significantly determine its existence and degree. This aspect should be especially underlined because if corruption is treated as deviance of economic relations only, it is not possible to reduce the degree of corruption to a socially acceptable level, which
5 Corruption as a deviant attitude of inter-sector cooperation 5 would not harm the efficient operation of society. Those fighting against corruption should understand the nature of corruption if they want to fight efficiently. [Blackburn Forgues-Puccio, 2009] The permanence of corruption can be explained by the fact that it soaks everything and becomes a social norm. The corrupt behaviour of individuals is able to survive and operate successfully in the long term through an evolution process (adaptation). Thus, the actions against corruption require a strategic approach, ad hoc measures cannot bring any real achievements. [Mishra, 2005] One of the main conditions of acts against corruption is the recognition of corruption itself. The political structure, as the precondition of corruption and the corruption itself cannot be measured directly. The problem of measuring is in the measuring methods. Corruption is a hidden phenonemon and its degree can be estimated primarily in an indirect way. The widespread methods (Corruption Perception Index of Transparency International, Control of Corruption as part of World Bank Institute s Governance Indicators) are based on experts estimations, which also include the possibility of artificial inertia, which means that if a country is once qualified corrupt, the survey respondents will qualify it corrupt later on and it will lead to the overestimation of corruption. [Dreher et al. 2007] CPI ranks more than 150 countries according to the degree of perceivable corruption, based on experts evaluation and public opinion polls. The World Bank Institute has a Worldwide Governance Indicators (WGI) project, which reports aggregate and individual governance indicators for 212 countries and territories over the period for six dimensions of governance: Voice and Accountability; Political Stability and Absence of Violence; Government Effectiveness; Regulatory Quality; Rule of Law; Control of Corruption. [World Bank Institute, 2010] The indicators are constructed with the help of unobserved components methodology. The six governance indicators are measured in units ranging from about -2.5 to 2.5, with higher values corresponding to better governance outcomes. [Kaufmann et al. 2008] According to a research, the Corruption Perception Index and Governance Indicators can strongly correlate. [Seligson, 2005] Other methods were also elaborated for measuring the corruption. These methods, as described below, estimate the degree of corruption not on the basis of subjective perception, but by following the economic processes: The PETS (public expenditure tracking survey) is a survey among frontline providers (schools, clinics and their staff), and local governments (politicians and public officers), complemented with central budget and other related data. The QSDS (quantitative service delivery survey) method elaborated for the estimation of corruption connected with services is a type of frontline provider survey. [Reinikka Svensson, 2005] Instead of reported corruption perception, Olken  tested a method in Indonesia on the road construction projects. He examined the perception of corruption among village citizens in the regions involved in the projects and made estimations about the missing expenditures and missing quantities. The corruption perceptions of local citizens is in weak correlation with the more objective measuring of missing quantities.
6 6 István Takács, Pál Csapodi, Katalin Takács-György The above examples prove that the perception of corruption based on experts estimations can be rather imperfect but the implementation of alternative methods has significant costs which can be undertaken occasionally (e.g. selecting the fields to be examined in the frames of supervisor programs, at project level by analyzing the risks). They cannot be applied, however, as a general method ensuring full coverage, due to their costliness and resource needs. Corruption can be perceived differently in different fields of economy and society, mostly where there are significant money flows. It is only partly connected to the public sphere, but it can also be traced in the relations between the actors of the economic life. The former, however, has more significant public weight and damage. According to the surveys, the political parties and some institutions belonging to the state administration are considered to be the most corrupt social-economic sectors and organizations [Bribe payers index 2008]. It follows from this, that only the cleaning of the key elements of the political system will lead to success in the fight against corruption. Political corruption concerns everybody. It is an expectation from the elected politicians and political parties that they work in the interest of the public, the people. Through their election they get an access to public funds and have such a power which may influence the whole society. Due to their privileged situation, the politicians or political parties can cause huge damages with their greed. The corruption risks also depend on the depth of corruption interwovenness between parties and their supporters. The transparency and accountability can considerably decrease the risks of political corruption. According to the survey of Transparency International [Global corruption barometer 2009], the state investments and construction industry, the real estate trade and development, the oil and gas industry, the heavy industry and mining are the most affected by corruption. This evaluation is a bit refined by the observation that the higher military expenditures compared to GDP and state expenditures are linked up with corruption. [Gupta et al., 2001] According to the international experience, the public procurement and privatization are especially endangered in regard to corruption. Corruption in public procurement processes distorts competition, leads to a waste of limited sources and inadequate fulfillment of basic social needs. Corruption destroys market efficiency and the utilization of development possibilities. According to some estimations, the corruption extending on whole systems may increase the costs of public procurement by 20-25% and often results sometimes completely unnecessary procurement of bad quality goods or services. That s why Csáki Gelléri  suggest that corruption and its impact can be reduced by implementing appropriate decision technology solutions. Corruption was especially closely related to the issues of privatization during the great economic and social transformation of the last two decades in the Central and Eastern European region. The aims of privatization also included the establishment of national owners class at any cost and the increase of state privatization revenues often at any cost. The home investors were preferred in the first case and the foreign investors were preferred in the second case.
7 Corruption as a deviant attitude of inter-sector cooperation 7 The privatization is less efficient in highly corrupted systems and can lead to the development of monopolies. [Bjorvatn Søreide, 2005] According to comparative analyses, the economy is more efficient if the civil servants are less corrupt. [Ades di Tella, 1999; Djanilov et al., 2002] It is also proved that corruption is in positive correlation with market concentration. This market structure experience raises the question how the corruption and institutional decentralization as well as increasing decision levels are connected to each other. A lot of authors say that the government decentralization has advantages and disadvantages, but the advantages prevail. Fisman Gatti  proved a strongly negative correlation between decentralization and corruption, which justifies the supporters of decentralization. There are also some other research projects which intend to refine this opinion and prove that corruption does not always decrease by centralization, sometimes even grows by it. [Fan et al., 2009] They revealed that higher state administration salaries reduce the perceivable corruption, but there is no such relation at subnational level in general, except for enterprise licences, governmental contracts, public utility services or customs services. Lessmann Markwardt  say that efficient monitoring of bureaucracy and the competition boosting decentralization have a positive impact on the reduction of corruption. If monitoring does not work, the negative impacts, like double space (for corruption) prevail over the positive effect of decentralization and increase corruption. The revealed statistical relation is strong. The outcome is not sensitive for the measuring methods of corruption and decentralization. All the above means that the decentralization is a possible tool for decreasing corruption if the monitoring of bureaucracy does not work. If this condition does not exist, it will lead to higher level of corruption. So the existence of free press is a basic condition for the efficient struggle against corruption. The freedom of speech and freedom of press are important human rights and strong control against the mistakes made by the government. Independent media are the most powerful institution to disclose the unlawful acts of government officials. A lot of research proved clear and strong negative correlation between freedom of press and corruption. [Freille et al., 2007, Brunetti Weder, 2003] It is very promising for the citizens of the Central-Eastern European region that the international organizations examining the freedom of press (like e.g. Freedom House) regard the press of the region free in our days. The next important question is the relation between corruption and efficiency of economy or, in other words, economic growth. The impact of bureaucratic corruption on economic growth has been debated for forty years. Some research has proved that a political regime determines the relation between corruption and economic growth. In the case of free countries, a non-linear relation was revealed between corruption and economic growth, which was not affected by the size of government expenditures. [Méndez Sepúlveda 2006] It is also very interesting outcome that the corruption level belonging to the maximization of growth is higher than zero. The corruption in the developing countries is the consequence of government policy and the socio-economic conditions, therefore the achievement of
8 8 István Takács, Pál Csapodi, Katalin Takács-György optimal growth cannot be the exclusive reason for the efforts to eliminate public policy corruption. The research also confirms that corruption is more harmful to investments and growth in smaller developing countries than in the bigger ones. There is a specific Eastern-Asian paradox: greater corruption results higher growth. This can be due to the fact that bureaucrats (state clerks at different level) prefer the obtained/obtainable advantages (privileges) to bribes and kickbacks. The interwovenness between state and business sector is stronger which enhances growth (technology-demanding production). [Rock Bonnett, 2004] The above outlined also supports the thesis that there can be an optimum level of corruption but it cannot be described without precise knowledge of the nature of anti-corruption methods. [Bose et al., 2007] So the corruption can increase or decrease the rate of growth depending on the features of the bureaucratic structure. [Evrensel, 2010] Corruption can contribute to an improvement on efficiency in a weak institution system, thus enabling the individuals to avoid the institutional deficiencies. [Aidt et al. 2008] The grease or bribe, which accelerates business in inefficient bureaucracies can significantly reduce the costs of waiting. Higher corruption can be beneficial in poorly governed countries, in the case of ineffective institutional systems. [Méon Weill, 2010] Corruption also diminishes the legitimacy of government in the eyes of citizens. It leads to serious moral crises, affects political stability and it is the key element in the poor countries failed attempts to utilize the development possibilities. Greater state involvement increases the chances of corruption and the regulating state encourages corruption because the profit is more influenced by the government policy than by traditional management or the corporation competency. [Del Monte Papagni, 2007] One of the key factors of powerful institutional system is the efficient legal system (legal regulations and judiciary practice) which has a threatening force by inflicting adequate punishment for corruption, together with a profound corruption disclosure (free press and investigation authority). The question is very complex. Herzfeld and Weiss  used cross-sectoral and panel data models and found significant relations between legal regulations and varied levels of corruption. They revealed that more civil servants become corrupt if the efficiency of the legal system decreases, and it has a feedback effect on the expectations concerning corruption. The salaries of civil servants can have an important role in the motivating factors of corruption. Their wages come from the redistribution of centralized sources and if this money is below the socially expected level, they are more inclined to accept bribes. One of the methods of cracking down on corrupt bureaucracy, or as Fan  named it kleptocracy is the appropriate salary paired with relatively efficient monitoring. The problem is very serious: for example the civil servants in Ukraine earn less by 24-32% than their private sector partners. The degree of corruption, however, is indicated by the fact that their consumption on the basis of household expenditures and asset holding is more or less the same. According to some estimations, the bribery in Ukraine is 0,9-1,2% of GDP, that is about million USD. [Gorodnichenko Sabirianova Peter, 2007]
9 Corruption as a deviant attitude of inter-sector cooperation 9 A lot of studies emphasize the fact that people are basically norm followers, but it is a problem when the corrupt behavior becomes the norm. [Csermely et al., 2009] The theories of the new institutional economics stress the interest-following behavior of people. The following questions arise: (1) Which institutional arrangement has the relatively lowest cost and highest efficiency in the case of different types of coordination problems of economic processes? (2) What are the effects of problems, costs and efficiency of exchange relations on the setup and changes of institutions? The theory suggests a simple model with the following factors as an answer to the questions: institution, exchange transaction, cost and efficiency. [Menard, 2004] In this approach the institution itself is the corruption network, the subject of exchange transaction is the privilege and its cost is the bribe. The private and social efficiency, however, is separated. The private efficiency is ensured by the two actors of corruption the civil servant and the entrepreneur because the entrepreneur uses the privilege which often means a higher income than the actual value of services and it is financed from public funds. Considerable share from this goes back to the corrupt civil servant, who possesses public funds which enable him to realize some extra profit (like risk charge). The social efficiency, however, is deteriorating because the cost of corruption, as external impact, is internalized [De Alessi, 1980] by the entrepreneur with the participation of corrupt civil servant shifting it to the taxpayers and, at the same time, decreasing the value of public goods and public consumption from the taxpayers money. In other cases, when the amount of public spending cannot be risen, the source of transaction costs will be the wages, and not the profit: the bureaucrats receive part of the income of workers. [Evrensel, 2010] According to the agency theory of the new institutional economics, there is a principal agent relation between the corrupting and corrupted person. It is clear that in this special principal-agent relation, where the aim of the principal is to set up an institution system for managing the bureaucracy, the measures for eliminating corruption cannot be efficient and the costs of corruption are the same as the profit achieved by them. [Del Monte Papagni, 2007] The fight against corruption is a very important task in the developed countries because the social privileges (the elimination of possible institutional inefficiency) obtained through corruption are considerably exceeded by social losses. The case of Italy is a good example for the necessity of fight against corruption and the positive effects of these actions. The changes in the political arrangement during the former decades increased corruption and extended it even to those levels of public administration and jurisdiction) where it had not existed before. A harmful social impact has become obvious. The expansion of corruption has weakened the loyalty to civil and organized society, the feeling of corruption encouraged further corruption because the risk of punishing corruption seemed to be low. The main reason for the success of anti-corruption campaign was the shift of political regime. Institutional changes are inevitable conditions of fight against corruption. [Del Monte Papagni, 2007] The key to success of anti-corruption programs, the best corruption prevention is not only the total transparency, but the minimization of an environmental impact which encourage violation of rules by diminishing the possibilities of avoiding punishment. [Lízal Kocenda, 2001]
10 10 István Takács, Pál Csapodi, Katalin Takács-György The aim of the study is to describe the social expenses and profits of corruption in functions, to discuss possible outputs and to identify possible aims and tools of fight against corruption. 2. Material and methods Based on the results of critical review of documents, the paper identifies and classifies the arguments concerning corruption. Considering the interests of corruption actors, the principal-agent theory of institutional economics and the theory of transaction costs, the paper sets up a theoretical model for the identification of social costs of corruption and for the classification of objectives of fight against corruption in Hungary and factors influencing possible tools. The corruption perception level of Central Eastern European countries, including the so-called Visegrad 4 (V4) countries, as well as the changes of corruption was evaluated on the basis of Corruption Perception Index of 2008 by Transparency International and the average and linear change (slope) of Control of Corruption index out of the World Bank Institute Governance Indicators. 3. Results On the basis of special references and own experience, the corruption-related money flows of those concerned (corrupted bureaucrat, corrupting party and society). (Relations (1)-(3)) Money flow of the bureaucrat R B = B(r,s) F B (r) (1) Money flow of corrupting party R C = B(r,s) + (1-α) ΔP(c) F C (r) (2) Money flow of taxpayers R T = I C B(r,s) + α ΔP(r) J(r) + ϕ B F B (r) + ϕ C F C (r) (3) where: R = revenues of participants from corruption (B: bureaucrat; C: corrupting party; T: taxpayer); I C = reduction of losses owing to corruption from the inefficiency of the system; B(r,s) = amount of bribe, which depends on the risk of discovering corruption (r), and the size of corruption (s); ΔP(c) = profit change due to corruption, which can be an extra profit or a loss; α = key to profit tax; if ΔP(c)>0; then α>0, if ΔP(c) 0; then α=0; F B (r) = the expected loss of the bureaucrat in case of getting caught; F C (r) = the expected loss of the corrupting party in case of getting caught; J(r) = costs of disclosing corruption and jurisdiction; ϕ B és ϕ C = efficiency of corruption penalties, ϕ 1.
11 Corruption as a deviant attitude of inter-sector cooperation 11 It can be declared that the risk is worth for a bureaucrat until his expected losses (either penalty or losses due to the changing livelihood) are lower than the bribes or the profit that can be achieved through the privileges ensured by corruption. The transaction is closed with positive profit for a bribing entrepreneur, until an extra income obtained through corruption is higher than the bribe or the expected losses or penalty, weighted with risk, from getting caught. If the corruption competition is big and the bribe payer s aims are to ensure his survival, he may commit corruption even with negative balance because his objective in this case is the minimization of losses. In regard to society, the money flow is negative in most of the cases. Except for the very special cases (see the above mentioned example of Georgia, that is the case of very weakly functioning state organization), the amount spent on the disclosure and overcoming of corruption is considerably higher than the advantages obtained through corruption. Hereinafter, the corruption infection of the Central Eastern European region is evaluated. The Corruption Perception Index (CPI) of the Transparency International is widely criticized but we use it for the comparison of the countries in the region since there is not any better and more widely used index. Based on V4 countries we drafted the CPI value of all the reported countries and the confidence interval given by the organization. It is clear from the confidence intervals that the perception of corruption in V4 countries is not significantly different, they belong to the same group (G1 on the right of Figure 1). On the left of Figure 1 it can be seen that the countries of that group are regarded moderately infected by the classifiers. It is also obvious that Group 2 (Estonia and Slovenia) are considered significantly clearer than Group 4 (Belarus, Ukraine and Russia are significantly more corrupt). Group 3 is a transition between G1 and G4. If all the examined countries are compared with the corruption level of V4 countries, the following groups of countries can be defined: European countries with significantly lower corruption level: Denmark, Sweden, Finland, Switzerland, Iceland, Netherlands, Luxembourg, Austria, Germany, Norway, Ireland, United Kingdom, Belgium, France, Slovenia, Estonia. Moderately corrupt European countries, not significantly different from V4 countries: Bulgaria, Croatia, Cyprus, Czech Republic, Georgia, Greece, Hungary, Italy, Latvia, Lithuania, Macedonia, Malta, Montenegro, Poland, Portugal, Romania, Serbia, Slovakia, Spain, Turkey. European countries with significantly higher corruption: Albania, Armenia, Azerbaijan, Belarus, Bosnia-Herzegovina, Moldova, Russia, Ukraine.