There’s a view that a certain amount of corruption should be tolerated, especially in emerging economies. Such an approach, so the thinking goes, gives officials the opportunity to become entrepreneurial and this in turn stimulates innovation and the market.
It’s even argued that fraud could be seen as a fount of innovation that somehow could be harnessed to more positive ends.
“This is all rather woolly thinking, and ignores several hard facts about corruption, and the dramatic negative effect it has on a country,” argues Professor Deon Rossouw, CEO of the Ethics Institute of South Africa (EthicsSA). “In particular, corruption has a very definite negative effect on a country’s ability to innovate and thus, by implication, its ability to provide economic benefits to its citizens.”
The opposite is the case. Professor Rossouw points to the close correlation between countries that show up at the bottom of Transparency International’s Corruption Perception Index and those that fare poorly on the Global Innovation Report, jointly published by Cornell University, INSEAD Business School and the World Intellectual Property Organization.
One of the ways in which corruption stifles innovation is by creating the impression that innovation is not necessary in order to get contracts, especially government contracts. Innovation is always the result of hard work and detailed industry knowledge, but if contracts are awarded corruptly, then the incentive to innovate is lost.
Out of the 28 most corrupt countries in the world, only 12 appear on the Global Innovation Index. Seven of these—Yemen, Sudan, Angola, Syria, Uzbekistan, Zimbabwe and Guinea—are ranked among the 20 least innovative countries; none of the remaining five—Kyrgyzstan, Paraguay, Tajikstan, Cambodia and Venezuela—rank above 100 out of 142.
“It’s clear that corruption is an inhibitor of innovation, and thus acts as a brake on the creation of new jobs and economic activity as a whole,” notes Professor Rossouw. “In a country like South Africa with a very high unemployment rate, this is one of corruption’s most insidious effects.”
Professor Rossouw argues that the definition of innovation must be expanded to include not only novelty and improvement but also its effect on society as a whole—in other words, the definition should encompass the ethics of innovation.
“It’s also interesting to note the extent to which innovation in the use of big data analytics is proving to be a very powerful tool in the battle to identify corruption,” he concludes. “The ability to access and process millions of data records from multiple sources is making it easier to spot corrupt practices like conflicts of interest and discrepancies between salary and lifestyle. This shows that innovation can be put to good use in the fight against corruption!”