A Study on Democracy and its Associated Factors’ Effect on Corruption

 

Introduction

While many scholars hypothesize that democracy reduces corruption, others criticize this hypothesis, arguing that democracy is only one factor amongst others in controlling corruption. This paper’s main argument is whether democracy reduces corruption. The author intends to: (i) Analyze the effect of democracy on corruption and try to answer the question of whether democracy reduces corruption and why. In this section, the paper will discuss some examples to support the argument. (ii) Analyze democracy-associated factors in controlling corruption like the duration of democracy and the level of countries’ economic prosperity. The paper also discusses the counterargument that democracy may sometimes increase corruption. (iii) Scrutinize the reasons why corruption increases in the initial stages of democracy and then decreases as democracy matures. (iv) Review and advance other factors associated with democracy in its relationship with corruption, including factors like the rule of law, free press, institutions’ effectiveness, females’ participation in governance, heterogeneity of the population and other factors. The author intends to put forward a novel perspective to the literature regarding the effects of democracy on the level of corruption in the ‘Republic of Sudan’ after the recent revolution that occurred in December 2019, upon which not much literature is available yet.

Democracy’s effect on corruption

Many scholars argue that robust democracies lead to less corruption and that democracy reduces corruption as it enhances transparency and accountability by increasing the flow of information to the public, which ultimately reduces the chances of the return of corrupted public officials through the next elections (Mohtadi and Roe, 2003 cited in Rock, 2009). Thak (2007 cited in Rock, 2009) claims that in Thailand, for instance, democratization broke up a centralized corruption network between senior bureaucrats, political elite, senior army generals and the Sino-Thai businessmen in 1960. Moreno (2002) further argues that the international trend toward democratization drives societies to become less tolerant of corrupt practices. This demonstrates the negative relationship between attitudes toward corruption and democratic attitudes. Saha et al. (2014) confirm that democracy’s negative impact on corruption is indisputable. They add that a higher level of political freedom is required to control corruption. Scholars like Chang and Golden (2010) and Jetter, Agudelo and Hassan (2015) agree that a higher level of democracy and political competition is directly related to less corruption. Brueckner (2021) argues that on average, the transition from autocratic regimes to democracy reduces corruption. Thus, he continues to argue, that more democratic countries tend to have less corruption in comparison with non-democratic countries. Brueckner (2021) further states that political competition and fair elections are two important democratic institutional characteristics that make political leaders responsive to citizens’ demands and thus, being less corrupt, or/and are averse to corruption, as this will significantly increase their probability of losing office of power.

In defending their argument that democracy reduces corruption, Kolstad and Wiig (2015) assert that elections increase the exposure of corrupt officials thus incentivizing the opposition to uncover corruption by the incumbent. Kolstad and Wiig (2015) add that competitive elections are expected to reduce corruption as corrupt politicians may be voted out of office. They state that voters are highly unlikely to re-elect politicians who favor their private interests over the public interest. In strengthening his argument that corruption decreases as democracy mature, Brueckner (2021) argues that politicians are less corrupt in democracies because being corrupt shall significantly increase the probability of losing office. He further states that competition acts as a penalizing device for politicians abusing offices of power for private gains. Brueckner adds that politicians are always threatened with [the prospect of] not being re-elected, or even impeached during their prescribed term in a democracy because of corrupt behavior; thus, elections increase political accountability which subsequently reduces the overall corruption pay-offs. Montinola and Jackman (2001 cited in Chang and Golden, 2010) also support this argument. They suggest that political competition represents a sanctioning measure that enables voters to throw corrupt people out of power. Therefore, the threat of losing office due to higher levels of competition reduces politicians’ willingness and incentives to engage in corruption. Treisman (2000) suggests that in democratic systems where elections are frequently conducted, competitors for office will always have an incentive to discover and expose the incumbent’s misuse of office power whenever an election beckons. Rose-Ackerman (2008) proposes that not only elections are sufficient, but the country must also establish the rule of law and protect civil liberties to reduce the level of corruption. Chang and Golden (2010) propose a counterargument that elections might increase corruption sometimes. For instance, if electoral authoritarianism is used to co-opt potential political opponents, corruption may be used by rulers as part of a larger political patronage strategy. Subsequently, elections may encourage corruption rather than reducing it (Chang and Golden, 2010).

The author agrees with Rose-Ackerman (2008), Saha et al. (2014) and Hallagan (2009) that although elections are important to control corruption, they need to be frequent, transparent and combined with other measures like segregation of powers, free press and other measures, to discourage decision-makers from indulging in corruption. Democracy also affects the normative society’s perception of corruption, making corrupt activities less attractive as they carry a social stigma. Kolstad and Wiig (2015) argue that democracy reduces corruption by increasing the costs of corruption and reducing the benefits of corrupt actions. Treisman (2007) took the relationship between democracy and corruption one step further by arguing that democracies, where the executive is elected through the parliament, are less corrupt than democracies where the president is directly elected. Treisman (2007) adds that the plural electoral system in a United Nations Interregional Crime and Justice Research Institute survey was often associated with lower bribes. The below illustration used by Saha et al. (2014) shows that the proportion of bribe-takers reduces as the democracy level increases. Note: The arrow indicates that the democracy level increases when it moves towards 0.

Factors associated with democracy that control corruption

There are several factors associated with democracy that affect corruption. One important factor in the relationship between democracy and corruption is the duration of democracy. Treisman (2000 cited in Rock, 2009) suggests that corruption declines with democracy duration. It’s argued that the duration of democracy is important not only for the strengthening of democracy itself but for controlling corruption, as it offers time for fledgling democracies to build strong public institutions, thereby applying rule of law which is necessary for controlling corruption (Rock, 2009). In support of this suggestion from another perspective, Chang and Golden (2010) state that regimes with shorter tenure tend to be more corrupt. Saha et al. (2014) assert that matured democracy is critical for fighting corruption. They add that in combating corruption, matured democracies are more effective than fledgling ones. This is because as democracy matures, its ability to detect and penalize corrupt activities increases more than in countries that are in the initial stages of democratization. Treisman (2000 cited in Kolstad and Wiig, 2015) suggests the duration of democracy far matters, rather than democracy itself.

Democracy’s impact on corruption has a larger extent for states with more mature democracies than more recent ones. Scholars argue that countries with longer democratic institutions have established stronger and more effective means to control corruption, thus, older democracies are likely to follow systematically stronger policies than newer democracies (Aidt, Dutta and Sena, 2008). Serra (2006 cited in Jetter, Agudelo and Hassan, 2015) agrees that consecutive democracy reduces corruption. Treisman (2000) argues that it’s not whether the country is democratic, what matters is whether a country has been democratic for decades. In support of his argument, Treisman specifies those countries with at least 40 years of uninterrupted democracy enjoyed a significant reduction in corruption. An analysis of Transparency International (TI) indexes supports Treisman’s findings that a period of 40 or more uninterrupted years of democracy decreases corruption (Treisman, 2000). Treisman further states that countries with 20-30 years of consecutive democracy also have slightly benefited from declining levels of corruption. He adds that there is a threshold of 20 years of consecutive democracy where corruption tends to decrease. Treisman (2007) also adds a liberal characterization to democracy, in addition to the interruption factor for democracy to be able to reduce corruption. He suggests that countries with long liberal-democracy history are less corrupted. Rock (2009) agrees that corruption reduces as democracy matures.

In addition to long democratic rule, it’s argued that democracy associated with a high level of economic prosperity decreases corruption (Amundsen, 1999). Rose-Ackerman (2008) agrees with this argument and justifies this as democracies with a high economic growth ratio have better functioning governments and, thus, less corruption. She adds that economic growth is the main cure for corruption in democracies, this can be improved by the promotion of education and good policies which will ultimately restore institutions to a minimum competency level that will enable fighting corruption. Brueckner (2021) and Treisman (2007) argue that country’s increased economic growth lowers its perceived levels of corruption. Other scholars suggest that the democratization effect in reducing corruption will increase as the country become richer and in contrast, democratization promotes corruption in poorer countries (Jetter, Agudelo and Hassan, 2015). They add that democratization can reduce corruption only if a country attains a basic degree of economic development. They justify this hypothesis through examples of young democracies where political powers are likely to be abused to maximize private gains, specifically in the case of low-income countries. From a rational choice perspective, Jetter, Agudelo, and Hassan (2015) argue that public officials are more likely to involve in corrupt activities in poor countries to enhance their limited income. They propose that without meeting a basic income level, officers will abuse the newly found political power for private gains. However, after reaching a certain level of economic development where basic needs are met, the hypothesis that democratization reduces corruption might be accurate. In their research to support this assumption, Jetter, Agudelo and Hassan (2015) suggested that in poorer countries with less than US$2,000 (in 2005) GDP per capita, democratization is suggested to increase the level of corruption. However, for countries with per capita GDP above the threshold of US $2,000, democracy reduces corruption considerably. This assumption was evidenced in many post-Soviet nations, like Ukraine, which suffered more corruption while moving forward towards democracy, contrary to traditional presumptions. Other scholars find a negative correlation between corruption and per capita income (Rock, 2009).

Having stated the belief that democracy reduces corruption and this hypothesis related factors like duration of democracy and countries’ per capita income, it is worth considering other counterarguments that democracy sometimes increases corruption. Mohtadi and Roe (2003, cited in Rock, 2009) assume that democracy enters the marginal calculations of corruptible public officials and rent seekers as it increases the flow of information for them and their ability to access corrupt public officers. Government officials in democracies respond to rising requests for undue favors by maximizing the income from bribes they collect from such requesters. Kubbe and Engelbert (2017) argue that democracy does not always guarantee transparent and clean governance. Saha et al (2014) claim that democracies with a narrow electoral gap between the ruling dispensation and opposition tend to increase corruption. In contrast, broad and matured democracies, and states with well-established rules of law reduce corruption. Amundsen (1999) suggests that democratization provides incentives for corruption in many means like corruption in electoral campaigns, hiring for senior civil service and political offices and undue or unjust privatization of formerly state-owned businesses and properties. Jetter, Agudelo, and Hassan (2015) argue that it’s not about democracy but rather about how people leverage the newly introduced democratic structure in fledgling democracies. This is perhaps evident in the case of poorer countries where the democratic structure is abused, resulting in higher levels of corruption.

 

Corruption and Democracy Trends

Although it was evidenced that democracy generally reduces corruption, however, once a country shifts from an autocratic regime to a democratic regime, the opportunities for power misuse arise. Corruption might increase as countries start democratizing their political system, but this effect is overturned in the final stages of transformation into a full-fledged democratic system. The hypothesis that democratization increases corruption in the short run was first introduced by Huntington (1968, first version), and later to be linked with the underdeveloped institutional frameworks in new democracies (Jetter, Agudelo and Hassan, 2015). Mohtadi and Roe (2003) found that corrupt activities after democratization initially increase and then decrease over time as democracy matures (Jetter, Agudelo and Hassan, 2015). Rock (2009) agrees that corruption initially rises, in newly democratized countries, before dropping as democracies become consolidated. For instance, levels of corruption rose in Indonesia and Thailand following democratization, as the failure of centralized corruption networks gave way to more destructive, unrestricted and decentralized corruption. This is largely due to a lack of institution building, but once the autonomous and effective institutional mechanisms are built, the level of corruption subsided significantly. More recent studies show that corruption decreased in both countries (Kaufmann et al., 2007 cited in Rock, 2009).

Rock (2009) suggests that bureaucratic quality declines during the first three years of new democracies but recovers and rises dramatically after the eighth year. Rock claims that as high-quality public sector bureaucracies and rule of law are necessary to control corruption, the hypothesis appears to be consistent with the argument that corruption may arise in the early years of democracy because the sanctions set to curb corrupt behaviors do not rise fast enough to obstruct off corruption. Kubbe and Engelbert (2017) and Treisman (2007) agree that corruption increases during the early years of transition. In their agreement with this hypothesis, Saha et al. (2014) define a “turning point” as the level where corruption reaches its maximum during the democratic transition before starting to decline as democracy reaches a certain maturity level, with the consolidation of rule of law and development of robust democratic institutions. They gave an example of East European countries in the stage before the turning point, and the United Kingdom and Denmark for the stage after the turning point. Rose-Ackerman (2008) argues that post-conflict countries are normally fragile and often a breeding ground for corruption and high-level malfeasance. Amundsen (1999) agrees with this assumption and refers to the fact that in the case of states in transition, and although the autocratic regime may have broken down, nevertheless the new political and administrative institutions have not yet reached operational capacity and full political legitimacy.

The author argues that the general assumption that corruption increases during the transitional period is not necessarily right. Citing the example of Sudan, after the 2019 revolution, and during the transitional period up till another military coup took power in October 2021, the TI Corruption Perception Index declined, and Sudan went from a score of 16 (rank 173) in 2019 to a score of 20 (rank 164) in 2021. This progress happened in three years during a civilian lead democratic government after 30 years of military dictatorship (from 1989 to 2019) and just before a military coup took place in October 2021 (2021 Corruption Perceptions Index – Explore the results, 2022).

Democracy Associated Factors leading to Reduction in Corruption

Although democracy is suggested to reduce corruption, however, the ultimate impact of democracy on corruption depends on many factors and how sensitive the society is and the sanctions against corruption are to the democratic country. Rock (2009) adds other important factors such as the rule of law and effective governance as two important factors leading to a reduction in corruption. In defending his supposition that only democracy is not enough; and from another perspective, Hallagan (2009) argues that even dictators can impose restrictions on corruption by imposing severe punishments on violators, thus building institutions that can control corruption and maximize gains associated with reduced corruption. Therefore, these factors are important to fight corruption regardless of whether the regime is democratic or autocratic. Treisman (2000 cited in Rock, 2009) argues that a bundle of country characteristics such as legal heritage, religious tradition, openness to trade and unitary central state, result in lower corruption as they reduce the marginal benefits of corrupt activities. Other scholars demonstrate that low public sector salaries stimulate corruption amongst public sector servants, as public servants will seek to bridge the gap between their earnings and spending through corrupt activities; accordingly, adequate wages are essential to control corruption (Rock, 2009).

The pace and effectiveness with which new democratic regimes can build institutions of accountability, transparency and trust that control the corrupt activities of government officials and private sector actors, are also key in fighting corruption. Rock (2009) argues that these institutions should hold people in power responsible, including military generals and chief executives. Amundsen (1999) supports the argument that transparency and accountability in democracies are essential as access to information is a significant deterrence instrument in fighting corruption. Hallagan (2009) suggests that countries where strong political accountability and robust restrictions on opportunistic corruption are controlled well, tend to be less corrupt. Hallagan adds that it’s also expected that corruption levels should be lower in democracies having a free press and separation of powers since these institutions can better expose and punish corrupt officials. Saha et al. (2014) argue that the democracy level depends on active media, an independent judiciary and active political participation of the people. These factors are essential for democracies to achieve greater results in fighting corruption. They also add that the active and efficient role of the judiciary and media increases the probability of the detection and punishment of corrupt activities. Furthermore, the detection and punishment function depend also on the degree to which the population is informed and educated. In other words, the probability of detection and punishment is dependent on the population’s sensitivity towards corruption, and how likely they know how corruption occurs and what to do about it. Saha et al. (2014) also suggest that a higher degree of democracy offers less opportunity for politicians and government officials to take bribes. It also heightens the cost of taking bribes, which subsequently reduces the corruption level in a country. Generally, a higher probability of getting caught and punished leads the decision-makers to hold back from engaging in corrupt activities.

Delivering effective governance that controls corruption depends mainly on the rule of law and the ability to use quality state bureaucracy that is capable to implement policies and programs successfully (Rock, 2009). Scholars argue that factors like civil liberties, political rights, and the prevalence of the rule of law are essential for democracies to control corruption (Jetter, Agudelo and Hassan, 2015). Saha et al. (2014) agree that the rule of law and other factors like economic and education freedom is key to suppressing corruption and in contrast, factors like unemployment levels and the existence of income inequality shall increase corruption. Rose-Ackerman (2008) claims that elections only are not sufficient, countries must establish the rule of law and protect civil liberties and implies an independent and professional judiciary, police and prosecutors with a high level of integrity and competence are also required to reduce corruption. In addition to the rule of law, Amundsen (1999) suggests that institutional checks and balances and free access to information are important anti-corruption measures. Rock (2009) suggests that the government’s bureaucratic quality and adherence to the rule of law are essential to control corruption. Rose-Ackerman (2008) argues that in democracies, inequality increases corruption. Saha et al. (2014) agree with this argument and justify that because, with increased inequality, rich people will have greater funds to pay bribes for preferential treatment while accessing public services. Another important factor in controlling corruption is women’s representation in governmental and legislative bodies. A survey suggests that women disapprove of corruption more than men, thus, governments with more women participation are less corrupt (Rose-Ackerman, 2008). Swamy et al. (2001) and Dollar et al. (2001 cited in Treisman, 2007) support the narrative that states with a larger share of women legislators or government ministers are less corrupt. They justify this suggestion as females are less tolerant of corruption. Jetter, Agudelo and Hassan (2015) accede that the role of women in society in the context of democratic structures reduces corruption. Treisman (2007) agrees with Rose-Ackerman’s suggestion while adding that a free press and openness to trade are key to fighting corruption. Cooray et al. (2017 cited in Saha and Sen, 2021) agree with Treisman that a free press improves government accountability and leads to better governance in democratic countries. Jetter, Agudelo and Hassan (2015) also agree that press freedom is key to fighting corruption. Rose-Ackerman (2008) argues that without the independence of government agencies that monitor and audit government spending from the executive to administrators, democracies can’t achieve much in controlling corruption. The centralization factor is also paramount, where Treisman (2000) using TI’s data, finds federalism is significantly related to higher corruption, thus suggesting that federal systems are more corrupt. Amundsen (1999) offers that decentralization provides new incentives for corruption. Although democracy is important, the level of corruption also varies with the legitimacy, strength and resolve of the country in its fight against corruption (Amundsen, 1999). Rose-Ackerman (2008) agrees that country’s resolve is essential in fighting corruption. She gives the example of countries transitioning from dictatorship or civil war to democracy will almost always have weak governments, thus demands of bribery will be used by officials to maximize their benefits.

It’s suggested that in addition to the aforementioned factors, low corruption is related directly to institutional quality. According to TI and the World Bank indices, poor institutions increase corruption (Rose-Ackerman, 2008). Scholars argue that without addressing institutional weaknesses, law enforcement measures targeting corruption alone are unlikely to be effective (Saha et al., 2014). Rose-Ackerman (2008) argues that good intention is not enough and cannot be translated into substantial reductions in corrupt activities without effective institutions. Hallagan (2009) agrees that corruption is less in countries with more transparent and effective institutions. Bhattacharyya and Hodler (2010) confirm that reduction in corruption depends on democratic institutions’ quality. Brueckner (2021) concurs that stronger democratic institutions lead to less corruption. Scholars argue that although citizens in democracies threaten to replace corrupt rulers through elections, this can only happen where institutions are effective and of high quality (Aidt, Dutta and Sena, 2008). Another factor that cannot be separated from the nature of the country in its efforts to fight corruption is the homogeneity/heterogeneity of its population. It’s found that corruption increases as countries have greater ethnic diversity and more heterogeneous populations and subsequently, regimes governing more heterogeneous states with ethnic fractionalization tend to be more corrupt (Hallagan, 2009). Hallagan adds It’s suggested that democratic regimes governing homogeneous countries will have bigger chances to control corruption. Brueckner (2021) argues that democracy’s effect on corruption is significantly different between states with high fractionalization and states with low fractionalization. He agrees that countries with higher ethnic fractionalization levels have higher corruption levels on average. Bruckner (2021) claims that democracy significantly reduces corruption only in countries with low ethnic fractionalization. He states the reason being the accountability of politicians under democracy is weakened by the common pool problem as fractionalization increases the common pool problem severity. Ethnic fractionalization means that the population of a country is more heterogeneous in terms of ethnic lines. This implies wider heterogeneity of politicians under democracy, which decreases corruption-fighting measures of democracy, Bruckner adds. Bruckner gives the example of India and despite having democratic institutions, corruption is high in India due to its high ethnic fractionalization. Accordingly, a transition from autocracy to democracy in strongly fractionalized countries has no significant effect on corruption. Finally, and in contrast, Brueckner (2021) suggests that in the most ethnically homogenous states democratic institutions are around ten times more effective in reducing corruption than in the ethnically mostly fractionalized states.

 

Conclusion

Several scholars argue that the relationship between democracy and corruption normally follows an inverted U-shaped graph, with corruption rising in the initial stage of democracy, up to a certain point, after which it starts declining. It was also evidenced that duration of democracy matters as it provides more time for new democratic regimes to build accountable and effective institutions, including public sector bureaucracy and rule of law necessary to control corruption. It was further suggested that per capita income is also an important factor to ward off corruption in a growing democracy (Rock, 2009). Scholars suggest that not only democracy but other variables like press freedom, heterogeneity and ethnic fractionalization of population, education and robust and effective democratic institutions are also related to low corruption levels (Jetter, Agudelo and Hassan, 2015). Saha et al. (2014) argue that democracy only is not sufficient to reduce corruption, other factors like effective institutions associated with democracy are critical to successfully deterring corruption. Well-functioning institutions and the high likelihood of detection and punishment are essential to deter most people from acting corruptly.

On the other hand, it’s also shown that democracy and corruption have a reciprocal relationship. As democracy reduces corruption, there is strong evidence that corruption hurts the emergence and survival of democratic institutions (Moreno, 2002). Treisman (2007) confirms this reciprocal relationship, adding that corruption could weaken democratic institutions directly or could be indirectly through other factors that undermine democracy. Moreno (2002) goes on to state that corruption can play a key role in political competition. For example, in Latin America, electoral campaigns of the opposition have benefited from revealing corrupt politicians in winning elections or widening their parliamentary representation. In summation, the author strongly believes that while democracy is crucial for reducing corruption, other critical factors include: good governance with efficient bureaucracy and effective institutions; tenure of democracy, civil liberties; homogeneous society; per capita income and availability of education; free and responsible press, and access to information, etc., factors that, individually or diversely combined, have considerable weight in determining the level of corruption in a democratic country.

 

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