America / Economy / Gov. Officials / Rule of Law

A Dishonest Truth: Corruption in the U.S.A.

Welcome to Chicago, the corruption capital of the country! Kind of catchy, don’t you think?

Far from being plastered on the city’s next welcome billboard, this slogan may soon become a rallying cry for Chicagoans tired of being the punchline in a fill-in-the-blank corruption joke.

The dubious distinction comes from a report released by the University of Illinois at Chicago on May 28. For the second consecutive year, Chicago led the nation in public corruption convictions with 45 cases of fraud, bribery, and embezzlement.

The report is hardly surprising, given Chicago’s history. Since 1976, the city has seen 1,642 public corruption convictions – a rate of almost one per week. Over the past three decades, more than 79 elected officials have seen the inside of a jail cell. The state of Illinois doesn’t fare any better, with seven of its past ten governors being indicted or arrested on corruption charges.

The schemes range from sneaky to bizarre. In one case, Governor George Ryan illegally issued drivers licenses to truck drivers in exchange for bribes. Fittingly, the arrangement was foiled when one of the illegal truck drivers was involved in a fatal accident right in front of the governor’s office.

Just last month, former Illinois Representative Dennis Hastert was charged with lying to the FBI and making illegal payments to an unknown recipient. Hastert is alleged to have funneled over $3.5 million to one of his former Yorkville High School students in exchange for his silence regarding possible sexual misconduct.

As bad as Illinois looks, it may not even be the country’s worst offender. According to statistics from ESPN’s FiveThirtyEight blog, Illinois ranks just sixth in corruption convictions per capita, getting out-sleazed by states such as Louisiana, Mississippi, and Alaska. In absolute terms, Illinois ranks third behind New York and California.

But no matter where the corruption takes place, it produces a definite drag on the U.S. economy. According to the World Economic Forum, corruption increases the cost of doing business by 10 percent. Bribes (and the drawn-out negotiation processes that accompany them) not only increase transaction costs, but also lead to greater uncertainty when conducting business. This makes it difficult for firms to accurately project their costs, thereby leading to an inefficient level of investment.

This could explain why investment in corrupt countries is on average 5 percent less than investment in non-corrupt countries, according to the International Monetary Fund. Lower levels of investment are associated with lower levels of GDP, slower growth, and weaker productivity.

Yet the most unsavory effect of corruption may be the inefficient allocation of public funds. Instead of allocating money to programs that offer the best value or represent the highest need, corruption distorts the decision-making process to favor ventures that maximize personal gain. For example, instead of pumping money into the nation’s public school system, a dishonest policymaker may instead choose to fund an expensive capital project if the construction company’s CEO slips him a blank check. Not only is this behavior unethical, but it also exacerbates income inequality, keeping wealth in the hands of powerful politicians.

So what is the cost of corruption? It depends on the area in question.

In Illinois, the dishonesty costs taxpayers roughly $500 million per year – enough to pay its entire backlog of unpaid bills.

In the U.S., if the 10 most crooked states reduced corruption to nationwide average levels, they could send a $1,300 check to every one of their residents and still come out ahead.

Globally, corruption is a $1 trillion venture and a waste of 5 percent of the world’s GDP.

Clearly, there needs to be a concerted effort to rip out corruption by the roots, but this is easier said than done. Tougher laws punishing the money-grubbers seem like a good place to start. Since 2012, seven states have passed additional rules aimed at cutting corruption. Five more have their legislative wheels in motion.

But standing alone, new laws do not curb corruption. Statistics show absolutely no correlation between the strength of a state’s anti-corruption laws and the level of corruption present in that state. More than laws, states need proper enforcement.

That means hiring more inspectors general to look into possible corruption cases. That means providing monetary incentives for every shady politician that is exposed. That means a streamlined corruption reporting process and enhanced protection for whistle-blowers.

Once a concerted corruption effort nabs a few high profile politicians, public servants will think twice before accepting bribes or stealing state funds. Like a Thanksgiving feast, slicing corruption will result in a cornucopia of benefits split among the rest of the state’s citizens.

The true cost of corruption isn’t just measured in dollars and cents, but in the trust it erodes, the citizens it harms, and the competitiveness it takes away.

Ugandan anti-corruption sign by is licensed under CC BY 2.0