By reducing market competition and promoting inefficient firms, bribery has the effect of driving up prices across the whole global economy. Research by the World Bank suggests that bribery adds up to ten percent to the cost of doing business internationally, the resulting costs being directly offset onto consumers through higher prices. Despite the vast extent to which globalization has increased international trade connections, whilst affecting developed economies, bribery is most prevalent in, and most concentrated upon, the populations of developing economies. Whilst the effect of inflated prices is relatively insignificant on those insulated by higher incomes, the effect on those with lower incomes is severe. For those living in absolute poverty, already struggling to pay for basic necessities, the reduction in purchasing power, resulting from inflated prices, reduces their already limited access to food, clean water, education, healthcare and other vital necessities. Thus bribery exerts a significant, immeasurable human cost on the developing world by exacerbating existing poverty and by reducing already limited access to the vital goods that are required to combat it. As human capital degrades we find that economic development is severely stunted and the roots of poverty engrain themselves further into the affected nation. Foreign direct investment from legitimately operating firms, who constitute the overwhelming majority, often collapses and, as a result, the state is further incentivized to seek income through bribery as tax revenue and state sector pay falls. When the incentives of state operation are skewed, away from the provision of services that are essential to maximize social welfare, towards less beneficial works that maximize officialsÊ ability to take bribes, we will often find that poverty is multiplied and human suffering ensues. It is important to highlight that the occurrence of bribery is strongly correlated to the existence of poverty as impoverished economies tend to have fewer resources with which to fund any effective legal justice
system. Thus, in a somewhat circular way, the lack of any rule of law has created societies in which the state is not held accountable to its peoples but instead acts of its own accord. The interests of the politicians at its helm are often the rationale for policy making and regulation. Consequently, through the abuse of power over the natural resources and regulatory authority in their possession, corruptible politicians may initially attempt to exploit their positions through the acceptance, or demanding, of bribes from firms. Through the deliberately poor provision of public services and the creation of vast amounts of red tape and bureaucracy, making Âlaw- abidingÊ business impossible, politicians are able to make bribery a necessary cost of doing business in economies where natural resources and business opportunities may be abundant. Hence firms may simply regard bribery as an access cost of doing business. However, it is important to remember that bribery is often self-inducing and, once a culture of bribery has been instilled, can often grow to the point that the status quo shifts from one in which bribery is anomalous to one in which bribery is an expectation. In accepting demands for bribes one might inadvertently set a precedent that signifies the acceptability of bribery and, in doing so, one might permanently disfigure the political systems with which bribery comes into contact. In some cases, this may occur to the point that developing economies are forever burdened with a political class that is incapable of serving the interests of its people. Thus bribery not only undermines democratic governance by creating wealthy and powerful elites at the detriment of society, but also by impeding economic development, hampering civil liberties, diverting state interests and cultivating a sense of normality around the act. Often, it is society at large that is the most affected victim of bribery and is, in many cases, the party in the weakest position to prevent it. The governmentÊs ability to influence the operation, or even the existence, of any rule of law often guarantees that the probability
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