Around 1-1.5 trillion U.S. dollars, or around two percent of global GDP, are lost to corruption every year, Daniel Kaufmann, president of the Natural Resource Governance Institute (NRGI), said on Sunday.
Speaking at a panel on integrity in public governance during the World Bank Group and International Monetary Fund Annual Meetings in Lima, Kaufman presented this startling statistic, a result of a lengthy study by the NRGI, an independent, non-profit organization based in New York.
However, according to Kaufmann, the figure is only the direct costs of corruption as it does not factor in the opportunities lost on innovation and productivity. "The misallocation of talent away from productive activities and innovation" has an even costlier impact on countries suffering from corruption in the long term.
Meanwhile, a country that addresses corruption and significantly improves rule of law can expect a huge increase in per capita income in the long run, the study showed. It will also see similar gains in reducing infant mortality and improving education, said Kaufmann.
Countries with better control of corruption averaged a five percent improvement in their budget deficits or surplus in the long term, he said. Based on the findings of the study, Kaufmann called for a new definition of corruption.
Believing that corruption is no longer a simple transaction between two parties, he called it a "tax on the poor and, increasingly, the middle class ... leading to higher levels of inequality."
"Corruption has shifted to large colluding networks, such as FIFA. These networks shape the rules of the game, institutions, policies and contracts. This is more insidious than petty corruption," he said.
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