Why Is a High Degree of Corruption Compatible with Growth in Some Countries but Not Others?

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The prevalence of public trust is also not similar in different societies. If a society relies more on personal networks and has stronger social network, it means that there is high level of trust among the general public of that society. In such societies, the relationship related to bribery and corruption is extensive with more people involved (Uslaner, 2012). Moreover, these relations are also more efficient because the deal is completed with no time lag and the briber is given the delivery of the required public goods like contracts, permissions or licenses whatever the briber needs for the facilitation of their business activities which in turn lead to the growth in the economy (Li and Wu, 2010). On the contrary, the countries having weaker social networks due to lesser public trust have low level of corruption as it is only present among few people. The bribe and corruption that takes place among those few people does not produce the desired results and a net loss for the briber is produced leading to a negative impact on the economic growth.

One of the most significant examples is that of the Chinese economy that has been identified as a country with deeply rooted corruption by the international organizations. Despite the endemic corruption, China has been flourishing rapidly and particularly in the last two decades, the annual rate of growth of the Chinese economy has been around 10% (Wedeman, 2012). Some other East Asian countries have been showing similar growth patterns like South Korea, Thailand and Indonesia. In the case of China, the corruption started worsening after the post-Mao reform period began in 1978-79. Though the era before the reform period was also never corruption free but corruption flourished excessively as Chinese officials started manipulating their valuable resources by paying bribe in the form of land, capital, liquor and even meat. According to the 1995 Transparency International, China ranked at number four on its Corruption Perceptions Index. Neither did the corruption stop nor did the economy halt as both were increasing dramatically (Wedeman, 2012). The Gross Domestic Product (GDP) per capita of the country grew thirteen-fold between 1980 and 2010, as identified by the International Monetary Fund (Wedeman, 2012). China's per capita GDP grew two times more than South Korea and eight times more than United States (65% increase in the per capita GDP during the same period). So, when China moved from a command economy to a market economy, the Chinese economy grew rapidly and so did the level of corruption in the country.

Corruption is widely spread in China as most of the resources are strongly controlled by the government. The social networks are thick and strong in the country which makes it easier for the bribery-corruption relationship to be extensive. A common belief in China is that "power cannot be deposited in a bank, so you had better profit from it while you can" (Li and Wu, 2010). Businessmen seek help from the government officials often; the strong guanxi culture prevalent in China makes it easier to establish numerous bribery-corruption relationships that may not be direct even. Even the foreigners have high level of trust on Chinese officials regarding corruption and are willing to pay huge sums of money for the smooth running of their businesses (Zhu and Zhang, 2016). The Chinese economy has gained a lot and has taken corruption to an advanced level where a mutual understanding is developed in both the briber and official so that the risk of getting caught is reduced while the official is paid later on even sometimes after the retirement of the official. This new feature in corruption has been referred to as the bribe globalization (Svensson, 2003).

To further understand the impact of corruption on the growth of the economy, the case of Philippines is taken into consideration. Philippines have no similarity to China even though the level of corruption is almost similar as well as its per capita income too; the level of trust among the public is very low and as compared to China, their economy has been growing at a very slower rate. The most significant kind of corruption that occurred in the country was the intervention of the state head in the operations of a business; by using its authoritative power, the state head would control the entry of any business in an industry. The state head would monopolize the industry, impose taxes or even extract fee for allowing the company to enter into the industry (Li and Wu, 2010). Moreover, the state head would control the growth of the industry and even steal the state collections and not use them for the benefit of the country. the fee, taxes and all kinds of surcharges applied by the state head are similar to robbery for the payers of the private sector; these businesses from private sector are not facilitated by the officials in any way for paying neither does their business have any positive impact due to this payment (Carino, 1985). The collection is simply imposed by the government officials that hinders their economic efficiency and acts as a deadweight loss for businesses. Since, the official is merely doing his duty according to the order of the state, there is no possibility that the victim may turn in the collector with the allegation of corruption. In fact, such kind of corruption that takes place in Philippines cannot even be proven by the victims as illegal or corrupt act since the state head is directly involved (Li and Wu, 2010).

Avery famous case of corruption that took place in Philippines was in 1970s in the coconut sector (the sector was highly significant as it accounted for almost 25% of the country's income from exports). a tax was imposed on coconut sales by the then-President Ferdinand Marcos while the head of the tax collector agency was Manuel Conjuango, a very close friend of the President (Crony capitalism: corruption and development in South Korea and the Philippines, 2003). All the money was used by Conjuango to acquire banks that became the source of further funding of the coconut oil pressing mills. Then all the extorted money gained from taxes was used to fund the mills both he and Marcos were controlling. Marcos also imposed a duty of the imports of cigarette fillers; the duty imposed was 100% but a special 90% reduction of import duty was given to Philippine Tobacco Filters Corporation, because the owner was his close friend Hermino Disini (Carino, 1985). Disini benefitted from the subsidized duty and became the major supplier of Fortune Tobacco by selling below the level of market price. Together, both companies monopolized the cigarette industry by driving all the rivals out of the industry and controlling the market dynamics. The owner of Fortune Tobacco was yet another close friend of Marcos and so, he was benefitting his