All political systems need to mediate the relationship between private wealth and public power. Those that fail risk a dysfunctional government captured by wealthy interests. Corruption is one symptom of such failure with private willingness-to-pay trumping public goals. Private individuals and business firms pay to get routine services and to get to the head of the bureaucratic queue. They pay to limit their taxes, avoid costly regulations, obtain contracts at inflated prices and get concessions and privatised firms at low prices. If corruption is endemic, public officials – both bureaucrats and elected officials – may redesign programmes and propose public projects with few public benefits and many opportunities for private profit. Of course, corruption, in the sense of bribes, pay-offs and kickbacks, is only one type of government failure. Efforts to promote ‘good governance’ must be broader than anti-corruption campaigns. Governments may be honest but inefficient because no one has an incentive to work productively, and narrow elites may capture the state and exert excess influence on policy. Bribery may induce the lazy to work hard and permit those not in the inner circle of cronies to obtain benefits. However, even in such cases, corruption cannot be confined to ‘functional’ areas. It will be a temptation whenever private benefits are positive. It may be a reasonable response to a harsh reality but, over time, it can facilitate a spiral into an even worse situation.

Q.4 Productivity linked incentives to public/private officials is one of the indicatives for: