Small Bribes that Lead to Big Losses

Corruption is a serious problem in many countries in the world. The world’s fastest growing economy India has taken a series of radical measures to mitigate adverse impacts of corruption.

However, regulations do not actually guarantee compliance. In fact, anti-corruption laws are routinely broken all over the world with impunity. This practice often begins with common people themselves who distinguish between small bribes and large bribes. According to many people, small bribes are mere facilitation payments. They should not really be called “bribes”.

Some countries like Australia and Canada even allow their people to make these payments legally! However, the payments have to be made outside their country. For instance, an Australian bribing official in Ghana is legal but the same act in Australia would be considered illegal and would call for punitive measures. It is incredibly hypocritical and insensitive on behalf of these governments. However, at the present moment, this is the truth.

In this article, we will have a closer look at this debate of small bribes versus big bribes. We will ascertain how it impacts the economy in general.

The Common Man’s Viewpoint

Common people do not see anything wrong with bribing officials when it comes to small offenses. For instance, traffic offenses in many parts of the world are almost exclusively settled via bribes. The same holds true for anti-graft protesters in countries like India. Many of these people watch their news on illegally obtained electricity stay in illegally built homes and at the same time advocate that the politicians of the nation must not be corrupt. The idea that a small grease payment is somehow less harmful or sinister than the big corporate payments is fundamentally flawed. However, this flawed opinion is still the opinion of the masses. Hence, it influences the popular vote and is somehow ascertained to be fair and correct!

Bribes Become Extortion

Small bribes are often paid as facilitation fees. However, if these bribes are paid too often, they stop being facilitation fees. This means that they are no longer willingly paid. Instead, these bribes are often demanded making it as extortion! Also, when one party is facilitating faster work, the work of the others automatically slows down. Hence, it becomes compulsory for everyone to pay a bribe or face a possible infinite time delay. Since time is money, most businesses will give in to the extortion and later, in turn, will extort the money from consumers.

In many countries, it is impossible to get any task accomplished in any government office unless bribes are paid off. This is coercion and therefore must not have any existence in a lawful society.

Slippery Slope

Small bribes are also a slippery slope. What starts as payment for preferential treatment soon morphs into payments made for extrajudicial benefits being granted. The resources of the society as a whole are squandered when bribes are received or paid and resources granted, or fines waived off in lieu of these bribes. Once the rationale that it is acceptable to pay and take a bribe takes root, amounts become immaterial. This is because amounts are always subjective. What is a big amount for one person maybe a small amount for another? Hence, classifying bribes as big or small is futile. Such a classification will not stop the bigger losses that are faced by organizations.

Accounting Fraud

In most countries of the world, giving and taking of any kind of bribes is illegal. However, we are aware that most companies have to pay bribes to get their work done in many countries, particularly developing countries. Since multinationals are operating in a wide variety of developing countries, this amount adds up to a significant sum.

The question now arises, how this amount is displayed on the financial statements of the company. It cannot be represented as bribe since bribery is illegal. Depicting it anything other than a bribe is a distortion of facts and hence can be called accounting fraud! Accounting fraud is a serious economic offence which leads to significant penalties and jail time. However, common sense dictates that companies that engage in bribery would also have to indulge in accounting fraud to cover up their tracks!

The Terrorism Angle

Money laundering is also an intricate part of bribery. A lot of bribes are paid with laundered money. Hence, the existence of a black market is mainly due to corruption. However, this black market infrastructure is often used by the wrong people. Terrorist activities also require funds which cannot be accounted for or tracked. Hence, the same infrastructure which was used for bribery can now be used to cause violence and kill people. Bribery may look quite harmless in the beginning. However, systematic corruption is what makes terrorism possible. In the absence of these black markets, terrorists would find it virtually impossible to execute their agendas.

Systematically Avoiding Bribes

To sum it up, classifying between small and big bribes is meaningless. Corruption must be avoided in all its forms. There must be an infrastructure in place to prevent the give and take of bribes. This is because apart from the personal costs that are incurred by people, these transactions seem to have enormous social costs.


❮   Previous  Article Next  Article   ❯


Authorship/Referencing - About the Author(s)

MSG team comprises experienced faculty and professionals who develop the content for the portal. We collectively refer to our team as - “MSG Experts”. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.

Managerial Economics