Corruptions Negative Impacts on Economic Progress

Corruptions Negative Impacts on Economic Progress

Before being able to efficiently analyze the affect that corruption has on economic progress, one must first establish the definition of corruption and then the environment that is being used in. For the purposes of this analysis, corruption will be defined as any form of dishonest or unlawful activity or action conducted by an individual or organization in a position of power for some form of private gain. This definition can be applied a plethora of situations; however, this analysis will focus on corruption adversely affecting the growth of small businesses.

The presence of corruption within a country’s political or economic system leads to the degradation of national welfare. As politicians begin to provide specialized and unfair treatment to specific businesses and organizations, a country’s economic well-being begins to destabilize. Specifically, small business owners are often negatively impacted because of their inability to compete with larger market players who are receiving preferential treatment because of actions such as, but not limited to, bribery. Moreover, the presence of corruption within a country is also detrimental to small businesses because of the external perception that foreign investors form of that country’s stability. A foreign investor is less likely to invest in a government regime that is known for being corrupt. The lack of foreign investment directly affects small business owners because as foreign direct investment decreases, growth opportunities are removed from the market space, less capital is allocated to consumers, which in turn allows them to spend less, and the opportunity to export goods and services diminishes. Furthermore, multinational corporations may choose not to enter into markets that have established corruption within their regimes or may altogether be barred from entering. Altogether, a country, and its small