They are all in bed together

Ángel Marroquín

Ok, let’s get serious and go straight to the international business section. So what has Mr Money prepared for us today? A study, of course.

“Corruption and Firm Growth: Evidence from around the World[1]” is a study recently published by the European Bank for Reconstruction and examines the experiences of 88,000 multinational companies in 144 countries with high levels of corruption between 2006 and 2020. What is it all about? The study analyses a group of companies that pay bribes and shows that doing so is harmful because this practice impairs the accounting process and affects sales, prestige and global productivity. However, the companies that pay bribes perform better in these economies than the companies that do not, and as a result, they grow faster and more robust in those markets.

What happens if companies decide not to pay bribes? First, choosing not to pay bribes affects companies negatively and prevents them from growing because they do not access where decisions about new investment and new business opportunities are made. Finally, the study shows that these companies grow slowly, and in the end, they are affected by about 10% of their total sales, more or less what they would have spent paying bribes.

Should multinational companies pay bribes in corrupt countries, or should they try to change that culture? Should we accept that businesses and companies from the first world act in underdeveloped countries in a corrupt way in the name of a greater good such as: promoting the economic growth of those economies?

Should we see the glass half full and emphasise the benefits companies create, such as providing employment and financially supporting workers’ families in the third world?

Let us not forget that the profits of these multinational companies return with them to the first world, and much of the money paid in bribes in corrupt countries goes to politicians and political coalitions that offer guarantees and weak regulations to those businesses (more likely of extractivist nature). That is to say, corrupt politicians, governing negligently. 

Mr Money trickily leaves us with no answers, nor does it offer us the last word. That is its game at the end of the day. However, one question is disturbing, and it is this: corruption has been part of companies for years. It is tacitly accepted that doing business with corrupt countries forces companies to enter a give-and-take game that leads nowhere.

Because if we are sure of one thing, it is that tolerating corruption only leads to more corruption, and this never benefits the poor.

Accepting corruption would be like accepting climate change with resignation, which will not prevent the climate crisis from escalating, and it will not make it any less terrible for everyone.

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s