Answer to Question #7061 in Economics of Enterprise for priscilla

Question #7061
nations with currupt and legal system have lower standard of living. why must that be so?
Expert's answer
Corruption is an activity that is used by officials of their rights and job opportunities for personal enrichment, bribery of public and political figures. It’s a symptom of fundamental economic, institutional and political weaknesses, so it undermines political development, democracy, economic development, the environment, people’s health and more.
Corruption exists in all countries, but it is more common in countries where the lower standard of living is presented. Conditions in low income countries conduct for the growth of corruption and hinder legal system developing. This can be explaining by some features which poor countries are characterizes by.
First of all, poor countries usually have highly regulated economies that give rise to large monopoly rents. Political competition and civil liberties are often restricted.& Laws and principles of ethics in government are poorly developed. And civil society organizations that provide information on which detection and enforcement for anti-bribery action is based , are not well developed
Secondly, administrators have poorly defined broad power that causes bad conditions in economy regulations.
There are some adverse effects, caused by corruption and illegal system, that damage poor countries economy. Among them we can highlight the most important:
1) underground economy rising;
2) unequal income distribution and and concentration of wealth in the hands of a few distorted consumption pattern;
3) negative impact on private investment, both domestic and foreign;
4) bad circumstances to establish and maintain domestic and internationally acceptable “rules of the game”;
5) undesirable consequences on both the revenue and expenditure sides of the government budget − fraud, embezzlement and misappropriation of public funds add to the losses;
6) poorly supervised financial system, that causes& serious social harm;
7) price controls, subsidies and black markets that corruption causes can lead to undesirable social and economic consequences;
8) corruption places severe constraints on a country’s capacity to undertake economic reforms.
Thus, corruption and illegal system poverty& in countries they exist. And above-mentioned effects are believed to be an important reasons why the least developed countries in the world have such a low standard of living.

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