Governance and Business Strategy - Essay Example

Developing countries normally tend to deal with institutional, social, political, and cultural obstacles in order to achieve sustainable growth rather than focusing on anti-corruption strategies. Data from developed countries indicate their successful stance against corruption practices. The objective of this paper lies with discussing how corruption as a social evil would impede the economic development of a country. According to the view of International Organization of Employers (2009), though corruption is common in all areas of daily life, public sector is found to be the most prospective area for corruption practices (The fight against bribery and corruption).

It has been identified that corruption practices exist even in democratic countries where political power is based on clientalism. To illustrate, in democratic countries, politicians take undue advantages of their power and get easy access to public resources. Naturally, the exploitation of social resources would lead to economic downturn as the nation is forced to substitute adequate resources to the exploited ones. Cartier-Bresson (as cited in Dearden, 2000) has put forward five economic conditions which amplify corruption practices within a society. . This diversion cost indicates a non-beneficial expense as it would not contribute to the economic interests of the nation.

Similarly, when corruption practices increase in a nation, it is reflected as the inefficiency of legal system; and thereby potential investors would hesitate to invest in public ventures. From the perspective of Endogenous Growth Models, inefficiency may become the direct cause of decline in investment because investors always give priority to the rate of return from their investment. In the opinion of Coupet (n.d), The Neoclassical Growth Model precisely indicates that misallocation of investment would check the uninterrupted and steady level flow of income, which in turn impedes the overall growth of the nation.

Sometimes, corruption prevention costs constitute a major percentage of nation’s total expenditure and it adversely affects the economic growth of the nation. When the corruption prevention costs increase, the government may cut down various fiscal benefits such as employee wages and other subsidies. Moreover, it may impose additional taxes on different industrial sectors too. All such regulations would seriously impinge on the national economic development. For instance, when the employee wages are reduced to maintain corruption costs, employees normally get discontented and that may cause immense brain drain.

Murali (2008) argues that in the modern business environment human power is the most powerful weapon without which no organization can expand further. Therefore, the migration of skilled and qualified employees to foreign markets would certainly weaken every developmental initiative of a country. Similarly, when government imposes additional taxes on