Why are some countries rich and others very poor? At the top of this list, put corruption — both policy and personal. The enclosed table contains one of the common measures of country corruption, published by Transparency International this past January, which shows the 10 least and 10 most corrupt countries. Other measures of wealth and poverty vary slightly, but all are close to this list.
The U.S. now ranks number 27, a drop of 11 places in just the last five years. Historically, the U.S. had been viewed as one of the least corrupt countries, but no longer.
There is a strong relationship between the level of corruption and per capita income. The least corrupt countries all have high per capita incomes, and the most corrupt countries have the lowest per capita incomes. Some countries became rich because of plentiful natural resources. Of the 10 countries with the lowest corruption, only Norway has the benefit of a major natural resource (oil and gas) in relation to its population. Venezuela, which has much greater oil and gas resources than Norway, was rich but is now poor — all due to bad policies (mainly socialist) and corrupt government officials.
Corruption is the best explainer of major differences in incomes between rich and poor. Typically, the least corrupt countries have 10 or more times the per capita income of the highly corrupt countries.
Corruption takes many forms that can be broadly lumped under personal and policy. Personal corruption has been around since the beginning of government.
Typically, someone who wants something from the government gives a bribe to a government official in exchange for a government contract or favorable regulatory action. As destructive as these activities are, the damage to the economy and to civil society is often far less than that caused by policy corruption. For instance, the so-called green lobby has pushed for subsidies for solar and wind, even in areas where they make no economic sense.
At the same time, they have been arguing for (and succeeding in obtaining) measures that would restrict the output and use of fossil fuels. These measures taken together have already greatly increased the cost of energy, which has a disparate negative impact on poor people. The producers and distributors of solar, wind and other green products give considerable campaign donations to politicians, with pious claims about what good they are doing when in actuality donations are often nothing more than bribes to make them richer.
The problem of how to regulate campaign donations has existed since the beginning of democracies. When governments were small, favors that politicians could hand out were more limited. But with the advent of the macro-state that involves itself in most everything, there is almost no limit on what can be corrupted — and given the nature of man, is corrupted.
When the population was small, the average person could arrange a meeting with his or her congressional representative. The U.S. still has only 435 members of Congress, but with a population of 330,000 million or so, it means about 760,000 citizens per representative. So, the odds of the typical voter obtaining a meeting to give a suggestion or register a complaint to their representatives are not much better than winning the lottery. But if you give a sizable campaign donation, the doors will magically open — which is not what the American founders had in mind.
The result is that political influence is increasingly skewed toward big institutions, whether they be business, labor, education or others, and very rich individuals who can afford the “access” tariff.
It should be no surprise that most of the least corrupt countries are small-population countries where political access by ordinary citizens is still possible. They also have well-educated populations, which Thomas Jefferson and other American founders noted was a prerequisite for an enduring democracy. Rich people can do great good with political and other donations by helping to educate the people on important issues. They can also do great harm by promoting destructive ideas.
Billionaire George Soros, the single largest donor to the Democrat party in recent years, was the main funder of the de-policing, de-criminal indictment movement. Many of his political contributions did result in pro-criminal elected officials, resulting in a surge of crime and murders in some major cities. Mr. Soros probably did not intend to have blood on his hands, but that has been the result of poorly thought-out policies. Mr. Soros is a complex person. In that, many of his contributions to pro-democracy and free-market organizations in Eastern and Central Europe have resulted in more freedom and prosperity, while his contributions to anti-free market politicians in the U.S. have resulted in less liberty and economic growth, and more poverty.
The second-largest donor to the Democrats was Sam Bankman-Fried of FTX fame. His ill-gotten gains help fund some political candidates whose policies will result in slower growth, less opportunity and more hardship. The extent to which his contributions pushed them over the finish line in close contests provides a textbook example of corruption fueling more misery.
• Richard W. Rahn is chairman of the Institute for Global Economic Growth and MCon LLC.