Corruption describes a relationship between the state and the private sector. Sometimes state officials are the dominant actors; in other cases private actors are the most powerful forces. The relative bargaining power of these groups determines both the overall impact of corruption on society and the distribution of the gains between bribers and bribees.

Analysis of corruption is part of the ongoing and inconclusive debate about which form of government is most conducive to economic growth. Although wealthy countries do tend to be democracies, there is no simple statistical relationship between growth and democratic government. The reason for this is not difficult to fathom – “democracy” is simply too general a term to capture the range of government forms that come under that rubric. Furthermore, a government structure that works well in one country may be dysfunctional in another context. Widespread, entrenched corruption is one form of dysfunction.

Is the establishment of democracy an anticorruption strategy? The desire for reelection constrains the greed of politicians. The protection of civil liberties and free speech, which generally accompanies democratic electoral processes, makes open and transparent government possible. In contrast, nondemocratic states are especially susceptible to corrupt incentives because their rulers have the potential to organize government with few checks and balances. But this contrast is too sharp. One need look no further than some state and local governments in the United States to find well-established corrupt systems that compare quite well with autocratic systems. For example, the former mayor of Detroit, Kwame Kilpatrick, helped drive the city into bankruptcy with his racketeering, including directing at least $84 million in city contracts to a personal friend. Rod Blagojevich, former governor of Illinois, was impeached and is currently serving a prison sentence (the fourth recent Illinois governor to go to jail) for trying to “auction off” the Senate seat left open when Barack Obama became president. Payoff scandals have implicated elected politicians in Brazil, Mexico, Venezuela, Italy, Korea, and Japan, to name just a few. Corruption is common at the local government level in France and Germany. The former prime minister of Croatia, Ivo Sanader, was found guilty of accepting more than $13 million in bribes from an oil company and a bank, to dominate the respective industries in Croatia. Clearly, democratic forms do not always succeed in checking corruption.