Corruption

Corruption is a moral outrage. It’s also an economic affront, eating up an estimated 5 percent of global gross domestic product and thwarting efforts to lift billions of people out of poverty. But there’s more than one way to look at corruption, which helps explain why it’s so difficult to stamp out. There are costs as well as benefits to cracking down: Cleanups can temporarily hold back economic growth and stifle investment. Economists study how bribery, embezzlement and extortion get around inefficient rules and help allocate scarce resources, such as building permits, school places or apartments. China, India and Nigeria have notorious corruption problems — which haven’t stopped their economies from powering ahead.

More than 100,000 officials have been snared by an anti-graft campaign in China, from military top brass to middle managers at state-owned companies. President Xi Jinping warned in 2012 that failure to clean up the problem could trigger social unrest and imperil the Communist Party. Scrutiny has crimped spending in high-end restaurants, sales of luxury goods and gambling in the casinos of Macau. It also triggered the first default of a Chinese real estate developer on its overseas bonds. Goldman Sachs predicts that the next phase will target $600 billion of off-the-books income of the country’s 69 million public-sector employees. The drive has rattled China’s securities markets and hampered some types of investment as officials try to steer clear of trouble, braking a slowing economy. A corruption scandal is also rocking business in Brazil, where a probe revealed more than a decade of bribes and kickbacks at state-controlled oil company Petrobras. In the U.S., Senator Robert Menendez was indicted in April 2015 on charges that he accepted almost $1 million in gifts and campaign donations to enrich a friend. He has denied wrongdoing. In April, the Panama Papers, a trove of leaked confidential documents from a Panamanian law firm, exposed politicians and other public figures who were using shell companies and offshore bank accounts. The prime minister of Iceland resigned following allegations that he hid wealth and dodged taxes. He denied wrongdoing. In Malaysia, tens of thousands of people turned out for an anti-corruption protest in August 2015.