Corruption and misgovernance are devastating for the poor, who routinely receive fewer social services, such as health and education, and have fewer resources to supply the bribes and payoffs that can be routinely demanded. Corrupt regimes often prefer defense contracts over rural health clinics and schools, a policy bias that worsens income distribution and diverts resources from the countryside to the cities. Bribery also carries with it great costs. Nor does the business community or society more generally. The costs of such corruption for overall business development are large.
Grand corruption poses somewhat different problems.
A survey of enterprises shows that in those economies transitioning from communism where grand corruption is more prevalent, the growth and investment rate of enterprises is much smaller, and the security of property rights is seriously impaired. At the same time, for a number of countries in the former Soviet Union, the survey finds that firms that purchased parliamentary laws, presidential decrees and influence in central banks do themselves benefit in the short run, though grand corruption imposes a particularly pernicious social cost on enterprise development. Leaky governments Empirical studies of the causes of corruption are fairly new. Evidence suggests it is a symptom of deep institutional weaknesses. Evidence supports a link between strong civil society and effective strategies for addressing corruption.