Tanzi (1998) makes an interesting additional point in explaining the increased attention given to corruption in policy making circles. The incidence of corruption, he claims, has been on the rise over the past several decades and by the 1990s had become so ubiquitous as to be no longer possible to ignore.<sup>7</sup> In a paper published in the _American Economic Review_ in 1997 Tanzi showed the extent to which government operations had expanded during the twentieth century. Looking at a set of 13 industrial countries, he noted that total government spending in relation to GDP had been about 12 percent on average in 1913, but had risen to 43 percent by 1990, with some countries having levels of spending closer to 55-60 percent of GDP. Revenues, of course, had risen accordingly. Higher taxes and higher spending reflected a substantial transformation in the role of the government in the economy, with governments by the 1990s heavily involved in education, health, social security, unemployment compensation, research and development, and numerous other activities. With this significant expansion in the scope of government activity and in the actual numbers of people engaged in carrying out or delivering a broader set of government goods and services, there was, he argues, a corresponding increase in the degree of government regulation and intervention in the economy, a development which created new opportunities for corruption. The expansion in the size and the role of the government also affected the developing countries, but these typically did not have long traditions of good governance and strong institutions, leading to a proliferation of opportunities for bribery and malfeasance. Two other factors which are also likely to have contributed to rising corruption are the rapid growth of international trade in the post-war period—again, vastly expanding the scope for the payments of bribes and “commissions”—and, more recently, the privatization process, particularly in transition economies. One might add to these two factors the rapid growth of foreign direct investment, pari passu with the growth of international trade. Tanzi believes these factors to have contributed to the spread of corruption as “a contagious disease,” further raising public awareness.<sup>8</sup>

# **3. Corruption and Its Sources**

For the reasons outlined above the 1990s witnessed the appearance of a large number of academic studies examining different dimensions of corruption: its causes, impact, and the institutional mechanisms that sustained it, often with a particular focus on the developing world 7 The World Bank indicator called “control of corruption” shows that for a group of 47 countries accounting for the lion’s share of world GDP, corruption was worse in 2012 than in 2000 for 30 countries and was unchanged or slightly better in the remaining 17, not a very encouraging picture for the global fight against corruption.

8 Daniel Kaufmann (2005, pp. 96-98) uses survey data for a large number of countries in which households and firms report on average bribery payments as a share of sales (for companies) to provide an estimate for the total annual worldwide bribery payments. His figure, which excludes leakages from budgets and theft of public assets, amounts to US$600 billion -US$1.5 trillion per year. Kaufmann’s methodology—described in detail in his 2005 paper—is conservative and actual bribery figures are likely to be higher, nearer the upper limit of his range estimate, and possibly higher.

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