The corruption debate continues

The concept of corruption is not so clear that if you see it, you would know it. 

China and India, no paragons of good governance according to all such indicators, have grown a lot faster than most “less corrupt” countries.
Cheong Kee Cheo, 

CORRUPTION is bad. This statement can find few dissenters from a moral or ethical standpoint. Corruption is bad for the economy. Equally unobjectionable? Many people, economists included, would concur.
And this is the premise of two recent articles on corruption in The Edge’s Forum pages. The first, “Are we really that corrupt?” (Issue 939, Dec 3), by the Institute for Democracy and Economic Affairs, came to the conclusion that since the country’s growth is unaffected by the perception of rising corruption as measured by Transparency International’s Corruption Perception Index, corruption may not be as bad as people think.
The other article, “Do investment and growth show we are not corrupt?” (Issue 941, Dec 17), by Quah Boon Huat, argued that Malaysia’s growth was in fact damaged by corruption. 
Neither conclusion is warranted. First, economic growth is affected by a host of factors, only one of which is corruption. It is almost impossible to make explicit all these factors — a prerequisite for isolating the impact of any one of them. 
Second, even if these can be made explicit, disentangling their impact can be a nightmare because they are almost certainly interrelated. 
And third, even if the impact of all these factors can be isolated, demonstrating the link between corruption and growth is no simple matter because the relationship between them is complex.
Economic theory will have us look at how scarce resources are misallocated because of corruption, the inefficiencies thus generated, and these inefficiencies’ impact on the economy.
To conclude that corruption has an impact on growth by comparing trends then is a bit like saying that the rise in crime must be caused by foreign workers/migrants since both have been rising over the same period. Or that strong sunshine causes shark attacks.
The difficulty of establishing a direct link between corruption and growth has not stopped scholars from producing a plethora of evidence-based research. But the results have been far from conclusive. Google “corruption and growth” and you will find many studies that demonstrate empirically the negative impact of corruption on growth. Indeed, this is the position taken by the World Bank and other multilateral organisations.
These studies, however, have to come to terms with some inconvenient facts. China and India, no paragons of good governance according to all such indicators, have grown a lot faster than most “less corrupt” countries.
At the same time, the dominant view is being questioned by some scholars. One paper, by Heckelman and Powell (Corruption and the Institutional Environment for Growth, Suffolk University, 2008), found empirically that “corruption is growth enhancing when economic freedom is… limited.”