A barometer of prosperity

The latest survey by Transparency International shows an increase in perceived corruption around the world. Most notably, the survey found that 67 per cent of people surveyed in North America and almost three quarters of Europeans think corruption has increased in the past three years. What’s critical here is the perception of greater corruption. That's because it's probably the most devastating on the economy. Here's what happens when corruption occurs:
1. Economic outcomes are distorted.
2. As corruption is perceived, it changes behavior and creates a self reinforcing cycle of greater corruption. If everyone else is corrupt why should I do the right thing?
3. Finally, valuable bonds of trust that help create efficiency in the economy are broken. If you no longer trust your credit card company, you will spend more time checking through your monthly statements, looking for alternatives, or forgo credit altogether.
It’s no coincidence that a perception of greater corruption goes hand in hand with a decline in prosperity. Long term wealth and widely shared prosperity are created by building relationships of integrity and trust not destroying them.