Inflation Even in the Cost of Corruption

Wolf Richter's picture

Wolf Richter

Inflation has pervaded every aspect of our lives, from skyrocketing gasoline to rents to well, corruption. But inflationary pressures in corruption are notoriously difficult to measure. Changes in price levels of under-the-table payments escape even the sharp eye of the Bureau of Labor Statistics—responsible for the CPI—and similar agencies around the world, and so they don’t include corruption in their indices. But in Germany, which is historically paranoid, and rightfully so, about inflation, having experienced two wipe-outs within one generation, there has been progress: inflation in the cost of corruption can now be estimated.

Turns out, a confounding new study by Friedrich Schneider, an economics professor and corruption researcher at the Johannes Kepler University in Linz, Austria, determined that corruption in Germany would cost the economy €250 billion ($325 billion) in 2012. In 2005, that amount was €220 billion ($286 billion). An increase of 13.6% over seven years.

Corruption is a matter of definition. In this case, it is limited to bribery of civil servants and does not include politicians. They’re in a different class. For example, Christian Wulff, when he was President of Germany, got entangled in revelations late last year that he accepted all sorts of favors from affluent benefactors over many years. His faux-pas included threatening the media—well, the tabloid BILD—when he learned that it would publish some new details. And he left his threats as a voice mail. Corrupt doesn't mean smart.

But he was a top politician in Chancellor Angela Merkel’s government. And she owed him. In 2005, when he was Premier of Lower Saxony, he announced that he wouldn’t run for the CDU’s nomination for Chancellor; instead, he supported Merkel, then the CDU leader in parliament (Bundestag). So she became Chancellor, and in 2010 he became President. In return, when sunshine hit his activities, she supported him. Popular outrage finally induced him to resign, but instead of being prosecuted, he was awarded an ironically-called Ehrensold (honor pay) of €199,000 ($260,000) per year for life, plus other perks.

And Germany is one of the least corrupt nations on earth! According to the Corruption Perception Index published annually by Transparency International, Germany and Japan are tied for 14th place. New Zealand is at the top, the US in 24th place—the index measures bribery of civil servants, not lobbying, campaign finance, corporate-government backscratching, Fed money handouts.... oops. For some nauseating details on that, read.... The Audit of the Fed Doesn't Call it 'Corruption' but it should.

Just behind Germany and Japan is another practically corruption-free country, Austria, where Ewald Nowotny, governor of the Austrian National Bank, is up to his neck in an international criminal scandal. And he is still in his job. For that whole debacle, and how  finally a major politician, though perhaps the wrong one, called for his resignation, read.... Bribery, Kickbacks, and Money Laundering at the Austrian Central Bank.

Even the mere bribery of civil servants, Herr Professor Schneider estimates, will cost Germany €250 billion this year. The economic damage comes from the effects when the best offers are bypassed in favor of inferior ones, which curtails investment and stifles growth. He proposes a solution: better pay for civil servants or stricter laws with more severe punishment, or both.

But anti-corruption laws are having trouble getting through the Bundestag. In 2003, Germany signed the United Nations Convention against Corruption, but unlike all other industrialized nations, it never ratified and implemented it, which puts Germany in the company of such illustrious nations as Sudan and Somalia. Of course, China, Gaddafi's Libya, Russia, and Pakistan ratified the Convention, and they're among the most corrupt nations in the world. Changing a few laws isn't going to stop corruption.

This bubbled up again in January when the Wulff scandal was white hot. The opposition SPD proposed to adapt German criminal law to the Convention, making certain acts by members of parliament punishable with up to five years in the hoosegow. But Merkel’s CDU nipped that in the bud.

And just then, an insidious and at once funny internet-age issue erupted across the border in France, or more precisely in a tiny village in Maine-et-Loire, with serious worldwide implications. Read....  Can’t Even Urinate in his own Yard Anymore.

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johnQpublic's picture

forgot to mention the three letter agencies such as the FDA who now get paid to approve drugs/cancer drugs faster

if you are paid to approve it faster, then its a bribe, and you can check their fee schedule to see inflation in the cost of bribing them year over year

case study documentary of this process and how it has affected the most promising cure for cancer that has been under development since 1976

a must watch if ever i saw one

KickIce's picture

Makes you wonder how some of these people sleep at night.

Zero Govt's picture

in a King Sized bed in a 5 start suite in Las Vegas compliments of Pfizers 'regulatory wicked weekend entertainment budget' all drinks and food inculded

BeetleBailey's picture

+10 - Thank You for that link.

Olympia's picture

Due to the German behaviour, Europe has become the “bedroom” where Jewish loan sharks rape the Europeans. The first time, they have served the Americans at the expense of the Europeans and the second time round they serve the Asian Jews at the expense of the European people again. It is because of them that in 1945 the American occupation of Europe started and in 2012 –again it is them to blame- the Jewish occupation begins …An occupation that did not come out of the blue but it was the result of a war attack. In 1989, Jew Greenspan levelled his “assault” against both USA and Europe from his position in FED …the cheap money “assault”, the result of which is now obvious. Cheap money destroyed the productivity of the western countries and forced them into unemployment. Peoples without employment got involved in huge debts and now, loan sharks are infesting their countries.

This is a game Jews couldn’t have played without the help of Germany …Without the first “willing” player. It is again because of stupid and unnecessary financing that Germany “fell into the trap” and turned again against Europe …the play is same, only this time it has different “bosses”. In the Second World War, Germany was financed by the American to start a world war that was a lost cause right from the start. It destroyed everything and at the same time it brought its American lenders to Europe. Today, something similar is happening. It got financed again by the FED that belonged to the Jew Greenspan to bring Europe to his countrymen loan sharks. The Jews by knowing Germany’s needs and complexes, they could play with them. This is why they put Germany in the adventure of reunification …the adventure of the so-called national “engagement” which was diligently made even more expensive. What for? …To finance it …To force the unified now Germany into unbelievable debts. Why did they over-indebt Germany? …to leave it with just one “way” of salvation.

Nowadays, Germany raves on an everyday basis against Greece. The accusations of the Germans against the Greeks are on the agenda. Lately, the word “Griechenland” should be by far the most used word in the German political speech. German politicians –and not just them—make accusations against the Greeks on an everyday basis. They accuse the Greeks even in the most dangerous and unjust way regarding the collective responsibility. They accuse them using the same racist rhetoric that they used in the past against the Jews and this is what condemned them in the minds of the people all over the world. After apologizing hypocritically for a million times, they came back with their familiar characteristics. As soon as they regained their powers, they started again the same old games …”Greeks” are useless, lazy, thieves etc.

Why do they keep making this organized and unfair, of course, defamatory campaign? For many important and unimportant reasons ...Reasons that are relevant to the simple psychological needs of the supporting actors and reasons of great importance in practice for the leading actors as well. There are plenty insignificant reasons connected to the anti-Greek feelings of the German leaders. Reasons always existed and they shall exist in the future too. Besides, it is a usual phenomenon to target the famous and the able men and when talking about peoples the Greek people is such. As the Persian poet says …”Stones and sticks are thrown only at fruit-bearing trees”.

Zero Govt's picture

The cost of corruption in a country is much easier to calculate than this academic thinks. You simply need gather the annual budget of Govt spending they provide every year

The entire Govt budget is corruption (societal theft). Period.

Further the way to 'solve' corruption is not as this Austrian academic suggests, to increase public sector wages and add yet more rules. This Austrian obviously hasn't noticed the graph of putting politicians on 'professional' wages 30 years ago and the mushroom cloud explosion in Laws, Rules and Regs these bizy-bodies added with gusto over this pitiful period has led to a commensurate huge increase in corruption, incompetence, waste, debt and anarchy, both home and abroad

So it's a bit of a 'shocker' the academic/crone propses much more of the same medicine (cancer) of over-paying Govt and more Govt rules that caused and fueled the corruption ..or no surprise at all to us who see crones underlining what Govt wants to hear to ensure its continued cancerous growth

Govt & Law is the corruption. Govt is the root of the fraud

The real solution, as always, is Freedom and the Free Market

Never a lesson learned in academia ..wonder who pays their wages eh Wolfy?

Peter Pan's picture

I think most of the bribe money is paid by parents to their kids to make them behave and do their homework. No wonder they grow up and want to become public servants.

AmericanFUPAcabra's picture

******the US in 24th place—the index measures bribery of civil servants, not lobbying, campaign finance, corporate-government backscratching, Fed money handouts


Civil servants? Thats it? How long until they develope the software for lobbying and corporate tug-jobbery?  Probably need to develope another super computer to read the 1,500 page tomes corporate lobbyists give to Obummer who in turn gives CONgress 3 days to read it and vote or the fucking sky will fall. I wonder where US would stand with all the other factors taken into account. Top 5? Top 3? 

anywho, yokudekimashita wolfsan. keep em coming

mkhs's picture

Why do these articles just seem to be a segue to previous posts?

Imminent Crucible's picture

As long as we the sheeple tolerate this constant theft, it will continue.

The world consists of the vast majority of people who work and produce with their hands and minds, and the tiny but enormously wealthy minority who do nothing but skim the value of our labor, craft and ingenuity. Plus, of course, their supporters in the zombie/welfare class.

The answer is to stop working for money. We must grow our own food, fix our own cars, buy our clothes at yard sales or make them--or barter our skills and goods with those who have what we want. Do nothing that creates a taxable event. Avoid whatever requires the use of the Fed's toxic debt-backed specie. Go dark, in other words.

We won't have to do it for long before the whole rotten status quo collapses and the Pirates Who Don't Do Anything have to go rob the Somalis or get a real job.



Zero Govt's picture

the far easier solution to dis-jointing yourself from society is to attack the social theft that is Govt where they skim and cream you: taxation

Stop Paying Tax

Zero Tax = Zero Govt = Zero Parasites living off your back

non_anon's picture

yes, humanity is heading to its utopia


Police: Lack of 7-Eleven sausages sends Bridgeton woman into frenzy

courtesy Drudge, of course

JohnKozac's picture

"Utopia" in Rochester:

Popeyes Runs Out of Chicken in Rochester, NY



engineertheeconomy's picture

My dealer's out of Gold Eagle coins. Anyone know where I can locate a consistant source?

ThisIsBob's picture

6.914 returns for gold eagle in coins on ebay this morning.

engineertheeconomy's picture

Come on Bob, that would be like trusting Ebay to buy condoms...

I meant a reliable source -

bugs_'s picture

inflation is most visible in the price change on inelastic demand goods.

interesting thought that corruption could have inelastic demand characteristics!

max2205's picture

Chicago isn't a country, but they would laugh at this small change.