Removing Cash is effective Anti-Corruption management

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scott-schaefer-politics (Photo credit: ScottSchaefer)

How do you systematically combat corruption when it seems to be found everywhere? In many countries around the world corruption is part of how business is being done, how you deal with officials and how you get things done. In a lot of places you will hear that it is part of the culture that there is nothing one can do about the phenomenon because the system as a whole would not work if there were no one to skim the cream so to speak.

In my mind there is at least one successful way that will insure the reduction of corruption significantly and that is by removing cash as the main means of payment from society. Cash is the fuel that ensures that corruption can flow freely and if one is able to reduce the amount of cash one can combat the most visible forms of corrupt behaviour and maybe even affect other forms of corrupt behaviour higher up the favours-for-cash food chain.

Corruption is operationally defined as the abuse of entrusted power for private gain (Transparency International) and can be found in two forms:

  • “According to rule” corruption – Which is corrupt behavior that ensures that people of power uphold the laws and rules that they have been entrusted with because to their position in society. F.eks. getting permits within a reasonable timeframe or speeding up bureaucracy.
  • “Against the rule” corruption – Is when a member of the public is able to ensure that a government official does not enforce rules. f.eks. A fine or penalty.

The cost of corruption is four-fold: political, economic, social, and environmental and the more advanced society becomes the more advanced is the corruption that one finds. From police officers taking small bribes to make up of the lack of adequate pay to election fraud through paid ballots.

It is my argument that societies that are not very advanced and therefor have a high degree of cash or natural economy, will be more prone to the two forms of corruption that ones where electronic transfers are more common. Another argument for removing cash in order to reduce corruption is that cash is most common at the bottom of the “food chain”. By cutting off the supply to higher levels in the chain and more damaging types of corruption one is able to reduce the impact as a whole.

We now have low-cost technological systems that can ensure that there is a less of a need for cash in society but more importantly these systems can be made available in developing and emerging markets thanks to telecommunication and improved systems of control. Systems like the ATM or home banking have found its way into the mainstream of all societies around the world and at affordable prices for everybody. Especially if one takes into account that a more transparent system will ensure that the cost of a credit card, interconnection and security systems are covered by the positive impact.

There are of cause challenges to reducing cash and as a technology it cannot be replaced in some parts of the society simply because it is the cheapest alternative. But by strategically targeting government and educational institutions, banking and international business there will be significant gains to be had through relative small investments for all parties involved.

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