'Corruption' is a term that is spat out with venom. We know that it's a bad thing. Yet most of us continue to understand it in kindergarten terms. This doesn't do us any good. If we can't be bothered to gain better perspective of it, we can't do a better job of stamping it out.

One of the nave culprits is the New Straits Times (NST). According to a reprint of its commentary by the International Herald Tribune on Oct 6, the NST asked the question 'do rich countries have low corruption because their people have no need to take bribes, or is it that low corruption engenders faster growth?" The NST argues that a reduction in corruption and growth are mutually reinforcing.

This commentary originated from what the NST calls the 'annual corruption perceptions index' issued by Transparency International (TI) where Malaysia ranked 37th out of 133 countries (first least corrupt, 133rd most corrupt).

Perception is a very tricky thing. It is not fact. But the NST seems to think that it is fact that rich countries tend to have low corruption. This brings me to the NST question that I would like to shoot down immediately.

The facts

Corruption and economic growth do not have a causal relationship! A common trap that we fall into when thinking about corruption and growth is that there is an inverse relationship between the two variables. So it would be ridiculous for us to fall hook, line and sinker for any political sound bite that wiping out corruption will automatically give us economic growth.

The NST should know better. Besides why must all roads lead back to growth?

Let me explain why there is no causality.

In terms of empirics, there is no proof. Peter Eigen, the chairman of TI summarised, 'on the basis of data from sources that have been consistently used for the index, improvements since last year's index can be observed for Austria, Belgium, Colombia, France, Germany, Ireland, Malaysia, Norway, and Tunisia. Noteworthy examples of a worsening are Argentina, Belarus, Chile, Canada, Israel, Luxembourg, Poland, USA, and Zimbabwe.'

Malaysia counts itself in the same good company as Organisation for Economic Co-operation and Development (OECD) countries like Austria, Belgium and France. The badly behaved include Poland, the USA and Zimbabwe. How did Zimbabwe - that is hell on earth under the murderous leadership of Mugabe - end up being in the same company with the deluded Bush and his homeland?

Malaysia is not a wealthy, first world OECD country with phenomenal growth rates but it is improving in terms of reducing corruption. The US is the richest economy in the world with better growth rates than many OECD countries and it is becoming more and more corrupt. In these two cases, corruption and growth have an inverse relationship.

But in terms of the usual well-perceived countries such as Australia, New Zealand and Singapore, they are less corrupt and are achieving growth. Then there are the usual suspects such as Indonesia and Thailand where sleeping with money under your mattress is the only safe option there is; they are more corrupt and not achieving growth (once the fatally flawed rosy statistics are corrected).

In these latter cases, corruption and growth have a direct relationship. Hence the inverse relationship and the direct relationship cancel each other out. So to the commentators at the NST, a reduction in corruption and growth are not mutually reinforcing.

In terms of economic theory, the sound body of work carried out by Alessandro Alesina and other economists demonstrates that there is no logic to establishing causality between corruption and growth.

Factors leading to corruption

Corruption is not an independent variable or in other words it is not a factor that somehow just occurs on its own. It is a symptom of a larger societal condition. There are two types of conditions.

One, it can represent a society that has incorporated say, bribes for not paying traffic summonses as being a part of daily life. Policemen may have the incentive to continually accept small bribes to supplement their pitiful income. People who whine about this injustice fail to demand that their policemen are better paid.

This is an example of where corruption is a mandatory part of society. Bribes are used to grease the wheels that turn everyday in daily life. While I condemn this logic, there are scholars who argue that without bribes, everything would come to a grinding halt and there would be no growth. This argument highlights the complexity of corruption that extends beyond the issue of ethics.

The second type of condition is what, for a lack of a better term, I would call endemic corruption. In 1993, the World Bank wrote about the making of the 'East Asian miracle'. It pointed out that in the absence of market forces determining resource allocation, governments stepped in to actively play a role in allocation.

In political economy literature this is called 'husbandry' such as the chaebol cooperation and coordination between big businesses, banks and the government in South Korea. Another version of husbandry is when governments create 'contests' that combine competition with the benefits of cooperation, among firms and between government and the private sector.

The key feature of each contest is that the government distributes rewards such as access to credit or foreign exchange, based on performance, which the government and competing firms monitor. Now to the rest of us, doesn't this sound like a potential formula for cronyism and corruption? But it isn't when it is a miracle of economic growth.

Instead of trying to haplessly figure out how corruption and growth interact, the NST should focus on something closer to home. 52 percent of the CPI respondents felt that the freedom of press helped the most in reducing the level of corruption by foreign companies and senior public officials.

Now that's something easy to understand for the oldest newspaper in the country.

TREENA WU is an economist and public policy analyst pursuing her PhD. She is currently residing in New York.