Corruption in its various forms – bribery, procurement fraud, illicit payments, embezzlement – continues to inflict massive damage on economies worldwide and hurts the poorest of those in our societies. Extensive academic research over many years and across many countries from the likes of the World Bank supports this view.
This article spells out the dark shadow corruption casts on the economic and social system as well as the implications for global development.
Estimates of the global cost of corruption
While exact measurement remains challenging, recent estimates and research provide a sense of the scale.
- The United Nations recently estimated the global cost of corruption at 5% of the world’s GDP. With global GDP projected to be around US$115 trillion in 2025, this potentially equates to about US$5.75 trillion lost globally to corruption and related illicit flows.
- Research from the International Monetary Fund (IMF) estimates that bribery alone – a subset of corruption – costs the global economy roughly 2% of global GDP
These figures put into stark relief the macroeconomic burden of corruption – not just as a moral or local governance issue, but as a global drag on growth, investment and development.
Government revenue and public investment suffer
Corruption depresses tax compliance, diverts public funds and reduces a state’s capacity to deliver vital services such as health, social care, education, or infrastructure.
The IMF has made clear that countries with systemic corruption collect significantly less tax revenue relative to similar but cleaner peers, hampering public-sector productivity and long-term economic growth.
Public-spending priorities skewed toward high-risk, low-return projects
When corruption infiltrates procurement and contracting, governments often favour large-scale, high-value projects where illicit gain is greatest, over essential social services.
As the OECD and others have pointed out, infrastructure, defence, or high-cost construction projects may be significantly overfunded, while primary healthcare, basic education, sanitation and maintenance are sidelined.
Weak institutions, eroded trust and reduced investment
Corruption undermines transparency, erodes citizen trust and creates an unpredictable environment for private-sector businesses and investors.
Surveys by watchdog organisations like Transparency International reveal that investors avoid markets with high corruption risk due to uncertainties around enforcement and regulatory consistency.
Market distortions, suppressed competition and bureaucratic rent-seeking
Corruption often encourages additional layers of bureaucracy and red tape, as officials build in complexity to maximise rent-seeking opportunities. Rent-seeking – increasing one’s wealth without contributing to a nation’s productivity – raises barriers for SMEs, stifles competition and discourages entrepreneurship.
Infrastructure and investment projects lose credibility and viability
Because corrupt practices raise the overall cost of projects, discourage transparency and increase political or financial risk, many worthwhile investment projects become unviable. Infrastructure projects are particularly vulnerable: cost overruns, substandard work, or outright abandonment are common when corruption infiltrates procurement.
The Global Infrastructure Anti-Corruption Centre notes that structural underinvestment and poor-quality capital projects sharply reduce long-term economic growth potential.
Financial instability and inequality deepen
Corruption affects not only the public sector but also private-sector financial systems. Illicit financial flows, money laundering and corrupt lending practices increase systemic risk. The 2008 global financial crisis provides evidence of this.
The corrupt activities of a few key players almost led to the total collapse of the world banking system. There has been a significant increase in the risk profile of many countries, both developing and developed, as a direct result of that crisis.
Understandably, the IMF argues that corruption undermines financial oversight, reducing banking stability and increasing the likelihood of crises.
As the United Nations Development Programme has analysed, corrupt systems also widen inequality: the well-connected gain access to public contracts, markets and economic opportunities, while the poor, who rely most on public services, suffer from diverted resources and degraded services.
Why it matters: the human and development cost
Beyond macroeconomic statistics, corruption carries severe social consequences. When access to essential services depends on personal networks or bribes, vulnerable populations – the poor, rural communities and marginalised groups – are disproportionately harmed. Often, as the World Bank has made clear that education, healthcare, water, justice and mobility become privileges rather than rights.
When corruption becomes systemic, tax morale weakens, policy reforms stall, private-sector investment declines, the pace of innovation slows and inequality deepens, damaging long-term development prospects.
The need for effective action
Addressing corruption requires sustained, co-ordinated reform, not rhetorical commitment. Key measures highlighted by experts include:
- transparent procurement and public-finance systems with strong audits
- independent anti-corruption institutions and courts free from political influence
- protection for whistle-blowers, journalists, and civil society
- international cooperation to track illicit financial flows and recover stolen assets
- public education and cultural change so corruption is no longer normalised.
Final word
Corruption is not a peripheral problem. It is a structural challenge that drains trillions from global GDP, distorts markets, deepens inequality and undermines trust. It denies public services, blocks opportunity, degrades infrastructure and suppresses human potential.
Combating corruption must therefore sit at the heart of any credible strategy for sustainable development, social justice and equitable economic growth. Without deep reforms in governance, transparency and public finance, meaningful progress will remain elusive.
Governments must stand up and fight against corruption: at stake is sustainable and equitable economic growth in their national economies.
References
- GIACC (2024) Global Infrastructure Anti-Corruption Centre Reports. GIACC.
- IMF (2017) Addressing Corruption with Clarity. International Monetary Fund.
- IMF (2019) The True Cost of Corruption. IMF Finance & Development Magazine.4
OECD (2015) Consequences of Corruption at the Sector Level and Implications for Economic Growth and Development. Organisation for Economic Co-operation and Development.
- Transparency International (2023) Corruption Perceptions and Investor Risk Survey. Transparency International.
- UNDP (2021) Human Development Perspectives: Governance and Corruption. United Nations Development Programme.
- United Nations (2018) Statement to the UN Security Council on the Cost of Corruption. United Nations.
- UNODC (2020) United Nations Convention Against Corruption Implementation Review. United Nations Office on Drugs and Crime.
- World Bank (2022) Governance & Corruption Overview. World Bank Governance Global Practice.
About the author
Professor of global economy at Cranfield School of Management, Joe Nellis CBE is one of the UK’s most experienced and well-known economists, with four decades of experience commenting on UK, European and global macro-economic trends.
Joe is a frequent commentator to national print and broadcast media on issues such as public investment, GDP and growth, tax and the wider economy, as well as data points such as inflation, unemployment and interest rates.
He has published 19 research and subject-based books and over 200 academic and practitioner journal articles. His research encompasses analysis of business developments in a changing world in terms of the macroeconomy, the role of government, the impact of technology, societal and demographic trends.