Privatization Movement and Ethics

difficult to control corruption across the world, especially with regard to developing countries and emerging economies. These countries depend on the investment from the developed countries for economic development, since they have large numbers of unemployed people. The governments face the enormous challenge of providing employment to the people. Foreign investment plays a crucial role in employing these people, and in its absence there may well be serious threats to political and economic stability.

Privatization movement and ethiCs Globalization, along with the advocacy of the New Public Management program, popularized the idea of privatization as a means to reduce costs and improve efficiency. One of the key questions is whether or not privatization reduces corruption. It is possible that privatization can reduce the scope of government intervention, thereby limiting the opportunities for corruption. Manzetti (1999) claims that although privatization has reduced the potential for corruption in the public sector, it also created several other problems, including a lack of transparency. However, the policies of privatization and contracting out have also created additional opportunities for unethical and corrupt behavior. Corrupt businesses can bribe the officials to get the contract. Contracts are sometimes awarded to businesses in which government officials have an investment. Most of the time, those with political connections have secured the bid for government contracts (Nellis and Kikeri 1989). Some of the countries do not have strict laws regulating the conflict of interest. On many occasions, government officials or ministers are in charge of contracting and therefore enjoy discretion in terms of awarding the contract to their own businesses. On many other occasions, the bureaucrats may not own any business, but will instead receive bribes as a reward for awarding the contract to their favored companies. This means that the officials can make money from the process without having to make any investment in business. The awardees of the contract, in their desire to make profits, provide low-quality services further undermining the efficiency. The contracting companies feel the necessity not only to recover the money they have paid as bribes, but also to profit substantially from their investments. As a result, they resort to the use of inferior materials. There are many stories of bridge and building collapses as a result of the use of poor-quality work. Private companies can use bribes to receive government contracts. The

companies receiving the contracts try to recover the money used in contracts by supplying shoddy materials and using shortcuts.

Susan Rose-Ackerman (2002) has shown how corruption during the privatization process can undermine both efficiency and state legitimacy. Zekos (2004) claims that in many societies, economic growth includes a substantial amount of corruption. When political power is used for economic gain, it redistributes resources from the poor to the rich, and in corrupt societies government bureaucrats devote their time and energy to the pursuit of rents affecting public institutions (Shleifer and Vishny 1993). Therefore, corruption can have a devastating effect on the functioning of countries by lowering the efficiency of economic and political system.

On most occasions, there is an Iron Triangle of corrupt individuals: government officials in charge of the award of the contract; the awardees of the contract; and the bureaucrats in charge of the inspection of the contract. Each part of the triangle is interested to gain as much as payoffs to the detriment of public interest. There is a cycle of corruption in government businesses conducted by the private companies which wastes scarce public resources.

In developing countries, many transnational companies engage in corruption. The foreign business interests with their bribes increase financial incompetence by adding extra and unjustified costs to routine government functions, thereby undermining governmental legitimacy (Hazlet and Sullivan 1994). At the same time, transnational corruption can cause inefficiency in national economies of the host countries, destabilizing the political situation and creating conflicts between the public and government officials (Hazlet and Sullivan 1994).

The bribing of the officials in foreign countries is currently prohibited by the United States. In many countries of the world, however, there are no strict laws prohibiting such bribes, which are regarded simply as an additional business expense. In many countries, gifts and other favors given to government officials are considered as cultural norms. Yet in other cultures providing gifts to the potential customers can be criticized as corruption or be regarded, at the very least, as ethically suspect (Lloyd 1993).

In the United States, there were allegations of corruption by the lobbyists, who are seen as trying to influence legislators. The lobbyists used different kinds of methods: buying expensive tickets to games, buying dinner, book deal for speeches and campaign contribution. With the passage