Reducing corruption takes a specific kind of investment | Efosa Ojomo


So in 2011, someone broke into my sister’s office at the university
where she teaches in Nigeria. Now thankfully, the person was caught,
arrested and charged to court. When I get into court, the clerks who were assigned
to my sister’s case informed her that they wouldn’t be able
to process the paperwork unless she paid a bribe. Now, at first she thought
it was part of a practical joke. But then she realized they were serious. And then she became furious. I mean, think about it: here she was,
the recent victim of a crime, with the very people
who were supposed to help her, and they were demanding a bribe from her. That’s just one of the many ways that corruption impacts
millions of people in my country. You know, growing up in Nigeria, corruption permeated
virtually every element of the society. Reports of politicians embezzling
millions of dollars were common. Police officers stealing money or extorting money
from everyday hardworking citizens was routine practice. I felt that development
could never actually happen, so long as corruption persisted. But over the past several years, in my research on
innovation and prosperity, I’ve learned that corruption is actually
not the problem hindering our development. In fact, conventional thinking on corruption
and its relationship to development is not only wrong, but it’s holding
many poor countries backwards. So, the thinking goes like this: in a society that’s poor and corrupt, our best shot at reducing corruption
is to create good laws, enforce them well, and this will make way for development
and innovation to flourish. Now, it makes sense on paper, which is why many governments
and development organizations invest billions of dollars annually on institutional reform
and anti-corruption programs. But many of these programs
fail to reduce corruption, because we have the equation backwards. You see, societies don’t develop
because they’ve reduced corruption. They’re able to reduce corruption
because they’ve developed. And societies develop
through investments in innovation. Now, at first, I thought
this was impossible. Why would anyone in their right mind invest in a society where,
at least on the surface, it seems a terrible place to do business? You know, a society where
politicians are corrupt and consumers are poor? But then, the more I learned about the relationship
between innovation and corruption, the more I started
to see things differently. Here’s how this played out
in sub-Saharan Africa as the region developed
its telecommunications industry. In the late 1990s, fewer than five percent of people
in sub-Saharan Africa had phones. In Nigeria, for example, the country
had more than 110 million people but fewer than half a million phones
in the whole nation. Now, this scarcity fueled
widespread corruption in the industry. I mean, public officials who worked
for the state-owned phone companies demanded bribes from people
who wanted phones. And because most people
couldn’t afford to pay the bribes, phones were only available
to those who were wealthy. Then an entrepreneur named Mo Ibrahim decided that he would set up
a telecommunications company on the continent. Now, when he told his colleagues
about his idea, they just laughed at him. But Mo Ibrahim was undeterred. And so in 1998, he set up Celtel. The company provided affordable
mobile phones and cell service to millions of Africans, in some of the poorest and most corrupt
countries in the region — I mean countries such as Congo, Malawi, Sierra Leone and Uganda. You see, in our research,
we call what Mo Ibrahim built a “market-creating innovation.” Market-creating innovations transform
complicated and expensive products into products that
are simple and affordable, so that many more people in society
could access them. Now in this case, phones were expensive before Celtel made them
much more affordable. As other investors —
some of his colleagues, actually — saw that it was possible to create
a successful mobile phone company on the continent, they flooded in with billions
of dollars of investments. And this led to significant
growth in the industry. From barely nothing in 2000, today, virtually every
African country now has a vibrant mobile
telecommunications industry. The sector now supports
close to one billion phone connections, it has created nearly four million jobs and generates billions of dollars
in taxes every year. These are taxes that governments
can now reinvest into the economy to build their institutions. And here’s the thing: because most people no longer
have to bribe public officials just to get a phone, corruption — at least within
this industry — has reduced. Now, if Mo Ibrahim had waited
for corruption to be fixed in all of sub-Saharan Africa
before he invested, he would still be waiting today. You know, most people who engage
in corruption know they shouldn’t. I mean, the public officials
who were demanding bribes from people to get phones and the people
who were paying the bribes — they knew they were breaking the law. But they did it anyways. The question is: Why? The answer? Scarcity. See, whenever people would benefit
from gaining access to something that scarce, this makes corruption attractive. You know, in poor countries, we complain
a lot about corrupt politicians who embezzle state funds. But in many of those countries,
economic opportunity is scarce, and so corruption becomes
an attractive way to gain wealth. We also complain about
civil servants like police officers, who extort money from everyday
hardworking citizens. But most civil servants
are grossly underpaid and are leading desperate lives. And so for them, extortion or corruption
is a good way to make a living. You know, this phenomenon also plays
itself out in wealthy countries as well. When rich parents
bribe university officials — (Laughter) When rich parents
bribe university officials so their children can gain admission
into elite colleges, the circumstance is different, but the principle is the same. I mean, admission
into elite colleges is scarce, and so bribery becomes attractive. The thing is, I’m not trying to say there shouldn’t
be things that are scarce in society or things that are selective. What I’m just trying to explain is this relationship
between corruption and scarcity. And in most poor countries,
way too many basic things are scarce. I mean things like food, education, health care, economic opportunity, jobs. This creates the perfect breeding ground
for corruption to thrive. Now, in no way does this
excuse corrupt behavior. It just helps us
understand it a bit better. Investing in businesses
that make things affordable and accessible to so many more people attacks this scarcity and creates the revenues for governments
to reinvest in their economies. Now, when this happens
on a countrywide level, it can revolutionize nations. Consider the impact in South Korea. Now, in the 1950s, South Korea was
a desperately poor country, and it was very corrupt. The country was ruled
by an authoritarian government and engaged in bribery and embezzlement. In fact, economists at the time
said South Korea was trapped in poverty, and they referred to it
as “an economic basket case.” When you looked
at South Korea’s institutions, even as late as the 1980s, they were on par with some of the poorest
and most corrupt African countries at the time. But as companies like
Samsung, Kia, Hyundai invested in innovations
that made things much more affordable for so many more people, South Korea ultimately became prosperous. As the country grew prosperous, it was able to transition
from an authoritarian government to a democratic government and has been able to reinvest
in building its institutions. And this has paid off tremendously. For instance, in 2018, South Korea’s president
was sentenced to 25 years in prison on corruption-related charges. This could never have happened decades ago
when the country was poor and ruled by an authoritarian government. In fact, as we looked at most prosperous
countries today, what we found was, they were able to reduce corruption
as they became prosperous — not before. And so where does that leave us? I know it may sound like I’m saying
we should just ignore corruption. That’s not what I’m saying at all. What I’m suggesting, though, is that corruption, especially
for most people in poor countries, is a work-around. It’s a utility in a place where there are fewer
better options to solve a problem. Investing in innovations that make
products much more affordable for many people not only attacks this scarcity but it creates a sustainable
source of revenue for governments to reinvest
into the economies to strengthen their institutions. This is the critical missing piece
in the economic development puzzle that will ultimately
help us reduce corruption. You know, I lost hope
in Nigeria when I was 16. And in some ways, the country
has actually gotten worse. In addition to widespread poverty
and endemic corruption, Nigeria now actually deals
with terrorist organizations like Boko Haram. But somehow, I am more hopeful
about Nigeria today than I have ever been before. When I see organizations
investing in innovations that are creating jobs for people and making things affordable — I mean organizations
like Lifestores Pharmacy, making drugs and pharmaceuticals
more affordable for people; or Metro Africa Xpress, tackling the scarcity of distribution
and logistics for many small businesses; or Andela, creating economic opportunity
for software developers — I am optimistic about the future. I hope you will be, too. Thank you. (Applause)

71 Replies to “Reducing corruption takes a specific kind of investment | Efosa Ojomo

  1. corruption is one of the biggest disease today . corruption in the whole system and corruption of the human mind .

  2. President Trump is bringing the malfeasance and massive corruption of the Democrat party, the Deep State, and the leftist media to light. And there will be justice done upon them.

  3. Isn't Nigeria along with a few others in Africa one of the countries which accepts "rape" as an embedded mentality in their mainstream media? If THAT isn't corruption in one of its WORST forms, I honestly don't know what is.

  4. Inorder to bring innovation, build infrastructure and create jobs, u need lots of money, manpower and planning. Where will these resources come from? From the stashes of corrupt officials. And the cycle continues until and unless an independent source of capital enters the field to support materially.

  5. By the way, use the search engine "Ecosia". That is a nonprofit Company which spends almost all money they earn into tree-planting.☺👌👌

  6. How do we heal someone with a lack or diminished capacity for empathy, which imo is the foundation of corruption? Ideally, these people, upon being identified should be barred from holding any sort of position in society with potential for significant influence. But where are the resources to then eventually provide the care these people need to return to health? I don't believe we're looking in the right direction when it comes to mental/emotional health, and I don't believe we currently have a true understanding of all facets of illness to be able to provide proper care. While this is the truth, people will remain sick, they'll remain in power, and corruption won't go away.

  7. talking about telecommunications, in the past, very expensive. today, cellular competition makes cheaper telecommunications service price.

  8. This isn't true because the US government is by far the most corrupt government to have ever existed on planet earth of all time. The US is founded on genocide and holocaust of Native American Indians. Metal of honors provided for slaughtering of innocent women and children. To this day, the mass holocaust that makes Hitler look like a school girl, still not taught in school. 500 years since 1492 and still corrupt so I don't buy this bullshit. If your foundation is bloodshed then your government will forever be corrupt.

  9. Good luck with distributing taxes into your economies. Everything will be distributed between the pockets of the same people. Punish them by publicly hanging. This is how it will end

  10. read it before, creating the market when there is none. The hardest thing was to have electricity and the road which leads to the most remote outposts of Africa, yet he found investors to build the roads and grid, respect him for celltell

  11. Corruption in Nigeria has moved on. It's still endemic but there is nothing which would entice me to invest there. Now Nigerians deal in stolen phones. There is not even one prosperous Country in sub Saharan Africa.

  12. I can see the connection that the speaker is making, that lack of economic prosperity leads to corruption, but he forgot the unique South Korean element: the chaebols. chaebols are 8 elite families that run corporations with a cozy relationship with the South Korean government and, at times, the South Korean military. Basically (I suggest you do your own research) the chaebols are companies in a free market economy but are playing with a different rule book that gives them an uncompetitive advantage. South Korean has the nick-name of The Republic of Samsung as 1/5 of the population works for that company. I don't think South Korean is a model to hold up without mentioning the chaebols and the costs that come with it.

  13. Corruption is not some kind of petty crime, but rather a tool of power…" -CGP Grey https://youtu.be/rStL7niR7gs 9:35

  14. Corruption comes with consequences. If the money to corruption ratio isn't right, no one will do it. It's not worth the discomfort. Thanks for something we've all known

  15. Alternatively, we could just cure the Psychopathy and Narcissism that drive corruption. All we need is a genomic vaccine that replaces DRD4 with DRD 1-3-5-6-7.

    Corruption/Psychopathy are just evolutionary survival mechanisms for already corrupt societies, but the also embed and worsen corruption. Remove it, remove the cancer.

  16. This is very true, my father work in govt department. He used to take bribe just to meet our family daily needs. Then after many years he started real-estate business along with the work it paid off really well. Now he helps people in return never takes a single rupee

  17. Great points but Nigerian government have so much money from oil but it’s not reinvested in the country . In some country yes lack of money is the source of corruption but in some countries it’s lack of true leadership foreign interventions and weak law enforcement is the problem

  18. Death penalty for the corrupt is the only solution . But no cat would want to trap itself . So it will never pass as a law

  19. India is very corrupt. You can't do anything without bribery. Getting a politicians punished for corruption in India is nearly impossible.

  20. When I was in Ghana I asked a teenage boy, 'What do you want to be when you grow up?'
    He responded instantly and enthusiastically
    "I wanna to be a politician!"
    I was very impressed and asked what do you want to do as a politician. He responded bluntly
    "That is how you get all the money"
    *Palm to face*

  21. NO!! Material prosperity is NOT a solution. Only when the many people that have little demand govts that protect both the common good AND the ecology by rejecting private wealth inequity and extractive business practices, only then will earth, and its humans, achieve a sustainable, just and corruption free peace.

  22. GLOOMY Voice переведите это видео! Вот точно то что Оооочень актуально в России!

  23. But reinvesting will blocked by the constructed market. Population are telephony-mans, and worked places are created, one unit can't work seriously on 2 places. And corruption's masters don't give up so easy, they should criminal fight for power over his market.

  24. How many millions of $ of bribe did the phone CEOs have to paid the officials to get their companies started and continue.

  25. HBS Prof Clayton Christensen & Efosa Ojomo pitched this talk to SXSW[Austin TX] and they rejected them and had AOC instead. I felt better about my SXSW rejections. TED talks are better than SXSW anyway. I talked to Efosa and he is a gentleman. Several years ago I helped 2 NGOs develop MOOCs in French for Congo & Portuguese= Angola. World Mentoring Academy MOOC is multilingual for 400 courses. And support 200+ College credit tests like AP. CLEP, DSST, etc. Students can earn over 100 College degrees from USA State Colleges for less than $8k books & College fees and earn it in their hometown.

  26. Taxes are NOT "used by the government to re-invest into the economy".
    Taxes do NOT fund public spending. It's actually the opposite.
    Taxes are only used by the government to enforce the use of a certain currency.
    The People will never prosper or emancipate themselves economically if we don't gain the consciousness of how a currency works.
    #ModernMoneyTheory #MMT

  27. I recently listen to a talk about a rather opposite trend: Investment in a region's institutional quality can give a better return than investing in its infrastructure, because the return on investment in infrastructure diminishes with decreasing quality of governance. I think his talk relates to this paper:
    http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.169.8569&rep=rep1&type=pdf
    (Andrés Rodríguez-Pose, London School of Economics)

  28. Also, ensuring that the money stays within the area secures economic growth. If the money moves offshore, then the economy lessens.

  29. Corruption is ideology problem. Investing is not gonna help, if the idea of stealing is still pardoned

  30. He's right in everything he says, he did however pass over the transition in telecom that's happened from them being state controlled institutions to existing in a competitive market place. Corruption (in terms of exploiting everyday people) is far more prevalent in state institutions than it is in businesses in competitive markets, Africa still has a long way to go to make it as easy to set up and run a business as it is in the richer countries. South Korea now ranks 5th in the Ease Of Doing Business, in 2006 it ranked 27th, Singapore, which made the transition to wealth a decade before SK ranks 1st, Georgia is a big mover up the EODB rankings and has a fast growing economy as a result. Only one 'African' country ranks in the top 30 in the index – Mauritius in 13th – which is by far the richest country per capita GDP in Africa, most other African countries are near the bottom of the list.
    To become wealthy a countries first step needs to be to unleash their domestic businesses from state subjugation.

  31. How can we get all the plastic Anglo-Saxon yuppies from the plum positions here in the USA?
    Is it not corruption? They are not even an ethnical majority.

  32. Say something about China. What if a country only plunder resources, capitals for its state own enterprises to prosper.

  33. This is nonsense.
    Speaker assumes that African communities are capable of shedding corruption and dramatically increasing intellectual horsepower, educational attainments, professional aptitude, etc.
    Everything history and relevant sciences tell us contradicts this.

    We could pour all the money in the world into African or muslim nations, and in the end we would be barely better off compared to burning our cash on a bonfire.

    Before any significant change, you would need to change core culture and genetics. Which just will not happen.

  34. This exact situation was present in Pakistan in the late 80's and early 90's. Thousands of dollars were paid in bribe to "Pakistan Telecommunication Limited" for a landline phone connection until Paktel, Instaphone & Mobilink started providing cell phones at relatively cheaper rates. By the late 2000's PTCL would be giving free connections and for under $5 a month, you had unlimited calls. The problem however is still this, corruption from the system may have been removed, but the people who provide the service are still the same, which means a simple complaint can take months to resolve, or not be resolved at all. Corruption is no doubt an immense problem that plagues humankind, but the very basic ethics and morals that shape a person is still the biggest problem of them all.

  35. RahSum-

    Scarcity breeds Corruption

    South Korea's example, which earlier was highly corrupt, as innovation came in via Samsung, Hyundai etc. Corruption reduced. Recently a person was given a very long term prison sentence on corruption charges, which would have been impossible back then.
    Look at her now!😉

    Innovation can reduce scarcity and hence, corruption. Example of Nigeria. Expensive mobile phones coupled with scarce goverment control led to scarcity. But, when innovation came and simple and cheap mobiles were introduced… Corruption plummeted.

  36. Technology is liberty.

    Democratizing solutions (making them inevitably available to everyone) always leads to prosperity. 💥 ❤️ 💥

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