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Corruption is a problem in countries across the world, with developing countries often believed to be more prone to it, although there is no evidence to suggest this is the case.
However, in the transition from a state-planned economy to a market economy, private enterprises inevitably have an element of corruption, which manifests itself in the subordination of business to any level of government administration, as well as the patronage of the government over business structures.
There are two functions that corruption possesses. The first is its negative function impeding economic development. The second, less commonly acknowledged one, is corruption plays a role of lubricant to stabilize ties between business and political authorities. At the initial stage of the transition to a market economy, the second function plays the major role, as it makes up for imperfections in the legal regime.
Appropriation of corporate opportunities signifies the emergence of a unique form of mutually beneficial combination of private and state interests. But without this combination, the development of entrepreneurial initiative and free market reforms wouldn't be possible. During this period, the purpose of anti-corruption efforts is not to eradicate it, since the corruption is an integral way to boost economic activity and create a free economic area that is free from the State-planned system. Rather the aim is to keep the corruption within certain limits, as its rapid interdiction would mean elimination of entrepreneurial initiative and a return to the times before the transition begins.
Inevitably in the course of development comes the moment when corruption reaches a certain turning point, after which its functions and its role change. When a market economy has been established, the necessity for corruption, peculiar to the transitional stage, disappears. Having fulfilled its historical role, it begins to impede development of a new social system, dragging society back to the transition phase, as corruption can only exist as an intermediary between traditional and contemporary economic cultures.