The recent arrest of the trader at the Swiss bank UBS for alleged illegal trading has highlighted the role of corruption in contemporary business. It could be argued that as the economy has become more globalised, the reverse take-over of companies to obtain public listings on respected stock exchanges has increased the probability of 
corruption.
Furthermore, the safeguards of corporate governance have increasingly been infringed. In the UBS case, it has cost the CEO, Oswald Gruebel, his job and led to losses of £.15bn for the bank.
Like the ‘bad apple’ in the barrel of good ones, the ‘rogue trader’ moniker hides a more complex and systemic reality. Should we worry about corruption?. If you subscribe to the Efficient Market Hypothesis (EMH) the costs of corruption are already included in the prices of financial assets. Furthermore, that if rational expectations hold in economic transactions then individuals will engage in forward-looking contracts, leading to equilibrium outcomes.
There are basic approaches to the economics of corruption:
- Corruption as ‘sand’: its grit damages the efficiency of economy’s machine. The Swedish economist, Gunnar Myrdal argued that argued public officials construct higher bureaucratic hurdles in order to demand bribes and thus reduced efficiency in production.
- Corruption as ‘oil’: The starting point is that corruption is merely a transfer and does not lead to a loss of social welfare. The American economist, Natahaniel Leff argued that, in respect of economic development, corruption increases social welfare because it allows economic agents to escape burdensome regulations.
At this level of economic abstraction, one may take a sanguine approach to the two perspectives. But at a more comprehensive and visceral level, corruption may develop a corrosive character, particularly in respect of discrimination.
The sub-title of the American sociologist Richard Sennett’s book The Corrosion of Character is “personal consequences of work in the new capitalism” in which he looks at the breakdown of traditional employment and the communities associated with it. In this environment, the imperatives of a flexible workforce means that discrimination in the employment bargain can flourish.
This appears to reinforce the economist Gary Becker’s ‘taste’ model to justify discrimination on the basis of gender, race, sexuality, disability and age. That is, some employers may indulge their employees’ and customers’ ‘taste’ for not being associated with certain groups. In segmented labour market theory discrimination may flourish in labour markets in general because of the splintered nature of each segment.
In the case of women, it may seem ironic that the outgoing President of the World Bank, Robert Zolliek recently pronounced that “women were an emerging market”. Followed by the news that the Australian armed forces has scrapped limits on women being in combat roles, it suggests its seems some kind of corner may be starting to be turned. This is nearly 220 years after the publication of Mary Wollstonecraft’s A Vindication of the Rights of Women in which she opposes the conventional view of the time that women should not have a public education.
Yet this age-old prejudice prevails as Cordelia Fine, the Australian social psychologist, dissects in her recent book Delusions of Gender. She likens the current vogue in neuroscience to use brain scans to reinforce the caricature that women are from Venus and men from Mars. Fine compares the current fashion for brain science (based on subjective interpretation of MRIs) to justify treatment of men and women in business with the C18th best seller An Enquiry into the Duties of the Female Sex. The author, the Reverend Thomas Gisborne, stated that the qualities of science, rationality, jurisprudence, political authority, abstraction and so on were the attributes of the male mind. Whereas, the female mind was unsuited to these pursuits as they cluttered women’s natural cognitive functions of soothing the labours of the male mind.
Many of the subscribers to the business pot boiling books on leadership and the sexes, who draw on neuroscience to make the same point, would probably find Gisborne’s vision historically quaint. Yet both suffer from no theory, limited evidence and contaminated data. Fine’s research extensively reviews scientific studies across a range of different disciplines to find little difference between sexes; mainly explained the social construction of gender. A bit like the difference across the social Rubicon of the Thames that divides North and South London. 
Casual observation could lead you to ask why is so much of British management dominated by mediocre provincial white boys? They tend to conform to some Stepford-like corporate culture that reproduces itself over time. Just the suits and haircuts seem to change but the essential construction remains. The objection could be made that there are a greater number of women in senior positions in firms. But the key issue is their distribution across different industries, for example under-represented in primary and secondary ones.
The nature of this form of corruption is made worse by the embrace of a quasi-scientific and medical aetiology that seeks out differences in the gender to reinforce the a priori ‘taste’ for employers to legitimate discrimination in the workplace. Drawing on alchemy to discriminate against any group corrodes the character of society and is less a form of ‘sand’ type of corruption than one that renders the machine obsolete and damages the economy permanently.