Corruption takes place in transactions between private individuals or firms and public officials; thus, it is the misuse of public funds and the failure of public trust that is of particular concern. Corruption seriously undermines the effectiveness of government. Over time corruption tends to corrode popular confidence in public institutions. This makes it harder to raise the standards of public service, deflects public debate away from economic performance toward this single issue' and in extreme cases prompts (or at least provides a justification for) violent changes in government.
"Rent-seeking" can become an obsessive preoccupation. Public officials will do nothing without bribes, and many people are unproductively employed in securing their favours or buying their silence. Corruption can thus become an institution's [raison d'etre], rather than a minor aspect of its activities. In extreme cases, such as in countries which are major exporters of illegal drugs, administration in entire regions and arms of government may become perverted by corruption. It tends to favor those with economic or institutional power.
Some corruption is on such a scale that it has major economic consequences: it may stimulate the illegal export of capital or result in large projects being awarded to contractors (often multinational companies) according to the size of their bribes rather than the quality of their performance.