Corruption reduces levels of trust in dealing with both business and the
state. Consequently, corruption encourages the reliance upon ethnic, religious, family
and other ties, where contract enforcement relies on sanctions and reputational
effects within a defined group (Landa 1994). Business life becomes fractured into
clans or illegal mafias, with the loss of the benefits of wider cooperation and
competition. The efficacy of the general, inclusive and non-discriminatory legal rules
that are necessary for the operation of a modern, complex, market economy is
undermined (Hayek 1960; Weingast 2005; Hodgson 2006b).