The last 15 years have seen a remarkable change in the perception of corruption at both national and international levels, driven in large part by civil society organizations and watchdog groups. In the many countries where corruption is endemic, but where public discussion had been most limited, it has become the focal point of increasingly open campaigns by civil society and political parties. In the international arena, a series of conventions at both the global and regional levels have influenced corporate codes of conduct and the agendas of development finance agencies. This increased awareness has achieved a notable toughening of anti-corruption legislation in many countries and spurred changes in corporate behavior. But these achievements remain quite modest in relation to the overall scale of the problem. There remains woefully
inadequate recognition of the ways corruption is intertwined with the larger necessities of eliminating poverty, halting climate change, and rebuilding failed states. What anti-corruption measures are now in place need to be vastly extended.
Corruption manifests itself in many different ways—from the looting of major assets to small-scale bribery, to political and party finance, to corruption both by and within multinationals, and to the interface with organized crime. The tales of large scale looting by the elite of many nations are sadly numerous—an accumulation of huge fortunes by a rogues’ gallery of heads of state, including Abacha of Nigeria ($4 billion), Suharto of Indonesia ($15 billion channeled to his family over 30 years) to Mobutu of Zaire ($4 billion, made and probably lost) and Nazarbayev of Kazakhstan (up to $1 billion pilfered from national oil revenues for special accounts). But at the other end of the spectrum, even minor acts of corruption—like small personal bribes to police or bureaucrats— can eat away at the fabric of society.
While the different forms of corruption may converge in a toxic stew at the national level in scores of countries, the goals of each form are distinct—and each needs to be approached with a different set of solutions. Corruption in political finance has only one objective: the retention of power. The arrival of multi-party states in the post–Cold War world has raised acute problems in political funding, since in only very few cases do such parties have extensive membership structures and, in even fewer cases, are these members able to contribute sufficient funding to finance electoral activities. But the cost of getting elected in a multi-party democracy is often quite high. In contemporary India, the cost of winning a parliamentary election has been estimated at $50,000; in Tanzania, the cost of running in a primary election has been put at $30,000. These sums effectively require candidates to seek investments that ultimately need to be repaid with interest frequently in the form of allocating contracts to financial backers once a party has achieved or retained power.
In Western democracies, the membership-based funding of major parties has become increasingly problematic and has led to a continuous revision of the legislation which governs political financing. This has seldom been successful. In 2003, the World Economic Forum published an assessment (based on 101 countries) of the extent to which legal party donations influenced subsequent government policy when the beneficiary party took power. This was found to be a medium-scale problem in 70 countries—including Canada, France, the United States, and Britain—and a high-level problem in 21 countries.
Well below the level of the elites in both kleptocratic regimes and democracies are the daily experiences of two to three billion of the world’s poor, who often have to bribe their way to get services that governments should provide for free. In 2001, in Pakistan, a Transparency International survey found that 90 percent of homes with access to public education paid an average bribe of $90 to teachers to ensure their children made it to higher grades—the equivalent of 20 percent of per capital gross domestic product. In the same year, surveys across Ecuador, Paraguay, and Bolivia found that the delivery of virtually any public service required a bribe. In Uganda, a 2009 survey found that citizens were obliged to pay bribes of between $20 and $60 for basic health services, even AIDS relief. In a 2009 assessment of India’s food distribution program, commissioned by the central government itself, some 40 percent of supplies were reported to have been diverted through corruption. In these and a host of other cases in the developing world, the acute inequality in access to resources gives rise to a massive industry of small scale corruption. And when one’s very survival is predicated on a pay-off, it highlights just how difficult it is to eliminate.
The drivers of petty corruption— survival, greed, compulsion from above, or guanxi (Chinese for “connections”)—are substantially different from that of larger institutionalized graft. Taking “commissions” by semi-skilled and skilled workers on extremely low incomes may be justified by those soliciting the bribe as a means of survival. But once the pattern is established, this can easily be regarded as a permanent source of additional income, with a high upper limit. In many cases, this form of corruption is institutionalized as police officials, or say, port managers, take a small daily allotment from revenues and pass a share upstream to their superiors. In the guanxi payments typical in China (but also prevalent in clan and tribal relations across Africa), the senior members of a family secure a position for a junior relative in the expectation of being rewarded by underthe-table extra income earned by the new appointee. In many cases, such networks become a means of simple survival in desperately challenged economies, rather than a means of retaining or cementing political power.
But the problem for those who would seek to destroy these networks and create more transparent governance is often that, regardless of the origins of these illicit deals, the pattern of corruption calcifies, adding layer upon layer that can persist for generations and across regimes. Indeed, the mechanics of Kenya’s Anglo Leasing scandal (in which the government grossly overpaid for passport and forensic equipment, siphoning millions of dollars into politicians’ pockets) were put in place in the latter years of the rule of the nation’s second president, Daniel Arap Moi, but the graft was perpetuated by his successor, Mwai Kibaki. Many cases such as this—and there are far too many to list here—have as much to do with the retention of political power through corrupt means as with the simple enrichment of crony networks.
While the origins of each type of corruption may be diverse, the phenomenon they create is always dynamic, like a cancer capable of morphing and attracting newly malignant players—to the point where it infects entire societies. As such, the remedies must be idiosyncratic to the country, society, and nature of the corruption. And, much like fighting cancer, the first and often most crucial step towards a cure is recognition.
International recognition of the problem, largely initiated by civil society, has strengthened over the past decade and has spawned a number of important initiatives. These have included the Organisation for Economic Co-operation and Development (OECD) Convention Against Illicit Payments in 1997, and the 2005 UN Convention Against Corruption. While the UN convention is more far reaching in scope (providing for the repatriation of corruptly gained assets) the OECD convention is the subject of a fairly effective review process by its signatory states, which the UN has so far been unable to achieve.
This new emphasis on drafting international law against corrupt practices has triggered a significant response by multinational companies. For example, all of the 2,200 companies in the UN’s Global Compact have committed themselves to abide by either TI’s Business Principles for Countering Bribery, or the comparable principles defined by the World Economic Forum’s Partnering Against Corruption Initiative. Although reality all too often has fallen short of the ideal, when cases of large-scale commercial corruption have come to light, tough judicial responses have at least triggered a new aversion to bribery by leading international companies. Here are just a handful of recent examples: the German engineering giant, Siemens, was fined $1.34 billion in 2008 for the widespread use of bribes to win overseas contracts; Loïk Le Floch Prigent, a former chairman of Elf, was charged in 2001 for corruption in the sale of frigates to Taiwan (all but implied was the collusion of the French government); in January 2010, Britain’s BAE Systems struck a plea bargain for $450 million in fines with the U.S. Department of Justiceand the U.K. Serious Fraud Office in connection with the Al Yamamah arms deal with Saudi Arabia where it was alleged that bribes of $1.5 billion were paid to Prince Bandar bin Sultan, a former Saudi ambassador to Washington; and, in January 2009, a subsidiary of Halliburton was fined $579 million for bribes paid to win a contract for a $4 billion natural gas plant in Nigeria’s southern delta region. But if these prosecutions are a glimmer of hope, they also highlight the massive and widespread practice of Western companies in perpetuating corruption.
An even more troubling threat to the emergence of a set of higher corporate principles is that all four of the BRIC countries—Brazil, Russia, India, and China—lie at the bottom of TI’s ”Bribe Payers Index,” with Chinese and Russian companies ranked as the worst offenders. In spite of this unpromising record, both countries are conscious of a shift in global attitudes and more active climate of prosecution. In 2008, Russia’s Basic Law against Corruption was introduced, partly to enable the country to support the UN’s and OECD’s anti-corruption initiatives. Even in China, the issue is coming to the fore. In 2006, Premier Wen Jiabao told a meeting of Chinese traders and investors in Africa: “Our enterprises must conform to international rules…must be open and transparent, should go through a bidding process for the big projects…and reject corruption and kickbacks.” These moves give hope that Russia and China will eventually become significant supporters of the international conventions that have helped shape global corporate behavior, although Beijing still opposes the adoption of the UN’s “peer group” monitoring system.
Meanwhile, multilateral agencies are awakening to the scope of the crisis and the potential role they might play in stamping out corruption. Many had previously ignored the issue of corruption, even as their activities provided substantial lubricants to encourage graft. The World Bank, for example, had by 1996 lent a cumulative $23.7 billion to Indonesia and $1.4 billion to Zaire, much of which went directly into the personal accounts of Suharto and Mobutu, respectively. In principle, World Bank President -Jim Wolfensohn (1995–2005) and Paul Wolfowitz (2005–07) began to reverse this trend, requiring stricter monitoring of loans and allocating additional funding for civil society projects. Between 2004 and 2009, funds committed to promoting “justice, law, and administration” accounted for roughly 20 percent of the bank’s overall lending.
Yet the imperative to continue lending and support development has prevented the bank from suspending its operations in countries where major, institutional corruption is rampant. Within a year of the public exposure in Kenya of the Anglo Leasing scandal, the World Bank and other donors had resumed lending as usual, although it was clear that elements of the scam (and its perpetrators) remained in place. And, in 2009, the expansion of lending as a response to the global economic crisis has made it even less likely that the World Bank and its sister agency, the International Monetary Fund, can be truly effective in combating corruption among their borrowers.