Economic austerity has fuelled the fight against corruption in many countries: here
a march in Rio de Janeiro, Brazil.
First day in prison for former Filipino president Joseph Estrada, arrested in April
2001.
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The
size of world corruption
Before you
can measure corruption, you have to know what it is. The United Nations and the World
Bank have adopted the sober definition offered by Transparency International, which
calls it “the misuse of public power for private profit.”
But even its authors recognize the limits of this description since it takes no account
of private sector corruption. To understand this, it’s best to look at how graft
works in practice. A bribe, according to the English dictionary, is “a sum of money
or other favour, given to someone in authority so as to influence their opinions
or behaviour.”
Putting a figure on the amount of corruption in the world is very hard but also irresistible.
Patrick Moulette, executive secretary of FATF (Financial Action Task Force on Money
Laundering), says there is “no financial basis to measure the extent of this illegal
activity. All the figures given are fictitious and unscientific.”
FATF documents, however, cite the International Monetary Fund’s estimate of $80 billion
a year. In comparison, the total of criminally-acquired capital is reckoned at between
$500 and $1,500 billion—two to five percent of the gross world production.
Case studies are a much more accurate guide. One in Milan, conducted before and after
Operation Mani Pulite (Clean Hands), showed that the city’s public works budget had
been inflated by 30 to 40 percent. The airport extension project, for example, could
have been cut from 2,610 billion lire ($1.1 billion) to 1,990 billion ($860 million).
Transparency International has in the past few years published a Corruption Perception
Index (CPI), and more recently, an index of corruption in exporting countries, the
Bribe Payers Perceptions Index (BPI). Both are based on rigorous opinion polls among
businessmen, financial analysts, journalists and sometimes the general public. They
are not exhaustive (not every country is represented) and remain subjective (because
they measure corruption as perceived by those asked). But despite these two drawbacks,
they give a meaningful picture of the situation and, in the absence of other surveys,
the indexes have been accepted by public opinion.
In 2001, the CPI index revealed that Finland, Denmark and New Zealand were seen as
the least corrupt countries, while Indonesia, Uganda, Nigeria and Bangladesh came
out bottom of the list.
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Corruption
may be as old as government, but rapid globalization has given it alarming new dimensions.
For the United Nations, the scourge has become a top priority, although so far, the
battle is being waged in thick fog
Public corruption is
a crime as old as government itself. In the fifth century BC, Plato talked about
it in his Laws. Two centuries later, the Indian political reformer Kautilya1 listed
40 temptations that civil servants might yield to. But the state of corruption today
is unprecedented in at least two respects: scandals are erupting the world over,
and people are no longer in the mood to tolerate them.
In less than a year, two sitting presidents—Joseph Estrada in the Philippines and
Alberto Fujimori in Peru—have been forced to resign, while a former president—Carlos
Menem of Argentina—has been put under house arrest. In each case, the main legal
charges and the immediate public outcry against them involved corruption.
Something that until recently was seen as just an internal government affair has
become an explicit priority for all international bodies, from the G-8 nations and
the World Bank to the United Nations, which plans to draft an anti-corruption convention
by 2002. This surge of activity reflects various concerns, but has been fed by a
single process: globalization.
The first “mandate” on corruption received by international bodies has come from
governments themselves. Twenty years of ever-faster financial transactions, spurred
by deregulation and the rise of electronic communications, has turned money gained
from criminal activities into a source of political and financial instability. And
money embezzled through corruption has gone hand-in-hand with the money made by organized
crime.
“These two kinds of crime feed off each other, hiding and recycling their profits
in the same way,” says Daniel Dommel, president of the French branch of the NGO Transparency
International. “To stay out of sight, organized crime uses corruption, which weakens
institutional safeguards against such criminals.”
In recent years, several scandals have revealed the extent of the scourge. In the
summer of 1998, the International Monetary Fund (IMF) lent Russia eight billion dollars
to stave off the collapse of the ruble. Benyamin Sokolov, Russia’s chief auditor,
told a BBC interviewer in November that year: “We have looked into what happened
to some of the IMF money and we have to admit that several billion dollars did not
go to the programmes they were earmarked for. Some of it was simply stolen.”
The following summer, the biggest money-laundering scandal in U.S. history erupted,
with the Bank of New York at its centre. According to the FBI, the Russian mafia
used this venerable financial institution to funnel $10 billion back into the Russian
economy after its passage through the tiny Pacific island-state of Nauru, famous
for “offshore” banks that ask few questions of their customers.
“Forty years ago, just one place in the world, Switzerland, guaranteed secrecy for
its banking clients, but today there are more than 50 such countries,” says Yves
Mény, head of the Robert Schumann Centre at the European University Institute
in Florence and author of Democracy and Corruption in Europe (Cassell, London, 1996).
Monitoring financial movements, particularly through tax havens, is now one of the
main features of the battle against corruption.
An
annual blacklist
The
Financial Action Task Force on Money Laundering (FATF), which grew out of meetings
of the G-8 countries and is based at the Organization for Economic Cooperation and
Development (OECD), has since 2000 published an annual blacklist of the most financially
suspect countries, sending a sharp jolt through the genteel world of international
finance.
“We want to get all banking centres, including the least willing, to conform to international
standards,” says FATF executive secretary Patrick Moulette. “We’re exerting constructive
pressure on all of them, whether they’re tax havens like the Marshall Islands, Dominica
and Nauru, or countries such as Egypt, Israel, Lebanon and Russia. Note that we’re
removing Russia from our blacklist of 17 countries because it passed a law this summer
imposing tighter controls on its banking system.”
Economic interests are also pressing international organizations to crack down on
corruption. But not for moral reasons. Firms operating in the international arena—from
construction to water supplies—are horrified by the demands for ever-bigger kickbacks.
The
bribing game
“Economic
liberalization has sent the cost of bribes skyrocketing, but few have noticed,” says
Rob Jenkins, who teaches political science at Birbeck College (London). “During public
sector privatization, prospective buyers fight each other to bribe politicians and
civil servants. And with each new reform, firms that want to have a say in drafting
the new rules or simply want to know what the rules will be, are forced to make pay-offs
without getting any guarantees in return. I’ve seen that in every country where I’ve
looked at economic reform—in India, South Africa and Uganda. It is ironic that in
the early 1980s, the IMF and the World Bank promised that their liberalization programmes
would reduce the power of bureaucracy and thereby stamp out the source of corruption.”
To eradicate this kind of crime, the OECD in 1997 drew up a Convention on Combating
Bribery of Foreign Public Officials in International Business Transactions, which
has been signed so far by 33 countries. “Its main point is simple,” explains Dommel.
“It bans firms in the signatory states from paying kickbacks to foreign officials.
Until a few years ago, such “commissions” were tolerated in many countries. In France,
for example, they were officially tax-deductible. It was compared to going to confession
in church.”
The Convention’s many critics say it is a step in the right direction, but far from
enough. “It seems absurd to condemn bribing an official of a government-owned airline
and then shut your eyes to a kickback paid to an official of a private one,” says
Stuart Eizenstat, former U.S. under-secretary of state in the Clinton administration.
His comments are especially pertinent at a time when the economic fashion is to privatize
public services. Benoît Dejemeppe, a state prosecutor in Brussels and a corruption
expert, notes that the OECD convention is largely based on the Foreign Corrupt Practices
Act, which U.S. President Jimmy Carter pushed through Congress in 1977 in the wake
of the Lockheed bribery scandal that rocked governments in Europe and Japan. “In
over 20 years, only four major corruption scandals have led to criminal convictions,”
he says, “so I conclude the law isn’t strict enough.”
A third “mandate” against corruption comes from civil society, which has shown increasing
concern about the murky relationship between politics and money. “In the process
of worldwide ‘quasi-democratization’ and global access to information, what people
want above all else is transparency,” says Jenkins.
Eluding
all control
Until the end of the Cold War, the major political movements upheld widely contrasting
ideologies; how they were financed was seen as less important. Today, in contrast,
institutional political debate boils down to minor differences over how to apply
broadly similar economic programmes, all requiring big sacrifices by most of the
population. So it is no accident that anti-corruption campaigners have emerged at
the same time as economic austerity in Western Europe, financial crises in Southeast
Asia and Latin America, and structural adjustment programmes in many poor countries.
But the slowness of the anti-corruption process, the problems investigators come
up against as they try to trace international networks, the rarity and lightness
of the penalties—all have helped in fostering a good dose of cynicism. French journalist
Denis Robert has published several books about corruption scandals. His latest, (Révélation$)
written with Ernest Baeckes, is about how a Luxembourg-based clearinghouse called
Clearstream operates. Such institutions are vital to the business of banking since
they catalogue all transactions and list the people who make them. They nevertheless
encourage anonymity and elude all control.
An
insult to the poor
“The
very word ‘corruption,’ if it means a departure from the legal rules, is no longer
appropriate,” says Robert. “It’s the system that’s corrupt. And the institutions
never react until long afterwards. As Spanish judge Baltasar Garzón said,
the fight against corruption is a fight between a mammoth and a leopard.”
The battle is not only uneven but is being waged in thick fog according to five European
judges, all anti-corruption experts, who wrote an article in the French daily Le
Monde last May, soon after Robert’s book came out. “The main thing that emerges from
this investigation,” they wrote, “is the deafening silence of those responsible for
the system that is in the dock.… The tactic of hiding one’s head in the sand might
suggest that the book was a pointless exercise. But we think that it’s only just
started to tell the true story.… The book should help Europeans understand what clearinghouses
do and throw new light on the globalization of finance.”
The effectiveness of different ways to fight corruption is still being debated. But
everyone at least agrees on what the enemy is. Even James Wolfensohn, the Australian
president of the World Bank, raised the then taboo subject inside the Bank in 1996.
He called corruption a serious “cancer” that “insulted the poorest people by diverting
money to the richest.”
1. Author of
Arthashastra, a famous philosophical treatise. He was adviser to King Chandragupta
from 321 to 297 BC. |
