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Special Report: Corruption (Public Life)
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Robert Klitgaard 1 Excerpts from 'International Cooperation against Corruption' ;published in SPAN; Sept/Oct 1998 issue; page 38.
2 Watch this space for new additions!
3 Watch this space for new additions!
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Today, especially in Bengal, things are going terribly wrong. Many people believe it is because of the moribund bureaucracy - government, institutional, private ... whatever - that is responsible for this unacceptable state of affairs.

The objective of 'Stop'n Look!' is to throw the searchlight on the problems created by those people who are thriving in an obsolete bureacratic system - at our expense. We compile information from the media, as well as first-hand reports from our correspondents, that show how callous our elders have become.

You will be the ultimate judge of our future direction.

Viva la vox populi!

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Special Report: Corruption (Public Life)
1. Excerpts from 'International Cooperation against Corruption', by Robert Klitgaard ;published in SPAN; Sept/Oct 1998 issue; page 38.
Combating corruption is such a difficult and sensitive issue that many national political leaders who support such efforts in principle are hesitant to undertake them in practice. How can international cooperation help build support for fighting corruption, both nationally and globally?

Virtually all forms of corruption are proscribed by virtually all countries. Why then don't countries take more steps to reduce corruption? If countries have trouble fighting corruption, it may be because they lack sufficient will or sufficient local capacities, such as proper strategies and structures (including incentives), to prevent corruption. In some instances, local capacities are constrained by costs, in others by a a lack of know-how and in still others by insufficient efforts ti devise strategies to combat corruption.

International cooperation can help individual countries to develop new initiatives in which international cooperation could play crucial roles in combating corruption. One is the sponsorship of regional diagnostic studies. Countries would cooperate in organizing and funding, and then share the results of, private sector studies of systematic corruption in several areas (such as procurement, health care and courts). These studies would help identify systematic improvements that might be made and suggest how to ensure permanence of improvement through monitoring.

Corruption's Universality
In Belgium and UK, Japan and Italy, Russia and Spain and other countries, allegations of corruption play a more central role in politics than at any time in recent memory. Corruption is hardly a problem exclusive to developing countries or countries in transition. It is true that in Venezuela a local dictionary of corruption has been published in two volumes (Diccionario de la corrupcion en Venezuela, 1989). But it is also true that a French author put together something similar for his country (Gaetner, 1991). Probably every country could publish a similar work.

The fact that much corruption in developing countries has important industrial country participation is now commonplace. The non governmental organization Transparency International focusses on corruption in "international business transaction" and points out that there are First World givers of many Third World bribes.. In coming years, the World Trade Organization is likely to find that this issue is a central one.

The reminder that corruption is everywhere - in the private as well as the public sector, in rich countries and poor - is salutary, because it helps us avoid unhelpful stereotypes ... and convey unhelpful subliminal messages. It may suggest that all forms and instances of corruption are equally harmful. Even more perniciously, it may lead less discerning listeners or readers to conclude that because corruption exists in every country, nothing can be done ...

Corruption is a term with many meanings ... Viewed most broadly, corruption is the misuse of office for unofficial ends. The catalog of corrupt acts includes - but is not limited to :

  • bribery
  • extortion
  • influence peddling
  • nepotism
  • fraud
  • the use of 'speed money' (money paid to government officials to speed up their consideration of a business matter falling within their jurisdiction), and
  • embezzlement.
Although people tend to think of corruption as a sin of government, it also exists in the private sector. Indeed, the private sector is involved in most government corruption.

Effects of Corruption
Different varieties of corruption are not equally harmful. Corruption that undercuts the rules of the game - for example, the justice system, or property rights, or banking and credit, devastates economic and political development. Corruption that allows polluters to foul rivers or hospitals to extort exorbitant or improper payments from patients can be environmentally and socially corrosive. In comparison, providing speed money to get quicker access to public services and engaging in mild irregularities in campaign financing are less damaging.
Of course, the extent of corruption also matters. Most systems can stand some corruption, and it is possible that some truly awful systems can be improved by it. But when corruption becomes the norm, its effects are crippling. Such systematic corruption makes establishing and maintaining internationally acceptable rules of the game impossible, and is one of the principle reasons why the least developed parts of our planet stay that way.

Corruption as a System
Consider  two analytical points. First, corruption may be represented as following a formula:

    C = M + D - A
Corruption equals monopoly plus discretion minus accountability. Whether the activity is public, private or nonprofit, and whether it is carried out in Ouagadougou or Washington, one will tend to find corruption when an organization or person has a monopoly power over a good or service, has the discretion to decide who will receive it and how much that person will get, and is not accountable

Second, corruption is a crime of calculation, not passion. True there are both saints who resist all temptation and honest officials who resist most. But when bribes are large, the chances of being caught small, and the penalties if caught meager, many officials will succumb.

Combating corruption, therefore, begins with designing better systems. Monopolies must be reduced or carefully regulated. Official discretion must be clarified. Transparency must be enhanced.. The probability of being caught, as well as the penalties for corruption (for both givers and takers) must increase.

Each of these introduces a vast topic. But notice that none immediately refers to what most of us think of first when corruption is mentioned  - that is, new laws, more controls, a change in mentality, or an ethical revolution. Laws and control prove insufficient when systems do not exist in which to implement them. Moral awakenings do occur, but seldom by the design of our public leaders. If we cannot engineer incorruptible officials and citizens, we can nonetheless foster competition, change incentives and enhance accountability - in short fix the systems that breed corruption.

Anti Corruption Strategy
Fixing flawed systems is not easy. Successful examples of doing so exist, however, and they contain several common themes. 

Punish some major offenders : Successful strategies begin by "frying a few big fish". When there is a culture of engaging in corrupt acts with impunity, the only way to begin breaking it up is for a number of major corrupt figures to be convicted and punished.
Involve the people in diagnosing corrupt systems : Successful campaigns against corruption involve the people. If only they are consulted, citizens are fertile sources of information about where corruption is occurring. Ways of consulting them include:

  • carrying out systematic client surveys
  • setting up citizens' oversight bodies for public agencies
  • involving professional organizations consulting with village and borough councils, and
  • using telephone hot lines, call-in radio shows and educational programs
Business people and groups should participate with the protection of anonymity in studies of how corrupt systems of procurement, contracting and the like actually work. Such studies would emphasize systems and not individuals.

Focus on prevention by repairing corrupt systems : Successful anti corruption efforts fix corrupt systems. They use a formula such as C = M + D - A to carry out "vulnerability  assessments" of public and private institutions. Like the best public health campaigns, they emphasize prevention.

Of course, reducing corruption is not all that one needs to care about. If for example, so much money were spent attacking corruption and so much red tape and bureaucracy were created that the costs and losses in efficiency outweighed the benefits of reduced corruption, such efforts would be counterproductive. Ways in which countries can design effective anti corruption strategies are the following:

  • change the "agents" carrying out public activities
  • alter the incentives of these agents and of citizens
  • collect information in order to raise the probabilities of corruption being detected and punished
  • change the relationship between agents and citizens and increase the social consequences of corruption
In each case, one has to work through the putative benefits, as well as the many possible costs, of anti corruption activities.

Reform incentives : In many countries, public sector wages are so low that a family cannot survive on a typical official's salary. Moreover, measures of success are often lacking in the public sector, so that what officials earn is not linked with what they produce. It should be no surprise that corruption flourishes under such conditions.

Fortunately, around the world, experiments in both public and private sectors are emphasizing performance  measurement and the overhauling of pay schemes. Fighting corruption is only one part of a broader effort that may be called institutional adjustment, or the systematic recasting of information and incentives in public and private institutions (Klitgaard, 1995). Institutional adjustment is the next big item on the development agenda.

Political Will  
"What you say is fine," it might be argued, "but what if the people on top are themselves corrupt? What if the international business people and local business cliques have powerful incentives to do the corrupting? If the people on top in public and private sectors are benefiting, will the reforms you mentioned have a chance of taking hold?"

The worry is that corrupt officials on top are monopolists unwilling to sacrifice their rents, and international and local business people are locked in a prisoners' dilemma in which the dominant strategy is to bribe. A corrupt equilibrium is reached, as a result of which rulers and top civil servants and some private companies gain, but society loses.

What can be done in such a situation? The reflexive answer is "nothing". But consider the analogous question, "Why would national leaders , who are mindful of their self-interest, ever undertake free-market reforms, privatization and related policies, all of which sacrifice their personal control over the economy?" Yet such reforms have swept the world, as has the remarkable "third wave" of democratic reforms.

Some governments do, of course, resist establishing good governance. But in the decade ahead, the crucial problem will not be inducing governments to do something about corruption but rather helping them to decide what should be done and how. Because of democratic reform, new leaders dedicated to fighting corruption and improving public administration are attaining power as never before. Election campaigns from Nicaragua to Pakistan feature corruption as a major issue. And not just in developing countries, as public outcries about electoral campaigns in Italy and Spain, and negative publicity about campaign contributions in the United States, suggest. Many new leaders would like to improve customs and tax agencies, clean up campaign financing and elections, reduce bribery and intimidation in legal systems and the police, and in general, create systems of information and incentives in the public sector that foster efficiency and reduce corruption. Their problem is not political but know-how.

But it is also true that in many countries, leaders are of two minds. They may appreciate and decry the costs of systematic corruption, but they may also recognize the personal and party benefits of the existing, corrupt system. To assist them in moving toward a long-term strategy, it is necessary for several steps to be taken.

  • First, leaders must see that it is possible to make systematic improvements without committing political suicide. Sensitive consulting and technical assistance may help leaders learn from anti corruption efforts elsewhere, adopt a systematic approach and analyze confidentially the many categories o political benefits and costs.
  • Second, in developing strategies, leaders must recognize that not everything can be done at once. They should undertake behind closed doors a kind of cost-benefit analysis, assessing those forms of corruptions having the greatest economic costs (for example, corruption that distorts policies as opposed to determining who gets a specific contract) while considering where it will be easiest to make a difference. The anti corruption effort might begin where the public perceives the problem to be most acute. A good rule of thumb is that  to be credible, an anti corruption campaign must achieve some tangible successes within six months.
  • Third, leaders need political institutions. International collaboration can help provide it, permitting countries to admit to a common problem ("corruption is not just our problem, or my party's, or my administration's") and move together to address it. Indeed, international conditionality that applies across many countries might help a national leader justify anti corruption measures that might otherwise be embarrassing or difficult to make credible.
... Conclusion 
When corruption becomes systematic, fighting it must go beyond implementing liberal economic policies, enacting better laws, reducing the number and complexity of regulations and providing more training, helpful though these steps may be. Fighting systematic corruption requires administering a shock to disturb a corrupt equilibrium. It might include such steps as :
  • formation of a national coordinating body that is responsible for devising and following up on a strategy against corruption, along with a citizens' oversight board;
  • identification of a few key agencies or areas on which the anti corruption effort might focus its efforts in the first year, in the hope of achieving some momentum-building successes;
  • a capacity-building strategy within key ministries that takes the problems of initiatives (including incentive reforms) and information seriously; and
  • identification of a few major offenders whose cases will be prosecuted.
Combating corruption should focus on the reform of systems. It requires an economic approach, coupled with great political sensitivity. The design and implementation of the measures this article has been discussing must obviously be tailored to each country's conditions, but, at the same time, international cooperation can make a difference. Sometimes this may mean providing specialized technical assistance - for example, by organizing high-level anti corruption workshops or strategic consulting, or hiring international investigators to track down ill-gotten deposits overseas. International cooperation can help national leaders develop political resolve. Finally, international action can convey the useful truth that we are all involved in the problem of corruption - and that we must find solutions together.

About the author: Robert Klitgaard is Dean and Ford Distinguished Professor of International Development and Security at the RAND Graduate School, Santa Monica, California.

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