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Myth #1: Developing world hopelessly corrupt; Industrialized countries in Nirvana?

By Kaufmann | March 3, 2008 5 Comments »

Myth #1.  Developing countries, and governments in particular, are all rife with corruption, while corruption is virtually absent in much of the rich industrialized world.   

Actually, the reality is different. The evidence points to an enormous diversity in the extent of corruption within emerging economies, and among industrialized countries as well.  The data suggests that some emerging economies, like Botswana, Chile, and some of the Baltics, for instance, enjoy lower levels of corruption than some countries in southern Europe.

And the evidence is increasingly clear that corruption is not a challenge exclusive to the public sector. For starters, by definition it takes two to commit an act of bribery: the briber is a most often private, while the bribed is a public official or politician.  Through high level corruption, potentate conglomerates in some countries exert undue influence on the adoption of state laws, regulations and policies.  They are effectively engaged in what we call ‘state capture’.  In other countries the private elites may utilize subtler means to influence the state institutions and rules of the game for their own advantage, at the expense of a thriving and competitive private sector. Even where the reality is more nuanced than having outright capture of the state by a couple of oligarchs, the pernicious effect on competitiveness, productivity and growth can be vast. 

Of course, the evidence is also clear that most industrialized countries enjoy higher levels of governance and better corruption control than most developing countries.  It is in many poorer countries where corruption is particularly costly to their citizens, and where progress is most urgently needed.  But many multinationals, industrialized countries, and donor and multilateral agencies also need to do their part by addressing corruption in their own midst, and particularly focusing on governance in their economic, financial, and development aid links with developing countries. 

For instance, corruption in public works procurement for a project in a developing country can take place through the activities of a private multinational headquartered in a rich country.  Such multinational may be bribing a high official of the government in the recipient country.  The developing country government may be receiving the funding for a roads project through aid from a donor agency or multilateral bank, which may have failed to supervise properly — or worse. That is but one illustration of the global links in corruption.  Another one can involve money laundering and international financial centers: take for instance a corrupt country leader who plundered the public treasury or oil revenues of their countries, like the cases of Marcos in the Philippines or Abacha in Nigeria, among many others. They had little trouble in safely placing their looted proceeds in safe havens in rich country financial centers. To this day, the challenge of full  collaboration from rich financial centers in recovering looted assets still remains.

Corruption is a global challenge.  No country or institution is immune, though its extent varies a lot.  The challenge requires collective action by all.  By the industrialized, emerging and developing countries, by the public, private and NGO sectors, and by citizens around the world.

Topics: Aid Effectiveness, Corruption, Public Financial Management, Public-Private Linkages, Rule of Law, Transparency | | 5 Comments

5 Responses to “Myth #1: Developing world hopelessly corrupt; Industrialized countries in Nirvana?”

  1. David Hoffman Says:
    March 7th, 2008 at 3:07 pm

    It is much appreciated that Kaufmann acknowledges that corruption is not only a problem in developing countries, but in the developed Western world as well.

    Without that acknowledgement, efforts to reduce corruption in the developing world will appear sanctimonious and hypocritical. For example, in my travels around the world I am often asked what the difference is between a direct cash bribe for a government representative in, say, a former Soviet Republic, or the use of lobbyists in the US to deliver travel junkets, gifts, campaign funds and votes to elected leaders. This is a hard question to answer.

    The ultimate antidote for corruption, in both the developing and developed world, is transparency. The single most important way to ensure transparency is to create an enabling environment for a free, open and pluralistic media.

    Kaufmann would be smart to make this a dedicated section of his website.
    Judging from his many speeches on the subject, he certainly understands the importance of the media in ending corruption, yet far more attention should be paid to this issue.

    One other point worth noting is the role of some of the developed countries in blocking reform. Attempts by the previous World Bank President, Paul Wolfowitz, to suspend loans to countries violating anti-corruption policies, led to a backlash. It’s understandable why some non-democratic countries might have led this revolt, but when is someone going to explain a certain European country’s role in blocking enforcement of World Bank rules prohibiting corruption, as happened in India, Kenya and elsewhere? And why has at least one European country that publically supports free media and anti-corruption campaigns quietly ended its support for investigative journalism programs around the world? The developed, industrialized world needs to be consistent in the implementation of its anti-corruption policies, if they are to have any hope of success.

  2. delphine Says:
    March 7th, 2008 at 4:55 pm

    As globalization is increasingly blurring lines between developed and developing countries, the place where any transaction (whether corrupt or not) takes place, is becoming less and less relevant, therefore putting into question national rankings about corruption. For instance, if a local employee working in the African branch of a multinational executes a corrupt transaction at the request of a supervisor based in a developed country, would that transaction affect the corruption rankings of the developed country? or the developing one?

  3. Kaufmann Says:
    March 12th, 2008 at 6:57 am

    David Hoffman’s comment on my Myth #1, praising that there is also a limelight on the problem of corruption in the developed Western world, is of relevance — well beyond his words of appreciation. As President of the US-based Internews, which works on media development in poorer countires, he is well aware of the governance challenges they face in the countries they work with. Yet he does not shy away from pointing to sophisticated forms of misgovernance in his own country, the US.

    In that context, the blog entry I uploaded yesterday on alleged corruption in Alaska (with the video in the Baranoff hotel), illustrates. You can find it @ http://thekaufmannpost.net/oil-state-capture-and-corruption-in-alaska-hotel-baranoff-suite-604/. High level undue political influence, colluding with powerful private interests, is prevalent in many countries, rich and poor.

    Rightly so, David Hoffman emphasizes the paramount importance of transparency and media. He is pushing me for these to be key issues for this blog. This is duly noted. I will do my best, since they are central to improve governance. He is also asking probing questions on the World Bank’s (and its shareholders’) approach to supporting a free media and investigative journalism, as well as the Bank’s approach to lending in countries where there is corruption. These are complex and important topics, open to debate, which deserve fuller discussion. Thus, we will be addressing them in the near future — including in the upcoming World Bank blog on Governance and Anticorruption.

    Stay tuned.

  4. Kaufmann Says:
    March 12th, 2008 at 7:24 am

    Delphine is of course right that globalization blurs lines between developed and developing countries; in fact the world becoming ‘flat’ means that an exclusivist nation-state focus is obsolete.

    States still matter enormously nowadays, however, particularly for the well-being of their citizens, which in large measure depends on whether their state exhibits good or poor governance standards.

    Therefore, assessing governance at the national level is still relevant, without losing perspective on the importance of governance at many other levels as well: at the personal level, or for a multinational or a bank, a community or village, in large cities, and for international institutions.

    The quality of governance at many of these levels should also be assessed and rated where possible. In many cases that is done in fact. Transparency International (TI), for instance, in addition to rating countries according to their extent of domestic corruption, also rate countries depending on their multinationals propensity to bribe abroad. The World Bank, in its website, publishes a list of companies and individuals that have been sanctioned by the Bank due to engagement in corruption or other such related illegal activities.

    Further, keep in mind that the higher the extent of corruption within a country, the higher in general is the likelihood that their multinationals will bribe abroad as well.

  5. António Maia Says:
    June 19th, 2010 at 11:00 am

    I agree whit all your comments and ideas!
    In my opinion, Transparency seems to be a good tool do control and to prevent corruption in public administration. However, to have better chances to be efficient, this important tool must have two complementary dimensions.
    In my opinion it is not enough that public services show (through its web site and reports) it´s functions, what they did in the past years, what they are doing now, and what are their plans and strategies for the future.
    It is also import that citizens (any citizen) have the chance to put questions, to ask for details about that published information. We all know how easy it is to write a nice and beautiful report. We need to encourage citizens to find answers for their questions and doubts. We all need to create strategies to develop this encouragement in our societies.
    Transparency only has the chance to be effective and useful as a tool to reduce and to control the chances for corruption practices, if it will be actively participated by all the society (citizens, organized groups, civil society, organizations – both, formal or informal, companies, etc)
    For that, it is important to develop strategies to create in every citizen the capacity to thing about those questions and to be motivated to participate in public life (what we call citizenship).
    My name is António Maia. I am a Portuguese citizen and of course I am adding these opinions considering the perception I have about the problem of corruption all around the world

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