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