| I. The FactsJust days before a much-awaited | | | | wealthy individuals make use of off-shore |
| donor conference, the influential | | | | havens or "special purpose entities" to |
| International Crisis Group (ICG) recommended | | | | launder money, make illicit payments, avoid |
| to place all funds pledged to Macedonia under | | | | or evade taxes, and conceal assets or |
| the oversight of a "corruption advisor" | | | | liabilities. According to Swiss authorities, |
| appointed by the European Commission. The | | | | more than $40 billion are held by Russians in |
| donors ignored this and other | | | | its banking system alone. The figure may be 5 |
| recommendations. To appease the critics, the | | | | to 10 times higher in the tax havens of the |
| affable Attorney General of Macedonia charged | | | | United Kingdom.In a survey it conducted last |
| a former Minister of Defense with abuse of | | | | month of 82 companies in which it invests, |
| duty for allegedly having channeled millions | | | | "Friends, Ivory, and Sime" found that only a |
| of DM to his relatives during the recent | | | | quarter had clear anti-corruption management |
| civil war. Macedonia has belatedly passed an | | | | and accountability systems in place.Tellingly |
| anti-money laundering law recently - but | | | | only 35 countries signed the 1997 OECD |
| failed, yet again, to adopt strict | | | | "Convention on Combating Bribery of Foreign |
| anti-corruption legislation.In Albania, the | | | | Public Officials in International Business |
| Chairman of the Albanian Socialist Party, | | | | Transactions" - including four non-OECD |
| Fatos Nano, was accused by Albanian media of | | | | members: Chile, Argentina, Bulgaria, and |
| laundering $1 billion through the Albanian | | | | Brazil. The convention has been in force |
| government. Pavel Borodin, the former chief | | | | since February 1999 and is only one of many |
| of Kremlin Property, decided not appeal his | | | | OECD anti-corruption drives, among which are |
| money laundering conviction in a Swiss court. | | | | SIGMA (Support for Improvement in Governance |
| The Slovak daily "Sme" described in scathing | | | | and Management in Central and Eastern |
| detail the newly acquired wealth and lavish | | | | European countries), ACN (Anti-Corruption |
| lifestyles of formerly impoverished HZDS | | | | Network for Transition Economies in Europe), |
| politicians. Some of them now reside in | | | | and FATF (the Financial Action Task Force on |
| refurbished castles. Others have swimming | | | | Money Laundering).Moreover, The moral |
| pools replete with wine bars.Pavlo Lazarenko, | | | | authority of those who preach against |
| a former Ukrainian prime minister, is | | | | corruption in poor countries - the officials |
| detained in San Francisco on money laundering | | | | of the IMF, the World Bank, the EU, the OECD |
| charges. His defense team accuses the US | | | | - is strained by their ostentatious |
| authorities of "selective prosecution".They | | | | lifestyle, conspicuous consumption, and |
| are quoted by Radio Free Europe as | | | | "pragmatic" morality.II. What to Do? What is |
| saying:"The impetus for this prosecution | | | | Being Done?Two years ago, I proposed a |
| comes from allegations made by the Kuchma | | | | taxonomy of corruption, venality, and graft. |
| regime, which itself is corrupt and dedicated | | | | I suggested this cumulative definition:The |
| to using undemocratic and repressive methods | | | | withholding of a service, information, or |
| to stifle political opposition ... (other | | | | goods that, by law, and by right, should have |
| Ukrainian officials) including Kuchma himself | | | | been provided or divulged.The provision of a |
| and his closest associates, have committed | | | | service, information, or goods that, by law, |
| conduct similar to that with which Lazarenko | | | | and by right, should not have been provided |
| is charged but have not been prosecuted by | | | | or divulged.That the withholding or the |
| the U.S. government".The UNDP estimated, in | | | | provision of said service, information, or |
| 1997, that, even in rich, industrialized, | | | | goods are in the power of the withholder or |
| countries, 15% of all firms had to pay | | | | the provider to withhold or to provide AND |
| bribes. The figure rises to 40% in Asia and | | | | That the withholding or the provision of said |
| 60% in Russia.Corruption is rife and all | | | | service, information, or goods constitute an |
| pervasive, though many allegations are | | | | integral and substantial part of the |
| nothing but political mud-slinging. Luckily, | | | | authority or the function of the withholder |
| in countries like Macedonia, it is confined | | | | or the provider.That the service, |
| to its rapacious elites: its politicians, | | | | information, or goods that are provided or |
| managers, university professors, medical | | | | divulged are provided or divulged against a |
| doctors, judges, journalists, and top | | | | benefit or the promise of a benefit from the |
| bureaucrats. The police and customs are | | | | recipient and as a result of the receipt of |
| hopelessly compromised. Yet, one rarely comes | | | | this specific benefit or the promise to |
| across graft and venality in daily life. | | | | receive such benefit.That the service, |
| There are no false detentions (as in Russia), | | | | information, or goods that are withheld are |
| spurious traffic tickets (as in Latin | | | | withheld because no benefit was provided or |
| America), or widespread stealthy payments for | | | | promised by the recipient.There is also what |
| public goods and services (as in Africa).It | | | | the World Bank calls "State Capture" defined |
| is widely accepted that corruption retards | | | | thus:"The actions of individuals, groups, or |
| growth by deterring foreign investment and | | | | firms, both in the public and private |
| encouraging brain drain. It leads to the | | | | sectors, to influence the formation of laws, |
| misallocation of economic resources and | | | | regulations, decrees, and other government |
| distorts competition. It depletes the | | | | policies to their own advantage as a result |
| affected country's endowments - both natural | | | | of the illicit and non-transparent provision |
| and acquired. It demolishes the tenuous trust | | | | of private benefits to public officials."We |
| between citizen and state. It casts civil and | | | | can classify corrupt and venal behaviours |
| government institutions in doubt, tarnishes | | | | according to their outcomes:Income Supplement |
| the entire political class, and, thus, | | | | - Corrupt actions whose sole outcome is the |
| endangers the democratic system and the rule | | | | supplementing of the income of the provider |
| of law, property rights included.This is why | | | | without affecting the "real world" in any |
| both governments and business show a growing | | | | manner.Acceleration or Facilitation Fees - |
| commitment to tackling it. According to | | | | Corrupt practices whose sole outcome is to |
| Transparency International's "Global | | | | accelerate or facilitate decision making, the |
| Corruption Report 2001", corruption has been | | | | provision of goods and services or the |
| successfully contained in private banking and | | | | divulging of information.Decision Altering |
| the diamond trade, for instance.Hence also | | | | Fees - Bribes and promises of bribes which |
| the involvement of the World Bank and the IMF | | | | alter decisions or affect them, or which |
| in fighting corruption. Both institutions are | | | | affect the formation of policies, laws, |
| increasingly concerned with poverty reduction | | | | regulations, or decrees beneficial to the |
| through economic growth and development. The | | | | bribing entity or person.Information Altering |
| World Bank estimates that corruption reduces | | | | Fees - Backhanders and bribes that subvert |
| the growth rate of an affected country by 0.5 | | | | the flow of true and complete information |
| to 1 percent annually. Graft amounts to an | | | | within a society or an economic unit (for |
| increase in the marginal tax rate and has | | | | instance, by selling professional diplomas, |
| pernicious effects on inward investment as | | | | certificates, or permits).Reallocation Fees - |
| well.The World Bank has appointed last year a | | | | Benefits paid (mainly to politicians and |
| Director of Institutional Integrity - a new | | | | political decision makers) in order to affect |
| department that combines the Anti-Corruption | | | | the allocation of economic resources and |
| and Fraud Investigations Unit and the Office | | | | material wealth or the rights thereto. |
| of Business Ethics and Integrity. The Bank | | | | Concessions, licenses, permits, assets |
| helps countries to fight corruption by | | | | privatized, tenders awarded are all subject |
| providing them with technical assistance, | | | | to reallocation fees.To eradicate corruption, |
| educational programs, and | | | | one must tackle both giver and taker.History |
| lending.Anti-corruption projects are an | | | | shows that all effective programs shared |
| integral part of every Country Assistance | | | | these common elements:The persecution of |
| Strategy (CAS). The Bank also supports | | | | corrupt, high-profile, public figures, |
| international efforts to reduce corruption by | | | | multinationals, and institutions (domestic |
| sponsoring conferences and the exchange of | | | | and foreign). This demonstrates that no one |
| information. It collaborates closely with | | | | is above the law and that crime does not |
| Transparency International, for instance.At | | | | pay.The conditioning of international aid, |
| the request of member-governments (such as | | | | credits, and investments on a monitored |
| Bosnia-Herzegovina and Romania) it has | | | | reduction in corruption levels. The |
| prepared detailed country corruption surveys | | | | structural roots of corruption should be |
| covering both the public and the private | | | | tackled rather than merely its symptoms.The |
| sectors. Together with the EBRD, it publishes | | | | institution of incentives to avoid |
| a corruption survey of 3000 firms in 22 | | | | corruption, such as a higher pay, the |
| transition countries (BEEPS - Business | | | | fostering of civic pride, "good behaviour" |
| Environment and Enterprise Performance | | | | bonuses, alternative income and pension |
| Survey). It has even set up a multilingual | | | | plans, and so on.In many new countries (in |
| hotline for whistleblowers.The IMF made | | | | Asia, Africa, and Eastern Europe) the very |
| corruption an integral part of its country | | | | concepts of "private" versus "public" |
| evaluation process. It suspended arrangements | | | | property are fuzzy and impermissible |
| with endemically corrupt recipients of IMF | | | | behaviours are not clearly demarcated. |
| financing. Since 1997, it has introduced | | | | Massive investments in education of the |
| policies regarding misreporting, abuse of IMF | | | | public and of state officials are |
| funds, monitoring the use of debt relief for | | | | required.Liberalization and deregulation of |
| poverty reduction, data dissemination, legal | | | | the economy. Abolition of red tape, |
| and judicial reform, fiscal and monetary | | | | licensing, protectionism, capital controls, |
| transparency, and even internal governance | | | | monopolies, discretionary, non-public, |
| (e.g., financial disclosure by staff | | | | procurement. Greater access to information |
| members).Yet, no one seems to agree on a | | | | and a public debate intended to foster a |
| universal definition of corruption. What | | | | "stakeholder society".Strengthening of |
| amounts to venality in one culture (Sweden) | | | | institutions: the police, the customs, the |
| is considered no more than hospitality, or an | | | | courts, the government, its agencies, the tax |
| expression of gratitude, in another (France, | | | | authorities - under time limited foreign |
| or Italy). Corruption is discussed freely and | | | | management and supervision.Awareness to |
| forgivingly in one place - but concealed | | | | corruption and graft is growing - though it |
| shamefully in another. Corruption, like other | | | | mostly results in lip service. The Global |
| crimes, is probably seriously under-reported | | | | Coalition for Africa adopted anti-corruption |
| and under-penalized.Moreover, bribing | | | | guidelines in 1999. The otherwise opaque Asia |
| officials is often the unstated policy of | | | | Pacific Economic Cooperation (APEC) forum is |
| multinationals, foreign investors, and | | | | now championing transparency and good |
| expatriates. Many of them believe that it is | | | | governance. The UN is promoting its pet |
| inevitable if one is to expedite matters or | | | | convention against corruption.The G-8 asked |
| secure a beneficial outcome. Rich world | | | | its Lyon Group of senior experts on |
| governments turn a blind eye, even where laws | | | | transnational crime to recommend ways to |
| against such practices are extant and | | | | fight corruption related to large money flows |
| strict.In his address to the Inter-American | | | | and money laundering. The USA and the |
| Development Bank on March 14, President Bush | | | | Netherlands hosted global forums on |
| promised to "reward nations that root out | | | | corruption - as will South Korea next year. |
| corruption" within the framework of the | | | | The OSCE is rumored to respond with its own |
| Millennium Challenge Account initiative. The | | | | initiative, in collaboration with the US |
| USA has pioneered global anti-corruption | | | | Congressional Helsinki Commission.The |
| campaigns and is a signatory to the 1996 IAS | | | | south-eastern Europe Stability Pact sports |
| Inter-American Convention against Corruption, | | | | its own Stability Pact Anti-corruption |
| the Council of Europe's Criminal Law | | | | Initiative (SPAI). It held its first |
| Convention on Corruption, and the OECD's 1997 | | | | conference in September 2001 in Croatia. More |
| anti-bribery convention. The USA has had a | | | | than 1200 delegates participated in the 10th |
| comprehensive "Foreign Corrupt Practices Act" | | | | International Anti-Corruption Conference in |
| since 1977.The Act applies to all American | | | | Prague last year. The conference was attended |
| firms, to all firms - including foreign ones | | | | by the Czech prime minister, the Mexican |
| - traded in an American stock exchange, and | | | | president, and the head of the Interpol.The |
| to bribery on American territory by foreign | | | | most potent remedy against corruption is |
| and American firms alike. It outlaws the | | | | sunshine - free, accessible, and available |
| payment of bribes to foreign officials, | | | | information disseminated and probed by an |
| political parties, party officials, and | | | | active opposition, uncompromised press, and |
| political candidates in foreign countries. A | | | | assertive civic organizations and NGO's. In |
| similar law has now been adopted by | | | | the absence of these, the fight against |
| Britain.Yet, "The Economist" reports that the | | | | official avarice and criminality is doomed to |
| American SEC has brought only three cases | | | | failure. With them, it stands a |
| against listed companies until 1997. The US | | | | chance.Corruption can never be entirely |
| Department of Justice brought another 30 | | | | eliminated - but it can be restrained and its |
| cases. Britain has persecuted successfully | | | | effects confined. The cooperation of good |
| only one of its officials for overseas | | | | people with trustworthy institutions is |
| bribery since 1889. In the Netherlands | | | | indispensable. Corruption can be defeated |
| bribery is tax deductible. Transparency | | | | only from the inside, though with plenty of |
| International now publishes a name and shame | | | | outside help. It is a process of |
| Bribery Payers Index to complement its | | | | self-redemption and self-transformation. It |
| 91-country strong Corruption Perceptions | | | | is the real transition. |
| Index.Many rich world corporations and | | | | |