Corruption

Overview

Corruption is a form of dishonesty or a crime that is undertaken by a person or an organization that is entrusted in a position of authority to acquire illicit benefits or abuse power for one's gain. Corruption may involve activities like bribery, influence peddling, embezzlement, and fraud as well as practices that are legal in many countries, such as lobbying. Political corruption occurs when an office-holder or other governmental employee acts in an official capacity for personal gain. Historically, "corruption" had a broader meaning concerned with an activity's impact on morals and societal well-being: for example, the ancient Greek philosopher, Socrates was condemned to death in part for "corrupting the young". Contemporary corruption is perceived as most common in kleptocracies, oligarchies, narco-states, authoritarian states, and mafia states, however, research and policy statements acknowledge that it also exists in wealthy capitalist economies. In How Corrupt is Britain, David Whyte reveals that corruption exists "across a wide range of venerated institutions" in the UK, ranked as one of the least corrupt countries by the Corruption Perceptions Index (CPI). In a 2022 speech on "Modern Corruption", USAID Administrator Samantha Power stated: "Corruption is no longer just about individual autocrats pilfering their nation's wealth to live large", but also involves sophisticated transnational networks, including financial institutions hidden in secrecy. Responding to Whyte's book, George Monbiot criticized the CPI for its narrow definition of corruption that surveys mostly only executives about bribery. Similarly, others point out that "global metrics systematically under-measure 'corruption of the rich' – which tends to be legalized, institutionalized, and ambiguously unethical – as opposed to 'corruption of the poor'". Corruption and crime are endemic sociological phenomena that occur regularly in nearly all countries worldwide, in varying degrees and proportions. Recent data suggests corruption is on the rise. Each nation allocates domestic resources for the control and regulation of corruption and the deterrence of crime. Strategies undertaken to counter corruption are often summarized under the umbrella term anti-corruption. Additionally, global initiatives like the United Nations Sustainable Development Goals 16 also have a targeted goal which is supposed to reduce corruption in all of its forms substantially. Recent initiatives like the Tax Justice Network go beyond bribery and theft and bring attention to tax abuses.

Definitions and scales

Stephen D. Morris, a professor of politics, wrote that political corruption is the illegitimate use of public power to benefit a private interest. Economist Ian Senior defined corruption as an action to secretly provide a good or a service to a third party to influence certain actions which benefit the corrupt, a third party, or both in which the corrupt agent has authority. World Bank economist Daniel Kaufmann extended the concept to include "legal corruption" in which power is abused within the confines of the law—as those with power often have the ability to make laws for their protection. The effect of corruption in infrastructure is to increase costs and construction time, lower the quality and decrease the benefit. Corruption is a complex phenomenon and can occur on different scales. Corruption ranges from small favors between a small number of people (petty corruption), to corruption that affects the government on a large scale (grand corruption), and corruption that is so prevalent that it is part of the everyday structure of society, including corruption as one of the symptoms of organized crime (systemic corruption). "Corruption of the rich" is particularly hard to measure and largely excluded from conventional metrics like the CPI. A number of indicators and tools have been developed which can measure different forms of corruption with increasing accuracy; but when those are impractical, one study suggests looking at bodyfat as a rough guide after finding that obesity of cabinet ministers in post-Soviet states was highly correlated with more accurate measures of corruption.

Petty theft, grand theft, speed money, access money

Political economist Yuen Yuen Ang "unbundles corruption" into four types, encompassing both petty and grand corruption as well as legal and illegal versions: petty theft, grand theft, speed money, access money. According to her definition, speed money "means petty bribes that businesses or citizens pay to bureaucrats to get around hurdles or speed things up." This is the kind of corruption associated with the "efficient grease hypothesis," which economists found burdensome to businesses in practice. Ang defines access money as "high-stakes rewards extended by business actors to powerful officials, not just for speed, but to access exclusive, valuable privileges." Most theories about bribery focus on speed money, but neglects access money. "From a businessperson's point of view, access money is less a tax than an investment... making it more sludge than grease." The Unbundled Corruption Index measures the prevalence of these four types of corruption. Whereas corruption with theft and speed money is endemic in poor countries, access money can be found in both poor and rich countries.

Petty corruption

Petty corruption occurs at a smaller scale and takes place at the implementation end of public services when public officials meet the public. For example, in many small places such as registration offices, police stations, state licensing boards, and many other private and government sectors.

Grand corruption

Grand corruption is defined as corruption occurring at the highest levels of government in a way that requires significant subversion of the political, legal and economic systems. Such corruption is commonly found in countries with authoritarian or dictatorial governments but also in those without adequate policing of corruption. The government system in many countries is divided into the legislative, executive and judicial branches in an attempt to provide independent services that are less subject to grand corruption due to their independence from one another.

Systemic corruption

Systemic corruption (or endemic corruption) is corruption that is primarily due to the weaknesses of an organization or process. It can be contrasted with individual officials or agents who act corruptly within the system. Factors which encourage systemic corruption include conflicting incentives, discretionary powers; monopolistic powers; lack of transparency; low pay; and a culture of impunity. Specific acts of corruption include "bribery, extortion, and embezzlement" in a system where "corruption becomes the rule rather than the exception." Scholars distinguish between centralized and decentralized systemic corruption, depending on which level of state or government corruption takes place; in countries such as the post-Soviet states both types occur. Corruption has been a major issue in China, where society depends heavily on personal relationships. By the late 20th century that combined with the new lust for wealth, produced escalating corruption. Historian Keith Schoppa says that bribery was only one of the tools of Chinese corruption, which also included, "embezzlement, nepotism, smuggling, extortion, cronyism, kickbacks, deception, fraud, squandering of public money, illegal business transactions, stock manipulation and real estate fraud." Given the repeated anti-corruption campaigns it was a prudent precaution to move as much of the fraudulent money as possible overseas. In countries like the United States, there is a relatively strong sense of trust among strangers. In Latin American countries this trust tends to be decreased. Acquaintances are treated with trust and respect—a level of trust that is not found among acquaintances in countries like the United States. This is what permits for corruption in some Latin American countries. If there is a strong enough trust within an administration that no one will betray the rest, corruptive policies can take place with ease.

State-business collusion

While not necessarily involving bribery, recent research documents the emergence of "a particular kind of large, non-state business group" that is akin to a mafia system in China. In this situation, the boundary between public and private actors blurs.

Causes

Per R. Klitgaard corruption will occur if the corrupt gain is greater than the punitive damages multiplied by the likelihood of being caught and prosecuted. Since a high degree of monopoly and discretion accompanied by a low degree of transparency does not automatically lead to corruption, a fourth variable of "morality" or "integrity" has been introduced by others. The moral dimension has an intrinsic component and refers to a "mentality problem", and an extrinsic component referring to circumstances like poverty, inadequate remuneration, inappropriate work conditions and inoperable or over-complicated procedures which demoralize people and let them search for "alternative" solutions. According to a 2017 survey study, the following factors have been attributed as causes of corruption:

It has been noted that in a comparison of the most corrupt with the least corrupt countries, the former group contains nations with huge socio-economic inequalities, and the latter contains nations with a high degree of social and economic justice. While petty, grand, and systemic corruption, described above, are largely found in poor countries with weak institutions, a newer literature has turned to money politics in wealthy democracies and extreme global inequalities. Simon Weschle at Syracuse University examines the prevalence of campaign finance and its consequences for democracy. Kristin Surak at the London School of Economics explores the controversial practice of millionaires buying "golden passports" with no intention of actually migrating. In her words, "a full-blown citizenship industry that thrives on global inequalities" has arisen." Much of existing literature focuses on explicit corrupt actions like bribery and embezzlement, endemic in poor countries (see below). For "money in politics," the causes are very different and largely ignored in conventional literature. For example, the UK is a developed economy with a robust democracy, and yet London is a hub for money laundering. In a critique of the failures and politics leading up to the US financial crisis, a Stanford financial economist noted, "In the real world, it turned out, important economic outcomes are often the consequences of political forces. During 2010, people within regulatory bodies told me privately that false and misleading claims were affecting key policy decisions... I saw confusion, willful blindness, political forces, various and sometimes subtle forms of corruption, and moral disengagement, first hand." Social norms have been posited as an explanation for why some environments are corrupt and others are not. Contemporary corruption in Africa has been linked by a book to the historical systematic use of material incentives by colonisers to compel local African rulers to collaborate. For all developing countries, the degree of European settlement in the colonial era correlates with levels of contemporary corruption. Within less democratic countries, the presence of resources such as diamonds, gold, oil, and forestry and other extractable resources tends to increase the prevalence of corruption, also called the resource curse. The presence of fuel extraction and export is unambiguously associated with corruption, whereas mineral exports only increased corruption in poorer countries. In wealthier countries, mineral exports such as gold and diamonds are actually associated with reduced corruption. While democratization in countries with below average democracy levels was found correlated with some increase in corruption, in countries with above average democracy indices further democratization tends to reduce corruption. A study found the increase in corruption at low democracy levels associated with unfair elections and limited freedom of speech and freedom of association.

By sector

Corruption can occur in many sectors, whether they be public or private industry or even NGOs (especially in public sector). However, only in democratically controlled institutions is there an interest of the public (owner) to develop internal mechanisms to fight active or passive corruption, whereas in private industry as well as in NGOs there is no public control. Therefore, the owners' investors' or sponsors' profits are largely decisive.

Public sector

Public corruption includes corruption of the political process and of government agencies such as tax collectors and the police, as well as corruption in processes of allocating public funds for contracts, grants, and hiring. Recent research by the World Bank suggests that who makes policy decisions (elected officials or bureaucrats) can be critical in determining the level of corruption because of the incentives different policy-makers face.

Political

Political corruption is the abuse of public power, office, or resources by elected government officials for personal gain, by extortion, soliciting or offering bribes. It can also take the form of office holders maintaining themselves in office by purchasing votes by enacting laws which use taxpayers' money. Evidence suggests that corruption can have political consequences – with citizens being asked for bribes becoming less likely to identify with their country or region. The political act of "graft" (American English), is a well known and now global form of political corruption, being the unscrupulous and illegal use of a politician's authority for personal gain, when funds intended for public projects are intentionally misdirected in order to maximize the benefits to illegally private interests of the corrupted individual(s) and their cronies. In some cases government institutions are "repurposed" or shifted away from their official mandate to serve other, often corrupt purposes.

The Kaunas golden toilet case was a major Lithuanian scandal. In 2009, the municipality of Kaunas (led by mayor Andrius Kupčinskas) ordered that a shipping container was to be converted into an outdoor toilet at a cost of 500,000 litai (around 150,000 euros). It was to also require 5,000 litai (1,500 euros) in monthly maintenance costs. At the same time when Kaunas's "Golden Toilet" was built, Kėdainiai tennis club acquired a very similar, but more advanced solution for 4,500 euros. Because of the inflated cost of the outdoor toilet, it was nicknamed the "Golden Toilet". Despite the investment, the "Golden Toilet" remained closed for years due to the dysfunctionality and was a subject of a lengthy anti-corruption investigation into those who had created it and the local municipality even considered demolishing the building at one point. The group of public servants involved in the toilet's procurement received various prison sentences for recklessness, malfeasance, misuse of power and document falsifications in a 2012 court case, but were cleared of their corruption charges and received compensation, which pushed the total construction cost and subsequent related financial losses to 352,000 euros. On 7 July 2020, the Carnegie Endowment for International Peace, a global think tank, released a report claiming the Emirati city, Dubai, of being an enabler of global corruption, crime and illicit financial flows. It stated that the global corrupt and criminal actors either operated through or from Dubai. The city was also called a haven for trade-based money laundering, as it gives space to free trade zones, with minimal regulatory laws and customs enforcement. A report in September 2022 revealed that British Members of Parliament received a total of £828,211 over a period of eight years from countries of the Saudi-led coalition in the Yemeni Civil War. The money was granted in the form of all-expenses-paid trips to 96 MPs by Saudi Arabia (at least £319,406), Bahrain (£197,985), the United Arab Emirates (£187,251), Egypt (£66,695) and Kuwait (£56,872). MPs also received gifts, including a £500 food hamper, tickets for a Burns Supper, an expensive watch and a day out at the Royal Windsor Horse Show. The Saudi-led coalition was accused of attempting to buy influence in the UK. While the MPs registered the trips and gifts at Westminster as per the rules, critics called it "absolutely shameful" to accept donations from countries with poor human rights records.

Similar cases involving Saudi Arabia revolved around access and honours for donors to King Charles Mountbatten-Windsor’s charities. In 2022, four people were arrested for corruption in the European Parliament. This came to be known as the Qatar corruption scandal at the European Parliament. European Commission President Ursula von der Leyen said the allegations were "very serious" and called for the creation of a new ethics body to oversee the European Union.

Judicial

Judicial corruption refers to the corruption-related misconduct of judges, through the receiving or giving of bribes, the improper sentencing of convicted criminals, judicial activism, bias in the hearing and judgement of arguments and other forms of misconduct. Judicial corruption can also be conducted by prosecutors and defense attorneys. An example of prosecutorial misconduct, occurs when a politician or a crime boss bribes a prosecutor to open investigations and file charges against an opposing politician or a rival crime boss, in order to hurt the competition. Governmental corruption of the judiciary is broadly known in many transitional and developing countries because the budget is almost completely controlled by the executive. The latter critically undermines the separation of powers, because it fosters financial dependence on the judiciary. The proper distribution of a nation's wealth, including its government's spending on the judiciary, is subject to constitutional economics. The judiciary may be corrupted by acts of the government, such as through budget planning and various privileges, and by private acts. Corruption in judiciary may also involve the government using its judicial arm to oppress opposition parties. Judicial corruption is difficult to completely eradicate, even in developed countries.