Corruption - The world's big C

Corruption – The World’s Big C
Cases, causes, consequences and cures
By
Ian Senior

Publisher: The institute of economic affairs
Year: 2006

Summary of the book

The book is more like a rather long scientific article. It starts with reviewing definitions for corruption, which the author doesn’t find good enough and thus he tries to work out a definition himself. It goes like this " The definition consists of fi ve conditions that must all be satisfied simultaneously. Corruption occurs when a corruptor (1) covertly gives (2) a favour to a corruptee or to a nominee to infl uence (3) action(s) that (4) benefit the corruptor or a nominee, and for which the corruptee has (5) authority." According to his definition, he differentiates between corruption and theft or fraud in a special subchapter.

He then brings cases of alleged corruption and applies his own definition to them to find out whether they are really corrupt or not.

He studies the causes of corruption are determined using regression analysis (!) Data regarding 14 “independent variables” are correlated to the Corruption Perception Index (CPI) published by Transparency International for a number of countries (at least 27). The independent variables are grouped as 1) Ethical (2, religiosity: attending worshipping places, honesty: returning a lost wallet), 2) Social freedoms (2, freedom of media, personal freedom), 3) Economic freedom (10, including trade policy, monetary policy, capital flows and foreign investment, banking and finance …etc). A counter intuitive correlation was found between corruption and government intervention as well as religiosity, i.e. increases of government intervention and low religiosity was associated with lower corruption. The other factors with significant correlation were press freedom, personal honesty, prevalence of informal markets, respect for property rights, and the amount of regulation.

The consequences of corruption include: 1) Price distortion, 2) Covert and upward distribution of wealth, 3) Subversion of democratic processes, 4) Increased cost and reduction of investment, 5) Decline of society’s morality and ethics. The latter is particularly interesting. The author considers corruption as “infectious and contagious”. He notes that “In terms of initiating corruption, the legislative branch is likely to be the most influential. Presidents and prime ministers have enormous powers of patronage ……. If the legislative branch is corrupt, functionaries see what is occurring and realise that they can act similarly. Thus the executive branch becomes infected ……. When corruption (is) at a low level it is too late, because corruption percolates downwards through society. When corruption has reached the lower strata democracy itself is fatally flawed.” Here is another very important consequence “Those who are honest and uncorrupt have two options in such a system. They can partake in corruption to the extent necessary to carry on with the tasks of everyday life, or they can choose not to participate at all in the system …. The latter course of action leads the uncorrupt person to suffer greatly, while leaving the economic system wholly in the hands of the corrupt. It is no wonder that corruption is contagious.”

In his chapter on the cures for corruption, the author states that, “The principal people who can change a culture of corruption if they wish to do so are politicians …….. A fully functional democracy is the most effective way of enabling voters to get rid of corrupt politicians.” This is because the politicians would then realise that fostering an uncorrupt society would be a vote-winner.

His recipe for cleansing a state goes as follows: “First find a completely uncorrupt politician and make him president or prime minister, whichever is the position of executive authority. Then let him appoint a cabinet of other ministers who also are untainted by corruption. Next pass laws that give freedom to the press, provide heavy penalties for proven corruption, give protection to whistle-blowers, and dismiss on the spot any minister, law-maker or functionary found to be corrupt’. It is as simple at that . . . in theory! In practice, it is otherwise. The very people who are the greatest beneficiaries of corruption have the greatest power and use the corrupt nature of government to maintain that power.”

On the other hand “In wholly corrupt countries there is little scope for individuals to fight corruption,” because “to find an uncorrupt prime minister and ministers from a fully corrupted political system may be an impossible task.” He believes that the international funding agencies can have greater role in combating wholly corrupted societies, by imposing stricter rules for financial aid associated with a decline in corruption levels.

Critique and comments

In general the book is a good read, with many useful and informative parts, although I do not agree with many of the author’s ideas. For example, the definition of corruption that he proposed does not include theft. So if, according to him, Saddam Hussein builds many presidential palaces for himself from public money, he is not corrupt, he is looting public money! Also the condition that overtness precludes corruption cannot be accepted. He later states that “When corruption is endemic the starting point becomes: ‘If I don’t offer a bribe when everyone else is doing so, I won’t obtain the licence/contract/university place.’ Therefore the bribe becomes a form of taxation that must be paid, and the concept of corruption as a crime has been lost.” So it is possible to have overt and widespread corruption, where the society is forced to accept it, but they know it is not right.

Using regression analysis for determining the causes of corruption is silly. One can look for a regression analysis between the number of wild birds moving on one leg during the dawn of a hot August day and corruption, and it is possible, theoretically, to find a correlation. Besides, as the author himself states, the interdependence of the variables is not to be excluded, so there may be a number of indirect relations.

The most interesting part was that for consequences and cures. He clearly states that corruption is infectious, and that it percolates from the top to the bottom, not the other way round. Those who choose to remain uncorrupt have one of 2 choices, “Join them or leave them”. He also states that individuals have no chance of changing a wholly corrupt system, if the politicians are not willing to cleanse the society. His proposal that the international funding agencies can play a better role is flawed, since these are being managed by countries whose interest is to keep the current situation as it is. They are also corrupt, as he himself gave many examples about corrupt politicians in USA, UK, France, Germany and others.