Corruption is both a major cause and a result of poverty around the world. It occurs at all levels of society, from local and national governments, civil society, judiciary functions, large and small businesses, military and other services and so on.
Corruption affects the poorest the most, in rich or poor nations, though all elements of society are affected in some way as corruption undermines political development, democracy, economic development, the environment, people’s health and more.
Around the world, the perception of corruption in public places is very high:
World map of the 2010 Corruption Perceptions Index by Transparency International. Blue indicates less perception of corruption, whereas red indicates higher perception of corruption. Image source
But it isn’t just in governments that corruption is found; it can permeate through society.
The issue of corruption is very much inter-related with other issues. At a global level, the “international” (Washington Consensus-influenced) economic system that has shaped the current form of globalization in the past decades requires further scrutiny for it has also created conditions whereby corruption can flourish and exacerbate the conditions of people around the world who already have little say about their own destiny. At a national level, people’s effective participation and representation in society can be undermined by corruption, while at local levels, corruption can make day to day lives more painful for all affected.
A difficult thing to measure or compare, however, is the impact of corruption on poverty versus the effects of inequalities that are structured into law, such as unequal trade agreements, structural adjustment policies, so-called “free” trade agreements and so on. It is easier to see corruption. It is harder to see these other more formal, even legal forms of “corruption.” It is easy to assume that these are not even issues because they are part of the laws and institutions that govern national and international communities and many of us will be accustomed to it—it is how it works, so to speak. Those deeper aspects are discussed in other parts of this web site’s section on trade, economy, & related issues.
That is not to belittle the issue of corruption, however, for its impacts are enormous too.
This web page has the following sub-sections:
Rich Countries Involved In Corruption Abroad
A Cold War Legacy: The Curse Of Natural Resources; Inviting Corruption
Globalization, Multinational Corporations, And Corruption
IMF And World Bank Policies That Encourage Corruption
Corruption Everywhere; Rich And Poor Countries, International Institutions
Tackling Corruption
Strengthen Democracy’s Transparency Pillar
Address Weaknesses In The Global System
Improve Government Budget Transparency
Make It Harder To Embezzle Billions
Lessons From The Past: US’s New Deal In The 1930s
Direct Grassroots Action
More Information
Rich Countries Involved In Corruption Abroad
When asking why poor countries are poor, it is quite common to hear, especially in wealthier countries that are perceived to have minimal corruption (at least domestically) that other countries are poor because of corruption. Yet, corruption is not something limited to third world despots. Rich countries too have been involved in corrupt practices around the world.
As Professor Robert Neild from Trinity College, Cambridge University writes in Public Corruption; The Dark Side of Social Evolution (London: Anthem Press, 2002), “Rich countries and their agencies … commonly have been and are accomplices in corruption abroad, encouraging it by their actions rather than impeding it….” (p.209). Specific problems he highlights include:
The impact of Cold War corruption (supporting dictatorships, destabilizing democracies, funding opposition, etc);
Firms from rich countries bribing rulers and officials from developing countries to gain export contracts, particularly in the arms trade and in construction (even justifying it by suggesting bribery is “customary” in those countries, so they need to do it to, in order to compete);
The “corruption-inducing effects of the purchase, by the rich countries and their international corporations, of concessions in Third World countries to exploit natural deposits of oil, copper, gold, diamonds and the like.” Payments made to rulers often violate local (and Western) rules, keeping corrupt rulers in power, who also embezzle a lot of money away.
The drug trade. Neild suggests that international law and national laws in rich countries that prohibit drugs may serve to “produce a scarcity value irresistible to producers, smugglers and dealers.” Governments and civil society in the third world are often “undermined, sometimes destroyed” by the violence and corruption that goes with the drug trade. “This is probably the most important way in which the policies of rich countries foster corruption and violence. Yet the effect on the Third World seems scarcely to enter discussion of alternative drug policies in the rich countries.” Legalizing drugs, a system of taxation and regulation, comparable to that applied to tobacco and alcohol might do more to reduce corruption in the world than any other measure rich countries could take, he suggests. (See this site’s section on illicit drugs for more on that aspect.)
Rich countries have been used to it, too:
Bribery may be pervasive, but it is difficult to detect. Many Western companies do not dirty their own hands, but instead pay local agents, who get a 10 per cent or so “success fee” if a contract goes through and who have access to the necessary “slush funds” to ensure that it does. Bribery is also increasingly subtle.… Until recently, bribery was seen as a normal business practice. Many countries including France, Germany and the UK treated bribes as legitimate business expenses which could be claimed for tax deduction purposes.
— Dr Susan Hawley, Exporting Corruption; Privatisation, Multinationals and Bribery, The Corner House, June 2000
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A Cold War Legacy: The Curse Of Natural Resources; Inviting Corruption
Professor Neild is worth quoting at extensive length on the impacts the Cold War had in terms of encouraging or exacerbating corruption in the developing countries:
Many Western covert and overt military operation were motivated, in part at least, by the view, which may have been fearfully exaggerated, that the West’s supplies of raw materials and oil were threatened by communist intrusion into Third World countries. A feeling of vulnerability was understandable. The Soviet Union … was largely self-sufficient …; the West, in need of increasing supplies for its growing industrial production, depended heavily on imports from Third World countries…. Western governments used diplomacy plus overt and covert military operations to counter the Communists. Meanwhile western firms paid rulers to obtain concessions to extract oil and minerals.
The business of obtaining oil and mineral concessions has aways been conducive to the use of bribes, omissions, gifts, and favors, and remains so since there are huge “rents” (i.e. windfall profits) to be shared by the parties to a deal…. Third World governments rarely use auctions [for concession, which, when done honestly, removes the opportunity for buyers to bribe sellers]. They commonly sell concessions by negotiation. For which there are some good reasons. It is often necessary for the foreign company that buys a concession to build infrastructure, such as ports, pipelines, roads and dormitory towns for their staff; to make this worthwhile, a whole oil field or major mineral deposit has to be given to one foreign company, rather than split between many competitors; and that one company, which will become the source of a significant, perhaps dominant, part of the nation’s revenue, will acquire substantial economic power vis-à-vis the government. Hence strategic and diplomatic consideration enter the calculation: the government will want to give the concession to a company backed by a government which it believes will be helpful to it in its international relations—and in supplying it with arms and mercenaries. But …. there is [also] the prospect of bribes. Those who run a government that has a concession to sell will know that negotiation creates a strong incentive to the potential buyers to offer them bribes: they will know this from the point of view of the buyers, a sum that will only add a small percentage to, say, a billion dollar deal, will be worth paying in order to win the concession. Once negotiation is adopted as the means of allocating concessions, the dominant incentive is for bidders to engage competitively in the bribery of local rulers and fixers.
— Robert Neild, Public Corruption; The Dark Side of Social Evolution, (London: Anthem Press, 2002), pp. 136-137 [Emphasis added]
But Neild feels that this same attitude has affected rich countries’ domestic political behavior, too. Of particular concern to Neild in this is
the apparent tendency for bribery, which is intense in the business of seeking resource concession and selling arms, to become a secret habit of western firms and politicians that infects their domestic political behavior. Of this there has been considerable evidence in scandals that have occurred recently in Britain, France and Germany…. Le Monde published an outspoken editorial commenting on the [French company, Elf Aquitaine, corruption] affair:
For too long French policy in Africa has been neither moral nor effective.
… It would be wrong to deny that corruption is indispensable in the obtaining of drilling concession, though that does not mean that one should not try to stop it. M. Tarallo [a senior Elf Manager] is unfortunately right when he says that all petrol companies use it… But the sins of others do not absolve Elf. Added to which … Elf has used its money to keep in power dictators whose principle aim has been not the development of their country but their personal enrichment. In exchange, Paris could count on their support in its diplomatic battles and could offer captive markets to French firms…
This “neo-colonialism” was put in place during the presidency of General de Gaulle and has been maintained by subsequent governments regardless of party…
Looked at today the picture is not glorious. A former colonial power has taught corruption to its African clients—who were willing pupils—and there is nothing to persuade us that they have not rewarded their friends in Paris…
… In one case at least, lack of natural resources has apparently been an incentive to anticorruption policies: the tough ruler of Singapore, Lee Kuan Yew, is reported to have said that he came down hard on the corrupt because his tiny country with no natural resources has to rely on its good name to remain a center of banking and technology.
— Robert Neild, Public Corruption; The Dark Side of Social Evolution, (London: Anthem Press, 2002), p. 138 [Emphasis added]
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Globalization, Multinational Corporations, And Corruption
Corruption scandals that sometimes make headline news in Western media can often be worse in developing countries. This is especially the case (as the previous link argues) when it is multinational companies going into poorer countries to do business. The international business environment, encouraged by a form of globalization that is heavily influenced by the wealthier and more powerful countries in the world makes it easier for multinationals to make profit and even for a few countries to benefit. However, some policies behind globalization appear to encourage and exacerbate corruption as accountability of governments and companies have been reduced along the way. For example,
For multinationals, bribery enables companies to gain contracts (particularly for public works and military equipment) or concessions which they would not otherwise have won, or to do so on more favorable terms. Every year, Western businesses pay huge amounts of money in bribes to win friends, influence and contracts. These bribes are conservatively estimated to run to US$80 billion a year—roughly the amount that the UN believes is needed to eradicate global poverty.
