FAQs:

Some frequently asked critical questions

These frequently asked questions reflect critical thoughs on, or criticism, of the current focus on corruption in social theory and international development circles. These answers outline main arguments of the critical issues of contemporary debates in research and politics.

Isn't the anti-corruption focus and agenda trying to inflict a 'first-world' view of corruption on the rest of the world?

There are important arguments for both sides, and they each have something to learn from the other.

The 'Yes' Arguments

• The First World also has problems with corruption.
  
  The pressure to tackle corruption highlights the unequal relationship between the two worlds. First World countries have been rocked by scandals in recent years, and it's questionable how they can require higher ethical standards of Third World countries than they themselves are able to achieve.
  
  Even though the First World pays lip service to the need to fight corruption at home, there has been a lack of commitment to real change, with many countries still waiting to put the OECD Bribery Convention into law, and a lacklustre attempt to curb money laundering.
  
  
• Corruption is just one more excuse to limit aid and add on more conditions to existing funds.
  
  The First World has been placing conditions on aid for over two decades with little to show for it, other than a dramatic increase in indebtedness. Using corruption as an excuse, donors are able to appease tired publics who would rather see the money spent at home.
  
  
• Sometimes acts that would be considered 'corrupt' in the First World are normal business practice in the Third World.
  
  In many Third World countries, the giving of 'gifts' is an important part of doing business, with strong links to existing cultural traditions.
  

The 'No' Arguments

• Yes, corruption is a global problem, and all countries should do what they can to fight it.
  
  Two global initiatives should be praised for drawing attention to this problem. First, there is the OECD Anti-Bribery Convention. Second, there is Transparency International's Bribe Payers Index, which names and shames the worst offenders for paying bribes, with First World countries making up the majority of the list.
  
  Even though implementation has been slower than many would hope for, this is an ongoing process. It is being pushed along by the same groups that support the anti-corruption agenda in the Third World - civil society, development agencies, the international financial institutions, OECD, TI and so on.
  
  
• The First World is responding to calls from within the Third World to end the practice of 'turning a blind eye' to corruption.
  
  The call to combat corruption is strong throughout the Third World. For decades, leaders have been toppled following corruption scandals. Civil society within the Third World has been at the forefront of the fight against corruption.
  
  
• All countries need to develop country-specific responses for an effective fight against corruption.
  
  Traditions and normal business practice differ between countries, within the First World as well as between the First and the Third. Laws should develop that take these differences into account. If a practice is common and has the legitimate support of the community, it can be codified. For example, if gift-giving is customary, the law can specify the value. This ends the uncertainty and eliminates the chance that some will take advantage of the uncodified practice.
  

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Are the western powers applying double standards on the developing world in their anti-corruption efforts?

Donors must focus on the international nature of the problem and rethink the use of conditionality, in order to ease concerns about double standards. Confidence in government and business is at an all-time low, all over the world. Donors must acknowledge that the problem of corruption has to be addressed at home before recommendations can be made in other countries. Much has been done already, but there is still a long way to go.

Corruption at home
Western countries have been rocked by corruption scandals in the past few years. From 'Cash for Questions' in the UK, the Elf bribery scandal in France, and the whiffs of scandal with Enron in the US, corruption is a truly global concern. The question arises: 'Why are donors so confident that they can fight corruption in recipient countries when they can't even control corruption at home?' The questions continue when conditionality is brought to the table: 'How dare the donors put conditions on us when they're in such a mess themselves?'

In developing countries, the West has contributed to corruption through multinational corporations paying bribes and donors turning a blind eye to corrupt practices for geo-political reasons. However, much has changed in recent years. All donors have made fighting corruption within their own projects a foremost concern, and have dedicated increased resources for this purpose. The World Bank provides a public blacklist of all contractors who have been found guilty of corruption under World Bank contracts. All Western countries have signed up to the OECD Anti-Bribery Convention and are in various stages of implementation.

Commitment to these points - fighting corruption at home first, fighting corruption in aid projects, and fighting bribery - is vital, if donors are to avoid the accusation of double standards.

Concern with corruption is valid, despite criticisms
Western donors are all democracies and have an obligation to their citizens to spend aid appropriately. Gone are the days when the public would allow aid to be funnelled off to numbered bank accounts, because 'at least they're on our side'. The public and the media will not allow abuse of foreign aid.

Research has proven that corruption, even outside aid projects, disproportionately impacts the poor. Helping the poor is, and should remain, donors' number one objective. Fighting corruption is just one component, and should not be seen as an end in itself. But aid will never be effective while corruption siphons funding into non-productive areas, and the poor are subject to the vagaries of fraudulent and corrupt practices.

Conditionality and corruption
There is no indication that political conditionalities - linking aid to democratisation, the rule of law, fighting corruption and so on - will prove effective. Criticisms of conditionality range from the difficulties in monitoring compliance all the way to the imposition of a Western-designed 'new world order'. Donors should be cautious in applying conditions to the fight against corruption.

Internet links

OECD Anti-Corruption Division, available at http://www.oecd.org/EN/home/0,,EN-home-86-3-no-no-no,00.html

World Bank Listing of Ineligible Firms: Fraud and Corruption, available at http://www.worldbank.org/html/opr/procure/debarr.html

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Isn't corruption just a matter of culture and seen as 'normal' or 'traditional' in some societies?

No, all cultures abhor corruption. However, the legal definition of what constitutes corruption is likely to differ from country to country because of different cultural and historical traditions.

Is there a link between culture and corruption?

Often people will refer to a 'culture of corruption', but the linking of these two words is problematic. 'Culture' is a difficult term to define itself, as is corruption, and determining what corrupt practices are linked specifically to culture is extremely difficult. Who speaks for the culture: the national representatives in UNESCO, academics, or common people? Urban or rural? Local, regional or national? Indigenous or immigrant? Male or female ? Religious or atheist? White collar or blue collar? All of these factors make up many facets of a 'culture', and each may have different ideas of what constitutes corruption.

Even within similar cultures, there are differences in perceptions of corruption. The Presidential spoils system in the US, and the practice of MPs in the UK hiring spouses as secretaries, would be considered corrupt by most countries in the world. In the US, hiring one's spouse would be illegal for members of Congress and would be considered corruption. However, few would argue that this means that UK MPs are more corrupt than their US counterparts. It's just an example of different practices being acceptable.

Is the West less corrupt than the rest of the world?

Absolutely not, according to a recent report by Frank Vogl, co-founder of Transparency International. Anecdotal and empirical evidence suggests that all countries value integrity. Long before corruption hit the international agenda, leaders in developing countries have been ousted for corruption, through democratic means or otherwise. This proves that corruption is not acceptable to the public in developing countries.

Indeed, many people in developing countries actually see corruption, as they know it as originating in the West, largely through the actions of multinational corporations. For these people, corruption is an import and not a cultural tradition. Bribery is already illegal in all countries, so it is important to support the strengthening of states' ability to uphold the law.

The importance of legal distinctions

It is important that each individual country determines what is normal practice and what is not and then legislates accordingly. If gift giving in business transactions is normal business practice, then it can easily be codified into law. For example, the US government allows employees to accept gifts of no more than $20, with an annual limit of $50. The process of codification, along with employee training and public awareness, removes the uncertainty as to what is or is not acceptable behaviour. Often it is the uncertainty of what is and is not acceptable, by both locals and foreigners, that allows abuses of the system, rather than any cultural propensity for corruption.

Internet links

Frank Vogl, 'Myth: Corruption is a Cultural Phenomenon', TI Newsletter, June 2002, available at http://www.transparency.org/newsletters/2002.2/special.html#vogl

US Office of Government Ethics, available at http://www.usoge.gov/home.html

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Why worry about 'petty corruption'? Isn't this a necessary survival strategy of poorly paid public servants?

Perhaps. Not every corrupt public servant needs bribes to survive, and a distinction must be made between those who do and those who do not.

What is 'petty corruption'?

Petty corruption usually refers to low-level, small-scale corrupt practices. This includes 'grease money': for example, paying customs officials a small bribe to get goods cleared quicker. It also includes extortion: for example, paying police officers to avoid fines or imprisonment.

Unlike 'grand corruption', which impacts a country overall by taking large sums of money away from the public purse, petty corruption impacts the poor directly every day. It is often just as damaging to the poor, if not more so, than the bigger corruption scandals which get onto the news.

Do public servants need bribes to survive?

This is an important question to ask. In some countries, public wages are not only well below private sector wages, but fall well below the poverty line. Indeed, in some countries, wages do not even cover the cost of food and may not been paid for months. In these cases, bribery can be the only way in which to survive.

However, this is not the case in most developing countries. Public wages may be low but not so low as to endanger lives. Indeed, in some countries, the public sector is well-paid when compared to the private sector.

Will raising wages help curb petty corruption?

It has been found that it isn't that wages need to be so high as to make public servants incorruptible, but rather that wages need to be high enough so that people don't have to resort to corruption in order to put food on the table. If the public know that wages are too low to survive on, then many may overlook petty corruption out of empathy. Once this threshold of survival has been crossed, higher wages make jobs more valuable to keep, and public servants will want to avoid corrupt practices that may cost them their jobs.

However, governments can only raise wages so high. If it is found that the level of wage increase is too costly, then punishments for corrupt practices will have to be made stronger to discourage the behaviour. At some point, raising wages won't make much difference. An IMF study found that wage increases only help when 'bribe levels are low or the possibility of detection is high'. Raising wages as an anti-corruption strategy will only be effective if part of an overall package of reform, including strong internal and external controls, meritocratic hiring and promotion and proper training.

Internet links

Caroline Van Rijckeghem & Beatrice Weder, 'Corruption and the Rate of Temptation: Do Low Wages in the Civil Service Cause Corruption?', IMF Working Paper No. WP/97/73, June 1997, available at http://www.imf.org/external/pubs/ft/wp/wp9773.pdf

Ugo Panizza, 'Public Sector Wages and Bureaucratic Quality: Evidence from Latin America', Economia, Fall 2001, available at http://www.worldbank.org/wbi/governance/assessing/pdf/panizza.pdf

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Can 'accountability' and 'good governance' really reduce corruption?

Good governance is about reforming institutions and procedures to improve efficiency, effectiveness and accountability and to reduce corruption. It is important to remember, however, that too many reforms in too short a time can overburden the recipient and render reforms useless.

What do we mean by accountability?

Accountability has been defined by the World Bank as 'the constraints placed on the behaviour of politicians and public officials by organisations and constituencies having the power to apply sanctions to them'. An effective system of checks and balances, on every level of government, provides a means by which the public can keep power in check. A tax collector, for example, is accountable to the public through procedures that eliminate discretion in levying taxes. Without discretion, the tax collector is cannot over- or under-charge a tax payer, regardless of bribes paid or demanded. A prime minister is held accountable by the media, the judiciary, the legislation and the electorate. S/he can be booted out of office by the government or the people if corruption is found.

The public must understand its role in holding politicians and public officials to account. Improving literacy and civic education is key to improving the effectiveness of the most important constraint on corrupt behaviour - the people themselves.

What do we mean by good governance?

For most donors, good governance equals democratic government, and anti-corruption work tends to be placed within an overall strategy of assistance for democratisation efforts, which also includes related themes such as enhanced participation, strengthening of the rule of law, multi-party elections, institution building and making governments more accountable to their electorates. This is not to suggest that all donors share the same priorities or that approaches towards good governance within the donor community are identical, but there are similarities. These include helping to promote competition among political parties, high levels of participation and sufficient levels of civil and political liberties.

Good governance is also about effective and efficient management - the way that governments manage their resources and responsibilities.

Why is capacity so important?

Capacity building is sometimes used interchangeably with the terms 'institutional reform' or 'institution building'. It can simply refer to skills training, such as computer classes for civil servants, or it can refer to the bigger challenge of reforming institutions, such as simplifying legal procedure to allow courts to work more efficiently.

In order to fight corruption, many donors have a 'wish list' of reforms linked to good governance. This should be approached realistically. No country can simultaneously reform its legislation, judiciary, executive, civil service and social services, no matter how rich or poor. Donors need to prioritise and co-ordinate efforts to ensure that recipients do not become overloaded with reforms. There is also real danger that donors themselves can become overloaded with this work as well.

Internet links

The African Capacity Building Initiative, available at http://www.acbf-pact.org.

World Bank Governance and Public Sector Reform, available at http://www1.worldbank.org/publicsector

UNDP Democratic Governance, available at http://magnet.undp.org

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Will decentralisation make public officials more accountable, or simply decentralise corruption?

Although decentralisation may help curb some forms of corruption, it opens up new opportunities for different corrupt practices. It is important to keep this in mind when designing strategies.

Decentralisation to fight corruption

There are two major arguments for decentralisation. The World Bank sums both up in a recent report, Reforming Public Institutions and Strengthening Governance: '[t]he political rationale for decentralisation is the desire to move decision-making closer to people to foster greater democracy. The economic rationale is based on gains in allocative efficiency'.

Moving government closer to the people - local government for local people - should make it easier for the public to participate in the political process. They will know their local officials and will find it easier to influence decision-making and hold politicians and civil servants accountable.

Economically, local government should be more efficient than central government. Local officials should understand better how to match resources to local preferences, will know how to use local resources to keep costs lower and will have better overall knowledge of the needs of the local community.

Decentralisation may increase corruption

Decentralisation is intended to bring political power and decision-making closer to the people, but it can also create an entirely new level of bureaucrats who may demand bribes or mismanage funds. For example, cost recovery schemes for education and health, in which local schools and hospitals are allowed to charge fees for services, or local NGOs are given the resources to provide these services, have sometimes resulted in excessive charges and outright bribery.

Using decentralisation as a tool to combat corruption assumes high levels of local capability. It requires a number of tools: ombudsmen, competition, laws, budget support, strong links to central government, more civil servants, information, public literacy, more funding for local elections, increased materials and supplies, and most importantly, the authority to make important decisions. Many central governments (including in some donor countries) would not support decentralisation because of increased costs and decreased capacity.

This does not mean that decentralisation is not desirable for many reasons, but that donors should keep in mind both borrower capacity and changing opportunities for corruption before funding decentralisation projects.

Internet links

World Bank, 'Decentralization and governance: does decentralization improve public service delivery?', PREM Notes No. 55, June 2001.

Omar Azfar et al., 'Decentralization, Governance and Public Services: The Impact of Institutional Arrangements: A Review of the Literature', IRIS Center, September 1999.

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Isn't a strong/authoritarian government more efficient in curbing corruption?

A strong state is vital in curbing corruption. However, a strong state doesn't have to be an authoritarian one, but then again it doesn't have to be democratic either. Many of the new democracies have been called 'weak' democracies, with an impotent media and fragmented civil society. There is little chance of an effective campaign to fight corruption under these circumstances, whether the government is democratic or otherwise. Indeed, a strong authoritarian state is said by some to be preferable to a weak democracy, although others might disagree on ideological grounds.

Pro-democracy arguments

Democracies can provide valuable tools for fighting corruption. Regular elections help to ensure that leaders remain accountable to their citizens. The World Bank claims that civil society and the media are 'the two most important factors in eliminating systemic corruption in public institutions'. Civil society includes both formal and informal groups outside the state. Civil society can put pressure on the government to fight corruption, ensure greater accountability and prevent other government abuses. A free media assists civil society in providing a check on those in power and a forum for discussion.

In democracies, evidence has shown that both civil society and the media tend to be stronger than under dictatorships. Therefore, they would provide a more effective check on corruption than under a non-democratic system.

Pro-authoritarian arguments

Authoritarian states are free from some of the potentially corruption-generating practices found in democracies. Political parties and elections require finance and patronage, and there is considerable opportunity for corruption. Combating corruption should be a long-term objective, and democracies often lean towards short-termism.

Civil society can hinder the fight against corruption. The pro-democracy camp has been accused of 'romanticizing' civil society, which includes elements such as organized criminal gangs and groups based on ethinicity (for example, the Ku Klux Klan). Also, with all the money out there to fund civil society groups right now, it's hard to tell which groups are legitimate and which have been formed to get a piece of this burgeoning pie.

Likewise, there's no reason to suggest that a free media will help in the fight against corruption. This depends on many factors - who owns the media, what their interests are, and so on.

Dealing with reality

As of January 2000, there were 120 electoral democracies in the world, many in developing countries. This means that donors need to find solutions for curbing corruption in democratic countries, whether or not it's the most 'efficient' method of government. Some would argue that 'efficiency' should not be our main concern, and we should instead focus on 'equity' and 'justice', more often associated with democracies than with dictatorships.

Internet links
Official World Forum on Democracy, available at http://www.fordemocracy.net/
Said Adejumobi, 'Between Democracy and Development in Africa: What are the Missing Links?', World Bank Conference on "Development Thinking in the Next Millennium", Paris 26-28 June 2000.

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Should offshore financial centres and 'tax havens' be outlawed?

It is important that both onshore and offshore financial centres (OFCs) become much more open and transparent.

Arguments for offshore centres

Some arguments for OFCs include:

• Offshore banking facilitates international trade. If companies were forced to return to onshore banking centres, with their increased costs, and to pay tax in their home countries, prices on consumer goods and services would skyrocket, standards of living would decrease and economic growth would decline or reverse.
• Most OFCs are located in small states with few other opportunities for diversification because of a lack of natural resources ('no soil, no oil').
• Terrorists, drug dealers, corrupt dictators and so on do use the offshore system; however, many more law-abiding citizens and corporations do as well, and they should not lose their right to privacy because of the abuses of the few.

Arguments against offshore centres

Some arguments against OFCs include:

• OFCs enable many corrupt individuals and criminals to exist and profit. Without these centres and their high levels of secrecy and often inadequate security arrangements (especially in newer OFCs), national governments will find it much easier to crack down on drug dealers, organised crime, money laundering and corruption.
• The probable effects on international trade are often overstated. There would be an adjustment period - as with the introduction of the minimum wage, for example - but the market would cope with the increased costs.
• The problem with small states is genuine, but other areas of diversification can and must be found. Employees who work in the offshore sector will be highly trained and well placed to find alternative employment. The World Bank and other donors are aware of this concern and are in dialogue with the small states regarding this.

A hypocritical stance by the OECD?

Many of the small states where most OFCs are located have cried 'foul play' regarding the recent crackdown by the OECD. Many of the older OFCs have highly respected disclosure systems and better records, in fact, than some onshore banks in the US and Switzerland, for example. Indeed, the OECD faces the accusation that pressure has been put on OFCs, not because of fears regarding money laundering and corruption but rather, shrinking tax bases in the West. OECD countries might be concerned with 'unfair tax competition', but that has little to do with fighting corruption.

OFCs are not entirely to blame for the billions hidden away by drug dealers and corrupt dictators. More needs to be done by both onshore and offshore banks to make it more difficult to launder or hide away ill-gotten gains.

Internet links

OECD's Financial Action Task Force on Money Laundering.

IMF, 'Offshore Financial Centers', 23 June 2000.

World Bank website on small states.

Michael Peel, 'Double Dealing', New Internationalist, August 2000.

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What is the role of international banks and multinational corporations (MNCs)?

anks and MNCs facilitate corruption on the 'supply-side', by turning a blind eye to corrupt transactions and by offering bribes or other inducements. Getting these organisations to comply with existing rules and develop new ones is vital in the fight against corruption.

What do we mean by 'supply-side'?

In a corrupt transaction, such as bribery, for example, there are at least two parties: one demands the bribe ('demand-side') and another provides the bribe ('supply-side'). It is not enough to focus on the 'demand-side': one has to remove the money and temptation by restricting the supply.

Multinational corporations (MNCs)

MNCs have not always been interested in fighting corruption. Although bribery increases the overall cost of a transaction, it can be built into the agreed price, maybe even entered as a tax deduction and can help uncompetitive firms win bids. Thus, individual companies might not want to see an end to the current situation. Fritz F. Heimann, head of TI-USA, lists several ways MNCs contribute to corruption:

• Bribery
• Gifts and entertainment
• Travel expenses
• Political contributions
• Facilitation payments to speed up red tape
• Inadequate record keeping and internal controls
• Hiding behind sales representatives and agents by paying these unreasonably high compensation
• Inadequate reporting mechanisms
• Poor standards set by upper management

The International Chamber of Commerce (ICC) has been calling for rules of conduct on corruption since the late 1970s, and the 1999 'Rules of Conduct: Extortion and Bribery in International Business Transactions' addresses this ongoing and long-standing concern with business conduct. The ICC's self-regulated rules go a long way to addressing the connection between business and corruption. Governments are also called upon to enact legislation that holds businesses to these rules.

International banks

International banks are used by corrupt individuals and businesses for money laundering and to hide illicit funds. There are regulations that make this difficult, but these are not always adhered to. Banks are increasingly being asked to 'know-your-customer' in order to find those using the system to hide corrupt acts. Tools used for decades to find and punish drug dealers are now being used in the fight against corruption.

There are issues that arise here: should these funds be frozen? Who gets the money? What proof is required? What about legitimate individuals or business that require privacy in their transactions? The international regulatory bodies are currently attempting to deal with these and other concerns.

Internet links

International Chamber of Commerce Rules of Conduct (1999): Extortion and Bribery in International Business Transactions.

IMF: Code of Good Practices on Transparency in Monetary and Financial Policies

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Why is political will and commitment necessary for an effective fight against corruption?

Without top-level support, sustained anti-corruption initiatives will not succeed. Whether political will exists from the beginning or is demanded by civil society, it is vital for the success of anti-corruption work.

What is political will?

When we refer to 'political will', we mean an express, and hopefully public, commitment from a country's leader(s) to a sustained anti-corruption strategy. The World Bank and other donors sometimes refer to this as a 'demand-driven' approach, with demand coming from the country itself, rather than from outside.

Why is it necessary?

Without a true commitment from a country's leaders, an anti-corruption strategy will have no chance of succeeding. Leaders set an example to businesses, politicians, military, civil service, civil society and ordinary citizens. If leaders behave corruptly and are seen to profit from doing so, there is little incentive for anyone else to behave otherwise. Leaders have the power to halt anti-corruption initiatives, by, for example, appointing non-reform minded judges, or by prosecuting journalists who report on corruption. The possibilities are virtually endless and apply to both democracies and authoritarian regimes.

The existence of political will also protects the interests of donors: by ensuring that money spent on anti-corruption initiatives is not money wasted, and by protecting donors from the criticism that work on corruption is interfering in recipient countries' affairs.

Challenges for donors

Measuring political will

There has been some research done on measuring political will but it is proving a rather elusive concept. One way to measure political will is to find a 'champion' at the top. However, speeches from politicians committing support do not necessarily translate into concrete action. Another way is to only deal with leaders that have actively sought donor assistance for anti-corruption work. This can also be tricky though. If it is common knowledge that donors have money available for this work, what's to stop a non-reform minded leader from initially pledging support and then going back on his/her word when the time comes for implementation? Donors must find ways to 'lock-in' this support.

Generating political will

One method suggested for generating political will is to support reform from the bottom up with civil society. The idea is that grassroots movements will put pressure on leaders to fight corruption. Although this approach has some merit, it depends on many factors (for example, the strength of civil society within the country, the interests of the groups used, and so on). Also, it opens donors up to the accusation of interference in the politics of a country.

There is also the use of conditionality on aid/trade/etc. However, donor conditionality has not proved an effective restraint on behaviour in the past, and it seems unlikely that anti-corruption work will be any different.

Internet links

World Bank, 'Assessing Political Commitment to Fighting Corruption', PREM Note No. 29, 1998.

D. Kapur & R. Webb, 'Governance-Related Conditionalities of the International Financial Institutions', G-24 (United Nations) Discussion Paper No. 6, available at http://www.g24.org/g24-dp6.pdf

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Isn't the question of economic development and political democratisation more pressing than the problem of corruption for most developing countries?

These issues - economic development, political democratisation and corruption - are all inter-linked. A comprehensive approach that includes each issue will be more successful than tackling each separately.

Economic development & political democratisation

There is a 'chicken and egg' debate going on regarding the relationship between development and democracy.

• One school of thought contends that democracy is not feasible under conditions of extreme poverty. In order for democracy to flourish, a country needs universal education, adequate health care and sanitation, security and political stability. In other words, basic needs must be met before democracy can be sustained. Democracy encourages consumption over investment, reducing the funds available for development projects, and potentially weakens the state by opening it up to short-termism and reducing its ability to direct development.
• The other school of thought sees democracy as key to bringing about economic development. Democracies historically spend more on basic needs, such as healthcare and education. People have greater protection from persecution under democracies and will feel freer to contribute to development. Finally, democracy can actually strengthen the state by providing stability and legitimacy.

Economic development & corruption

In the 1960s and 1970s, a group of scholars saw a direct link between the modernisation process and corruption. These 'functionalists' believed that corruption helped aid social and political integration during times of great social change and filled needs not met by official means.

Economists in the 1970s and 1980s turned this argument around, showing that 'rent-seeking' actually added to red tape and closed access to the poor. Corruption diverts resources from productive activities and harms economic development.

There are still some who argue that corruption can serve a productive purpose, especially in situations where ethnic tensions are high and social stability is very low, but this is not a very popular stance to take nowadays. Few people now believe that corruption, in any form, is beneficial for economic development.

Political democratisation & corruption

The relationship here is quite complex.

• Democracy is said to curb corruption by ensuring the accountability of politicians and civil servants through checks and balances, provided by institutions, elections, civil society and the media.
• Corruption is said to harm democracy by weakening institutions, diverting resources and decreasing legitimacy.
• Democracy is said to increase corruption through the need to fund political parties, find supporters and respond to interest groups. Regular elections can also lead to a 'get it while you can' mentality among those who see public office as a means of personal enrichment.
• Corruption is said to foster democracy when it allows access to power those who may not ordinarily gain access, such as minority groups.

It is important here to always remember the complexity of this relationship. Assuming that democracy will help curb corruption ignores the opportunities for corruption that democracy brings. Likewise, assuming that corruption will help provide access for some groups ignores those who lose access because they cannot afford to pay for it.

Internet links

David Yang, 'More aid, more democracy', Christian Science Monitor, 21 March 2002.

International IDEA's Democracy Forum 2000 - 'Democracy and Poverty: A Missing Link?'

Robert Barro, 'Determinants of Democracy', Harvard Institute for International Development Discussion Paper No. 570, January 1997.

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What about the tax deductibility of bribes?

Although some donor countries allowed the tax deductibility of bribes, this is no longer the case following the OECD Convention on Combating Bribery. This sends out a strong political signal to would-be bribe seekers that bribes are no longer 'business as usual'.

The arguments for allowing the tax deductibility of bribes

Several countries used to allow companies to deduct the cost of bribes as a normal business expense. There were three major arguments for this practice.

1. 1. All business expenses are usually taken into account for tax purposes, and bribes are just one of many kinds of business expenses.
2. Even if bribes were made non-deductible, bribery would still take place.
3. Finally, if paying bribes is normal business practice, then companies who do not pay up will lose out to those who do.

Which countries did and which did not?

The OECD Convention

The OECD Working Group on Bribery produced the 'Convention on Combating Bribery of Foreign Public Officials in International Business Transactions' in November 1997, which went into effect on 15 February 1999. The Convention was originally signed by all 29 member countries and 5 non-member countries, while 26 of these countries have 'commit[ted] themselves to ensuring that their national parliaments approve the Convention and pass legislation necessary for its ratification and implementation into national law' (OECD website).

The Convention sends out a strong signal that bribery is not 'business as usual'. It argues against all three points above. Bribery is not a normal business expense and should not be treated as such. By offering a tax deduction, there is no deterrent for offering one in the first place. Finally, by agreeing to the terms of the Convention, countries create a 'level playing field', where businesses can turn down the request for a bribe, safe in the knowledge that their competitors will do the same.

Progress reports

Implementation of the Convention is ongoing. A progress report is available from the OECD. Read also Transparency International's 'Monitoring the OECD convention. Monitoring this process is essential for the Convention to maintain credibility and for it to work.

Internet links

Laws Prohibiting Tax Deduction of Bribes, available at http://www.mac.doc.gov/tcc/anti_b/oecd2000/pdf/chapter4z.pdf

OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Report on the Implementation of the Convention on Combating Bribery, 15-16 May 2002.

Martine Milliet-Einbinder, 'Writing Off Tax Deductibility', OECD Observer, 7 July 2002.

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What is the problem about political party finance?

Political parties can become 'bottomless pits' for money, both legitimate and illegitimate. Strategies must be in place to control fund-raising, spending and access.

Common methods of political party finance

In democracies, political parties act as intermediaries between the public and the state, so access to the parties becomes vital. The more money a party has, the more influence it is likely to wield.

There are several ways to raise money.

• Direct state funding: An amount is set aside from the central budget for political party financing.
• Party membership: Party members are charged fees, as individuals and/or as groups.
• Individual ownership: If someone is wealthy enough, s/he can self-finance a political party.
• External funding: Donations can come from individuals and groups.

Opportunities for corruption

In each of these methods there are clear opportunities for corruption.

• Direct state funding: This gives the existing leadership a considerable amount of power over finance. Who sets the amount? Who determines the distribution? Who decides when a 'raise' is appropriate? Although it releases parties from obligation to individuals or interest groups, it also could make parties less responsive to the needs of the public, which it no longer directly relies upon for finance. In the developing country context, it is also more expensive than many budgets will allow.
• Party membership: Wealthy individuals and groups can wield more influence than others, especially if different levels of membership (and access) are allowed.
• Individual ownership: Few others within the party are likely to have any control. Access to the one individual becomes all important, and outright bribery can occur.
• External funding: 'Whoever pays, calls the shots', so to speak. This is money from individuals or groups seeking influence, through legitimate and illegitimate means. It's important to remember that just because a donation may be legal and thus, non-corrupt, it may be illegitimate in the public's mind. For example, in the US, 'soft money' donations are legal but seen as wrongful in the mind of the public. So whether money is in the form of bribes, from illegal sources or through legal but distrusted sources, this sort of finance can undermine public trust in the entire system.

Suggestions for controlling corruption

One method is to require disclosure of all donations, both the amount and the donor and to ensure that this information is disseminated to the public. Another is establish limits on external donations. Yet another is to limit the ways in which parties can spend the money. Finally, another way is to eliminate private finance and rely on state finance, but that method can be problematic, as we've seen. The key here is transparency and diligence, and accepting that where access to power can be bought, there will always be those who try to find a way in. There have been many suggestions for trying to deal with political party finance, but it must be seen as an ongoing concern, in both the developed and developing worlds.

Internet links

Robert Williams, 'Aspects of Party Finance and Political Corruption', in Robert Williams (ed.), Party Finance and Political Corruption, Palgrave, 2000.

Doris Haddock, 89 year old 'Granny D', who walked across the US to protest 'soft money' donations and raise support for campaign finance reform.

'Political party finance: Can corruption be contained?', 10th International Anti-Corruption Conference.

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