Foldvary: Resisting Corruption
|December 31, 2004||Posted by Fred Foldvary under Progress Report, The Progress Report|
by Fred E. Foldvary, Senior Editor
We can sit here and propose ways to improve society, but even if government officials know about this, will they have the incentive to make reforms? Not if they are corrupt.
A corrupt person is someone in an organization who takes property in violation of official rules. An organization is corrupt if there are systematic corrupt takings. For example, if the police routinely stop drivers and illegally extort money, they are corrupt, as is the government that lets it happen. If you need to bribe an official to obtain telephone service or a train ticket, the official is corrupt, as is his bureau if this is a standard but illegal practice.
There was a conference at Santa Clara University on “Combatting Corruption” on March 26, 2004, which provided some insights on the problem. What follows is information from the conference and some of my ideas about the problem.
Private corruption is less difficult to eradicate than the corruption of governments. Private-sector corruption occurs with ‘asset misappropriation,’ when the employees of a company continuously steal from the firm. The most costly form of employee theft is in accounting, with fraudulent statements. Companies combat internal theft with audits and other controls, as well as by inviting tips from employees and customers. Having a good work climate helps combat private corruption. Private corruption can be controlled because when detected, the corrupt employee can be prosecuted as a criminal or sued for damages.
Governmental corruption can become entrenched because the corrupt officials are in charge of law enforcement, and they won’t act against themselves, and the public is powerless to stop it. The peoples with the least power are often the indigenous inhabitants. Indigenous people typically have an emotional attachment to their traditional land. The conquerors have superior military power and take their land by force.
This land grab has often involved corruption along with simple conquest. In the United States, the federal government often sold Indian land that had been tribal and communal. The government was supposed to compensate the Indians for the loss of their land, but in some cases, white traders claimed that there were debts, and siphoned off much of the money to pay them for phony claims. In many countries, indigenous people had no legal documents that gave them official title to land, even though they had traditionally lived there for centuries. Governments then claimed there was no legal title and took the land. This is corruption, because this taking was contrary to the country’s own legal requirements to honor indigenous property.
Much of the corruption in developing countries exploits grants and loans by international organizations such as the International Monetary Fund and the World Bank. The money for development goes to the government of the recipient country, which then makes contracts to build the school, highway, or dam. Corrupt government officials routinely take a cut of the development aid. Contractors include bribery in the cost of doing business.
This corruption not only takes resources from the people and deprives them of public works, but even puts them in danger. Contractors who have to pay extra bribes will try to squeeze out some profit with substandard construction. The result is school buildings which collapse and roads that erode. The public is worse off than if the aid had not been given. To add injury to injury, the country then has a huge debt to pay to the World Bank or IMF.
In many countries, much of the economy is operated by the government, and officials have to be bribed. Indeed, they put in many regulations in order to make people avoid them by paying bribes. When they make people have to wait for weeks to get electricity or telephone service, they invite bribes for those who want to get the service quickly.
How can governmental fraud be remedied? Fortunately, organizations which aid and lend to developing countries are now attempting to detect and reduce corruption. The U.S. federal government enacted the Foreign Corrupt Practices Act in 1977 to attempt to reduce the practice of bribing officials in order to do business. Another anti-corruption law in the U.S. is the Sarbanes-Oxley Act of 2002. International law, including the U.N. declaration of human rights, can be used to combat corruption and help empower the people. All these, however, have limited effect, because they don’t eradicate the cause of the corruption.
Corruption can be reduced if government has less power. There is less corruption if most of the economy is in the private sector, if political power is decentralized, and if there are fewer victimless crimes. Corruption can be reduced if there is more transparency, more disclosure and publicity on what government does. But the most important element of reducing corruption is the culture of the country.
A study titled ‘Governance Matters’ by several authors measured the amount of corruption in governments with various indicators. It found that the countries with the least amount of corruption are Sweden and Canada. Countries with relatively low corruption have a culture of honesty buttressed by democratic institutions and the rule of law.
The culture, however, can degenerate. In Latin America, for example, some countries such as Argentina and Venezuela have become more corrupt. Mass democracy can corrupt a country as the government seeks popularity with ever more welfare spending, paid for by borrowing. Much of the spending is siphoned to the pockets of corrupt officials. The high debt makes private loans too risky, so the government turns to the World Bank and IMF. The very existence of such lenders of last resort invites more corruption, since the officials know they will be bailed out.
Natural resources such as oil are often operated by government, and the huge amount of wealth becomes an attractive source of corruption. The people end up worse of than if there were no oil or minerals. The remedy is both external and internal. International organizations and the governments of the major powers need to make anti-corruption measures a top priority.
In my viewpoint, people can fight back by refusing to vote for corrupt officials and parties. Too often voters elect the lesser of evils, but if all the major parties are corrupt, electing what appears to be the least of the evils is an illusion. This is also a problem for the relatively less corrupt countries such as the U.S. You can help stop corruption by refusing to vote for the lesser of evils.
Where there is a corrupt dictator or oligarchy, the public may be helpless to stop it. But I think that in a corrupt democracy, the people can fight back with a movement to eliminate corruption. They need to focus on decentralizing, privatizing, and liberalizing. There can be protest marches and civil disobedience against corruption. A movement to combat corruption can declare a Day of No Corruption. Just for that day, people will refuse to pay bribes. The next year, declare two Days of No Corruption. Then make it four, eight, sixteen, until corruption gets squeezed into ever fewer days. The culture of corruption can be changed if there are people with initiative and courage who will fight for truth and righteousness.
Copyright 2004 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
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