Corruption is on the run. Or so we like to think. A high-visibility campaign to end the tendency of governments and businesses to look the other way has had results. Unfortunately, old habits die hard. Corruption may be under attack, but it is still too prevalent, its toll too high.
Corruption is a blight. That seems obvious. It saps a nation’s strength, tarnishes its image, divides rich and poor, and erodes respect for the law. Yet for years, economists argued that corruption actually served a useful purpose. They asserted that it allowed businesses to sidestep government inefficiencies. Executives were too happy to accept that rationalization. They paid off whoever held out a palm, dismissing complaints as misplaced moralism, an inability to accept cultural differences or naivete about the way the world really works. Governments played along, permitting companies to write off such payments as legitimate business expenses.
Those views are changing. Transparency International, a nongovernmental organization, has led the fight against corruption. It has been joined — belatedly — by other international organizations that have shrugged off their preference for looking the other way. A report released this week explains why such studied indifference can no longer be tolerated.
The Islamabad-based Mahbub ul Haq Foundation detailed the costs of corruption in South Asia. The study — supported by the United Nations Development Program — concludes that reducing corruption in India to the level of Scandinavian countries would increase investment by 12 percent and gross domestic product by 1.4 percent. Bangladesh’s yearly GDP would rise by an additional 0.5 percentage points if its bureaucracy were as clean as that of Uruguay. And if Pakistan were to cut its corruption to the level of Singapore’s, per capita income would rise by 50 percent.
National income would not be the only beneficiary. Corruption undermines a government’s legitimacy and, as has been demonstrated so recently in Islamabad, threatens democracy itself.
We should not be complacent. Corruption is not “someone else’s problem.” The Asian economic crisis was triggered in part by corruption: A substantial amount of money was channeled into unproductive investment because political factors were paramount. Greased palms rather than efficiency dictated where and how money was spent. The practices may have been more polished than in other less developed countries, but the effects were no less damaging. Japan has had its share of such scandals, but then so has the United States and every other industrialized country.
Moreover, bribery takes two. Transparency International’s most recent corruption ratings, released last week, documented the willingness with which the rest of the world participates in this destructive process. While Chinese businesses top the NGO’s Bribe Payer’s Index, South Korea, Taiwan and Italy followed. Japan has the dubious distinction of ranking sixth, with France right behind it. Even though the U.S. has been one of the few governments to make the payment of foreign bribes by U.S. companies illegal, it ranked 10th, tied with Germany, a country that allows businesses to expense such payments.
Nor does the complicity end there. Ms. Khadija Haq, coordinator of the South Asia study, made the point plain. “This corrupt money has a name and an account and it goes to offshore or island banks. International banking secrecy laws actually work to protect grand larceny.”
The havens are under siege, though. Transparency International’s persistence has had an effect. The Organization for Economic Cooperation and Development has passed a convention combating bribery that has been ratified by 18 countries (several of whom grace the Bribe Payer’s Index). It goes into force next February. The World Bank is now making good governance a criterion in its lending policies.
The bank has also just released a list of 48 countries with which it is working to combat corruption. The fact that those governments asked the institution to help them fight bribery is one indication that thinking is changing.
Only a cooperative, international effort will succeed. Governments fighting temptation need allies; bribe givers as well as takers need to be punished. At the very least, the incentives for bribery — such as treating those funds as business expenses — should be eliminated. If businesses want to “help,” “expedite” or bribe, then they should be free to do so — and be treated like the criminals that they are.
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