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Corruption in the OECD

We Need New Weapons

April 29, 2013 | by ALINA MUNGIU-PIPPIDI

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Corruption is one of the greatest impediments to the quality of democracy. But current policies such as pumping EU funds into Greece or South Italy often don’t pay out. Anti-corruption efforts must focus more on civil society actors instead of governments.

Democracies make up the largest group of countries in the world that has achieved a reasonable control of corruption. There are 51 electoral democracies, compared to only five autocracies with similar performances in controlling corruption. However, 59 other electoral democracies are fairly corrupt according to the Freedom House classification. The classic patrimonial regime described by Max Weber where power is a monopoly is now in the minority compared to regimes that enjoy some form of pluralism. But the spoiling of public resources still remains the main rule of the game.

Democratization increasingly produces a new type of regime where rulers monopolizing power who treat the state as their “own” patrimony are replaced with competing political groupings or parties that promote the allocation of public resources based on patronage, nepotism, and favours.

Under this “competitive particularism”, violent power grabbing is replaced with corrupt politics and elections – sometimes free, though not fair. The allocation of public resources is particular and unfair; rent seeking is practically common behaviour; the rule of law is partial as those in power are above the law; and the state is perceived as an instrument of spoliation of the many and enrichment of the few.

The classic example of this is Italy. Greece is another case in point. Politics in these democracies is a mixture of universal allocation (say, pensions) and particularistic allocation (say, infrastructure projects). The former go to every pensioner; the latter goes to businesses connected to the government. This greatly subverts the rationality of public investment, as other areas of investment might be more in need. But it has a rationality of its own. This is what Daniel Kaufman from Revenue Watch calls “legal corruption” and I call particularism.

Legal Corruption” is Present in Most Democracies

Particular allocation and government favouritism are the backbone of politics in many democracies regardless of who comes to government. Few countries have managed to build states autonomous from private interest and societal controls sufficient to constrain such behaviour from political elites. These are the countries in the “green” zone of the World Bank indicator Control of Corruption or ranked above, say, 7 in the scores of the Sustainable Governance Indicators of the Bertelsmann Foundation:

© 2012 The World Bank Group

France and Belgium are on the border, and none of the Mediterranean countries qualify. On the other extreme, although still on top of most of the rest of the world – except some oil rich monarchies, Singapore, or the Caribbean – we find the new member states from Eastern Europe.

The only shining success story here is Estonia. It’s based on a mix of neo-liberal policies with dried discretionary spending, transparency, Scandinavian style e-government and an active media and civil society. These seem like transferable policies, though it should also be mentioned that Protestant Estonia had 90 per cent literacy already by the 1880s, when in the Balkans the percentage was reversed. Nevertheless, this is our best example and we should make the most out of it.

Evolutions to good governance are so infrequent because, to a great extent, they depend on the collective action capacity of democracies to achieve normative constraints to elite predatory behaviour. This includes equality before the law and an impartial treatment of all citizens by the government. This implies that the key of the problems rests with the society and not the government.

Most current corruption literature, especially by economists, takes a principal agent perspective and thus postulates the existence of a well-meaning principal whose trust is abused by some agent and whose interest is to fight corruption. Most assistance for good governance programs is directed to such principals that are presumed to be above corrupt exchanges, such as ministries, control agencies, and anti-corruption agencies.

But those who have the highest discretionary power also have more opportunities to be corrupt, which makes high-level government officials the best placed to control such agencies or manipulate policy and legislation in favour of particular interest groups. Thus, in severely corrupt countries the risk is that the principal himself is the patron or gatekeeper. For citizens to be the principals themselves and keep a check on these officials, therefore creating accountability, we need to presume the grassroots existence of active and enlightened citizens able to take action.

Misdirected Policies

The relationship between corruption and democracy is therefore complex. A society needs enlightened citizens to generate demand for good governance. Their main instrument, proved to work, is transparency: reducing any spending which can be used discretionarily sounds like cutting one’s hand not to get contaminated by bacteria, but it works: Before Estonia and Georgia, Chile succeeded on the path of good governance partly on behalf of its neo-liberal policies. It would be ideal if the state could be trusted to redistribute: but in corrupt countries the state redistributes only to its clients, not to the needy.

This is why the relationship between democracy and corruption is “j-shaped”, meaning that when democracy is measured on a continuous scale, countries in the middle are outperformed by both strong democracies and strong autocracies on average, but old democracies over perform autocracies by providing the best quality of governance.

There is an intermediate period in the lives of democracies when political parties become the main vehicles of public resources spoiling. Pouring extra-resources in, like EU funds into Greece, South Italy or Catalonia only grants sustainability to what should otherwise have been a transitory phase.

Unfortunately, anticorruption policies for the past 15 years have not been up to the task. We give more discretionary money to corrupt governments and we sell across borders the concept that legal constraints and strong prosecution alone can clean a country. But corruption control and rule of law are practically synonymous. The two World Bank indicators correlate at nearly one here. So if you do not have one, you are certain not to have the other.

Statistical evidence that my research centre has uncovered shows that corrupt countries do not progress only because they import one or another institutional tool, or all of them. The toolkit of international consultants such as separate anticorruption agencies, where most donor agencies place their funds, freedom of information alone and transparency more generally has sizeable effects. The reason is that it is the only policy tool where implementation depends to a large extent on the society, not the government.

Ask the Villagers

If South Korea or Poland, for instance, despite their imperfections, have made some progress in the past 15 years, it is because a more active, though still insufficient civil society has pushed some accountability through transparency and activism. This has not happened in Mediterranean Europe thus far. Perhaps now, when resources are drying up and satisfying clients becomes far more difficult, some internal mobilization will stir up demand for good governance.

If only a tiny fraction of EU money for projects in Sicily, for example, would go to citizens’ associations who take part in the planning, evaluation and auditing of such projects and the publishing of allocations and costs online in real time! Thirty years of EU evaluations have not managed to uncover what any Sicilian villager could have told them from the onset: What the money is really for, and for whom. That is because such evaluations never consult with the villagers. We need another type of anticorruption if we want to rise to the challenge.

Prof. Dr. Alina Mungiu-Pippidi is Director of the European Research Centre for Anti-Corruption and State-Building at the Hertie School of Governance.

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