New Internationalist

Can the rot be stopped?

Issue 396

High rhetoric, low deeds. Vanessa Baird examines the murky world of corruption.

They were not a happy pair. The two Nepalese teachers of journalism seemed to get glummer by the day.

Finally, one morning, over breakfast in the Dhaka guesthouse where we were staying, they explained.

For three months they had been going to the Bangladeshi authorities to get an extension to their work permits.

They had started the process well in advance because they knew it could take a long time. Now their permits were about to expire within the next few days – and if that happened there would be hefty fines to pay.

There was nothing wrong with their paperwork. No reason was given for the delay. It was just that nothing was happening.

Could it be, I ventured, that the official concerned was waiting to be offered something?

Yes, that’s what their Bangladeshi colleagues had told them. They had even told them how much it might cost to ‘speed things up’. It was not a large sum, even by local standards.

‘Oh, just pay it,’ I caught myself thinking, but not saying. Fortunately, for the next thing one of the teachers said was:

‘That’s the most depressing thing. We are working here in an organization that is committed to social change and everyone is advising us to pay the bribe. How is anything going to change that way?’

She was right of course. And I felt ashamed of my own hasty, albeit unspoken reaction. A reaction that you might call pragmatic, realistic, responsive to local conditions. But impatient and unprincipled might be more to the point.

Which raises a – for me – awkward question: who am I to be talking about corruption?

Who is anyone, for that matter?

One thing that’s certain, there’s plenty of talk.

During a visit to Nigeria earlier this year British Chancellor Gordon Brown called upon African leaders to ‘make corruption history’. How could the G8 countries justify increasing foreign aid and writing off debt if the benefits were to line the pockets of corrupt officials? 1

After decades of treating corruption as taboo and wrapping it in euphemisms like ‘unexplained cost over-runs’ and ‘excessive purchase of vehicles’, even the World Bank has come out anti-graft. Corruption, it now declares, is ‘among the greatest obstacles to economic and social development’. 2

Bank Chief Paul Wolfowitz told a gathering in Jakarta this year: ‘Corruption not only undermines the ability of governments to function properly, it also stifles the growth of the private sector.’

So, there we have it. It’s official. Corruption is bad for business too.3

What is it?

But what is ‘corruption’? Dictionary entries suggest rottenness, perversion, and the defilement of something once pure and wholesome. But the most common definition in use today is ‘the abuse of entrusted power for private gain’. The gain may not be strictly personal – it may be to a group, company, political party.

According to corruption watchdog Transparency International, public perception is that the problem is growing. But that could be due to greater awareness and preparedness to talk about it.

Though corruption is notoriously hard to measure, the number-crunchers at the World Bank have been busy trying. They estimate that $1 trillion is paid in bribes a year while what they call ‘tainted procurement’ is worth around $1.5 trillion a year. And that’s only the tip of the iceberg, they say.4 On average it is thought that five per cent of national budgets ‘go astray’.5

But corruption is about more than money.

It saps the lifeblood of a society. It deepens inequality, the poorest and most vulnerable bearing the brunt of it. Usually it is they who, unable to pay the bribes , have to forgo the basic goods and services that should be free or at least affordable. Sometimes the clean water, the education, the basic health care to which they are entitled never reaches them. Funds have been ‘diverted’. Ultimately, and often, corruption kills. It is emphatically not, as some claim, a ‘victimless crime’.

Clearly it has to be tackled and many in the West think they have the answer: ‘good governance’. The reason that so many developing countries suffer from corruption, or so the thinking goes, is because they lack the good governance found in our western-style democracy.

Indeed the annual ‘global corruption’ survey conducted by Transparency International does show countries like Finland, Iceland, Sweden and Aotearoa/New Zealand winning the ‘least corrupt’ beauty contest. While the performances of Bangladesh, Chad or Uzbekistan are usually, well, dismal.6

What makes the difference?

Is it a question of culture?

Perhaps what is seen as corrupt in one country is quite normal and acceptable in another. One person’s nepotism is another’s family duty. One person’s bribe, another’s gift. Traditional customs of giving gifts to chiefs and the like have frequently been invoked in this context – especially by westerners doing business in Africa. But increasingly this is recognized as an excuse. ‘It’s bunkum,’ says Kenyan anti-corruption activist John Githongo. ‘Racist bunkum.’

So, is it an issue of wealth and poverty?

Not necessarily. Rampant corruption exists in luxurious surroundings – and in dirt poor ones too. Graft knows no social class. The favelas of Rio and the boardrooms of Hoffman La Roche are equally suitable locations for it.

Is it to do with stability then?

Corruption does tend to take hold in places where there is little security and when those in positions of tenuous power grab as much as they can as quickly as they can. But it has also flourished in places where those in power have too much security: the multi-decade rules of Suharto in Indonesia or Mobutu in Zaire (now DR Congo) for example.

It must be to do with power then?

If the old adage that ‘power corrupts and absolute power corrupts absolutely’ is true, then you would expect multiparty systems to be far cleaner than single-party ones. But recent experience in Africa and the former Soviet Union has taught us not to expect this. In fact Mozambique had far less corruption under the single-party Frelimo government than it has under its multiparty system today.

So it’s a question of political ideology?

Not necessarily. Corruption has dogged socialist and capitalist systems alike.

Yet some generalizations are possible. Stable societies with strong social infrastructures, respected institutions, functioning systems of accountability and transparency, and a relatively narrow equality gap are better protected against corruption. Countries in transition where there is great insecurity, where the stakes are high and the pickings rich, are extremely vulnerable. Everything is up for grabs.

The newly-independent and resource-rich states of Africa since the 1960s and the new states of the former Soviet Union since the 1990s fall into this second category.

Clompety clomp

It is often said that the Cold War was fought by proxy, with the people of Africa, Asia and Latin America doing the dying. But an economic war was also fought on these continents, with bribery and corruption proving useful weapons – and with lasting consequences.

Kleptocratic dictators were propped up, bankrolled, and sold arms by the superpowers and their allies. Massive loans were made on the back of big development projects – many of which were either useless or never built. Debt accumulated. Then came the global debt crisis of the 1980s. The International Monetary Fund stepped in and imposed ‘austerity’ policies upon debtor nations. Not upon their leaders, mind (think of Imelda Marcos’ shoe budget), but upon their people. Food subsidies were cut and public sector wages frozen. Unable to meet the rising costs of living, public sector workers had to supplement their income from elsewhere. You can guess the rest… In too many countries petty corruption and the soliciting of extra ‘payments’ from users became endemic in public service offices.

There is another way in which the international financial institutions, the IMF and the World Bank, fueled and continue to fuel corruption: by insisting on privatization. Rather than encouraging the payment of a living wage to public sector workers the World Bank has been exerting pressure to make privatization a condition of development aid. This is in spite of ample evidence that privatization of public enterprise provides fertile opportunities for corruption while increasing the cost of basic services to the poorest people.

The impact of such policies on poor people in the global South is intolerable. But, to the rescue, comes aid – or so they say!

Charities find the waste of donors’ money through corruption a very tricky matter. Oxfam UK, to take one example, briefly ran an advertisement maintaining that it did not fund corrupt projects.

This is an impossible claim to make. Take the tsunami disaster relief effort, which touched the hearts of millions. Corruption watchdogs in the worst affected country, Indonesia, estimate that between 30 and 40 per cent of funds that should have been spent helping victims were lost to corruption. Earlier this year two British charities, Save the Children and Oxfam, had to close down reconstruction projects in Aceh due to fraud worth hundreds of thousands of pounds.7

The need to react quickly; the distorting effects of large influxes of aid; the often poor state of local infrastructure; the compromises aid workers may have to make on the ground – all encourage corruption.

Some argue that aid itself is a mainstay of corruption. Andrew Mwenda, political editor of The Monitor, Uganda’s leading opposition newspaper, thinks aid to his country’s government should be cut. ‘The victim of aid cuts in Africa cannot be the poor. The poor are poor already. And they are growing poorer, not richer. The first casualty of aid cuts would be corrupt African leaders.’ 8

It is hard to see how the G8’s pledge to increase aid by $50 billion by 2010 will help eradicate poverty unless the poor for whom it is intended actually get to monitor it. They, or trustworthy independent monitors working on their behalf, need to be able to track exactly how much has been given to whom, when and for what purpose. Those responsible need then to be held to account.

The big piece

There is another piece to the global jigsaw of corruption – probably the most significant.

Obviously, it would be better if states were not ruled by thieves and liars and cheats. Improved governance would benefit many developing countries. But this is not just a problem restricted to poor countries.

‘Two of the most damaging ways that Northern institutions impact on corruption in developing countries are bribery by Northern companies, and money laundering by Northern banks of the proceeds of bribery and theft of state assets,’ says corruption expert Susan Hawley of the British NGO Corner House.9

Money laundering far exceeds aid given to developing countries. As one analyst puts it: ‘For every $1 of foreign aid that we are generously handing out across the top of the table, we are taking back some $4-$8 in dirty money under the table.’10

Western governments have been complicit, says Hawley, ‘turning a blind eye to activities that they would not tolerate in their own public officials.’

There are two reasons. First, privileged access to the natural resources of developing countries – oil and gas especially – is a strategic priority for an industrial world that is not too picky about how to get it. The Chinese are now also part of this game.

Second is export markets. Government export promotion ministries and export credit agencies have detailed knowledge of what is going on inside contracts – including the levels of ‘commissions’ or bribes – companies are paying. They just choose not to make a fuss. There are numerous cases where Britain’s Export Credit Guarantee Department has given support to projects despite corruption allegations. The Nigerian Liquified Natural Gas project is just one example currently under investigation.9

According to Hawley none of the export credit agencies of the G8 countries has ‘proper or robust debarment procedures’ for blacklisting companies. And although all the countries of the OECD have now signed up to various agreements to combat corruption and passed laws outlawing bribes to foreign officials, there have been very few prosecutions. This despite an OECD Convention on Combating Bribery in force since 1999. It’s the same story with money laundering. Hawley concludes that inaction in the face of substantive allegations is a clear example of complicity with these financial shenanigans. She calls for a ‘redesign of the Northern state’ to tackle corruption. Good governance, anyone?

In recent months Australia has been rocked by a scandal that shockingly exposes the culture of complicity and lack of ‘good governance’.

In March 2000, at a time when UN sanctions were in place against Saddam Hussein’s regime in Iraq, the Australian Wheat Board (AWB) passed millions of dollars in kickbacks to the dictator in exchange for an undertaking to buy more Australian wheat.

The money was to be used to build 2,000 concrete bunkers, ostensibly for storing grain. But, according to an internal email AWB executives have believed that ‘the bunkers are actually designed for burying Kurds…’

A leader in the Weekend Australian says: ‘This scandal goes to the very heart of the way we are governed. For almost a year AWB officers and public servants have ducked and dived when asked questions about the bribery scandal… While Australian wheat was being sold no one was game to ask about the way it was done. Not the Wheat Export Authority charged with watching the AWB. Not officers at the Department of Foreign Affairs and Trade who had ample reason to suspect something was going wrong…’ 11

Your own people

There is one corruption scandal that is so drenched in blood and tragedy that it is easy to forget that it is actually a story of corruption. I’m talking, of course, about the invasion and occupation of Iraq.

Ex-CIA agent Philip Giraldi writing in The American Conservative – not a natural enemy of the Bush Administration or the war – sets it out it plainly:

‘The American-dominated Coalition Provisional Authority could well prove to be the most corrupt administration in history… At least $20 billion that belonged to the Iraqi people has been wasted, together with hundreds of millions of US taxpayer dollars. Exactly how many billions of additional dollars were squandered, stolen, given away, or simply lost will never be known because of the deliberate decision by the CPA not to meter oil exports…’ 12

Giraldi describes how CPA staffers, unqualified young Americans, found mainly through the Heritage Foundation website, were paid six-figure salaries to serve 90-day rotations before coming home to tell their war stories. He cites the example of leading neocon Michael Leeden’s daughter, Simone, who despite being unable to communicate in Arabic and with no appropriate educational training became a senior advisor for Northern Iraq at the Ministry of Finance.

The litany of sleaze, cronyism and outright theft is stunningly surreal. A slush fund of $600 million for which there is no paperwork sitting in cash in Paul Bremer’s office… Two million in cash stuffed into one contractor’s duffel bag… Money disappearing by truck and helicopter load… A $550 million power plant contract awarded on the basis of a proposal just one page long… Custer Battles, a firm well connected to the Bush White House getting the $15 million contract to provide airport security – something it had no experience in…

You have to ask the question: who is trying to teach whom about governance? From where does Paul Wolfowitz – who in his former US Defense Department job championed fraudster Ahmed Chalabi and was a prime architect of the Iraqi invasion – glean his authority to lecture Indonesians about corruption? What can Gordon Brown say to Africans on the subject after he supported and continues to support this most corrupt adventure in recent history?

Perhaps such hypocrites can be held to account more easily for having spoken out on corruption. But equally when they use the language of anti-corruption it risks creating a climate of cynicism in which corruption can only continue to flourish.

There’s a piece of advice that Kenyan anti-graft activist John Githongo gives anyone who wants to try and combat corruption: ‘Start with your own people.’

It’s what he has done (see page 18) – and what thousands more are doing around the world. Many are active within civil society groups or organizations in their own countries and communities (see Action page 21). Others are investigative journalists or lawyers, risking their necks to get to and expose the truth. Others are employees prepared to jeopardize their careers in order to blow the whistle on wrongdoing in their workplaces. Many more, like the two Nepalese teachers, are just ordinary people prepared to take a stand against petty corruption in their daily lives.

This is where hope lies.

  1. Larry Elliot, ‘Gordon Brown tells African leaders make corruption history or lose confidence of Western donors’, The Guardian, 23 May 2006.
  2. World Bank, www.worldbank.org/anticorruption
  3. Paul Wolfowitz,World Bank, ‘Good Governance and Development: A Time for Action,’ Jakarta, 11 April 2006.
  4. The Africa All Party Parliamentary Group, The Other Side of the Coin: The UK and Corruption in Africa, UK Government, 23 March 2006.
  5. Transparency International www.transparency.org
  6. Transparency International, Global Corruption Report, 2006.
  7. Michael Sheridan, ‘Massive fraud hits tsunami aid’, The Sunday Times, 16 April 2006.
  8. Jennifer Williams interview with Andrew Mwenda in July 2005.
  9. Susan Hawley, ‘Redesigning the Northern state to combat global corruption’, The Corner House, 25 November 2005.
  10. Raymond Barker in oral evidence to the Africa APPG, 19 January 2006.
  11. The Weekend Australian, 30 September-1 October, 2006.
  12. Philip Giraldi, ‘Money for Nothing’, The American Conservative, 24 October 2005.

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