All one needs to do is pick up a newspaper in nearly any part of the world to read about the misdeeds of elected officials and others in positions of governmental authority. In the United States, for instance, we can read about former Rep. Jesse Jackson Jr., who plans to plead guilty to using campaign dollars to buy more than $750,000 worth of luxury items, memorabilia and other goods. Or to Spain where the ruling People’s Party (PP) has been buffeted over the last fifteen days by media reports alleging its former treasurers operated a slush fund with donations from construction industry executives that were then doled out to President Rajoy and other party leaders. Or to South Africa where tens of millions of dollars were said to have been paid for contracts related to the building of soccer stadiums for the FIFA World Cup held in that country in 2010.
On December 2012, Transparency International, a non-profit organization, issued its annual ranking on corruption in the public sector around the World. Greece is the most corrupt nation in Europe, Germany is 13th, United Kingdom is 17th. Denmark, Finland and New Zealand, all equal first with a score of 90 out of 100; bottom at equal 174th come Afghanistan, North Korea and Somalia. Since the rankings are of “perceived levels”, it is always possible to argue aboput who exactly should be in which positions. But the rankings are likely not much of a surprise for business people who have to navigate their way through such places as Mexico , 105, Dominican Republic, 117, or Kazakhstan, 133, where bribes are the way business gets done.
The consequences of corruption for economic and social development are severe. Corruption stymies sound investment and thwarts growth. It fosters inequality and eats away at fiscal and macroeconomic stability. It negates the potential positive impact of development assistance and gives an incentive to negligent exploit natural resources, adding to the damage to the environment. It severely curtails the effectiveness of government and the public sector in general and decreases the resources available to actually help the people, diverting resources away from direct impact to the citizenry into the hands of a corrupt officials and others who benefit from corruption. Additionally, there is an erosion of the rule of law that permeates the entire society and harms the national reputation and confidence in institutions, both private and public.
But it is not just the theft from public coffers or the direct costs of bid rigging and bribes. As states in a governance and corruption survey, for example, in Cambodia lower income households spend 2.3% on average of their income on bribes compared to 0.9% for rich households. In South Africa, an estimated 10% of the social security budget is lost due to fraud, theft and inefficiencies.
In short, corruption funnels resources (wealth) away from the people and serves to make the corrupt wealthier at the expense of society as a whole. It ultimately, results in poorer quality of services, infrastructure and services with a correspondence decrease in the quality of all three.
However, developed countries are not immune from the scourge of public corruption. In the US, according to FBI figures the costs associated with political corruption alone runs into the billions of dollars annually. In Illinois, Governor Rod Blagojevich is the fourth governor of Illinois out of the last seven to be convicted, and adds to the 1,828 public corruption convictions that state saw between 1976 and 2010. A report by the University of Illinois at Chicago estimates that corruption costs the state more than $500 million a year. Two states had even higher numbers of appointees, government employees (and a few private individuals) convicted of public corruption: New York, with 2,522 convictions and California with 2,345 convictions. Of the largest states though, Illinois had the highest per person conviction rate for public corruption, at 1.4 per 10,000 population.
I would propose the following possible areas for attacking public corruption:
1. Transparency in government procurement; 2. Create holistic training programs regarding corruption for business, government and the public; 3. Encourage the adoption of business codes of conduct; 4. Strengthen the legal and regulatory framework on anti-corruption; 5. Better pay for public officials others in government in developing countries. Can you think of others?
By Guest Contributor Ivan E. Mercado, Mercado & Rengel