Controlling Corruption / Edition 1

by Robert Klitgaard

Overview

Corruption is increasingly recognized as a preeminent problem in the developing world. Bribery, extortion, fraud, kickbacks, and collusion have resulted in retarded economies, predator elites, and political instability. In this lively and absorbing book, Robert Klitgaard provides a framework for designing anti-corruption policies, and describes through five case studies how courageous policymakers were able to control corruption.

Product Details

ISBN-13:	9780520074088
Publisher:	University of California Press
Publication date:	06/01/1991
Edition description:	First Edition
Pages:	230
Product dimensions:	5.50(w) x 8.25(h) x 0.60(d)

About the Author

Robert Klitgaard is Dean and Ford Distinguished Professor of International Development adn Security at the RAND Government School. He has been a professor at Harvard and Karachi Universities and has served as a consultant in twenty-one nations in Asia, Africa, and Latin America.

Read an Excerpt

Controlling Corruption

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By Robert Klitgaard

University of California Press

Copyright © 1988 Robert Klitgaard
All right reserved.
ISBN: 0-520-05985-9

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Introduction

What worries me more than anything among our problems," said Nigerian President Shehu Shagari in 1982, "is that of moral decadence in our country. There is the problem of bribery, corruption, lack of dedication to duty, dishonesty, and all such vices."

He was right to worry. About a year later his civilian government was toppled in a military coup, which the generals justified by the need to control corruption. This topic dominated the new regime's policies, as foretold in its first press conference in early 1984: "It is necessary to reiterate that this new Administration will not tolerate fraud, corruption, squandermania, abuse of public office for self or group, or other such vices that characterized the administration of the past four years."

The Shagari regime had tried. It had proclaimed an "ethical revolution" to combat corruption. The government had included a code of conduct for public servants in the 1979 constitution, and it had established a Code of Conduct Bureau to enforce the "prescribed behaviors." The leadership had even appointed a cabinet Minister of National Guidance to provide moral leadership against corruption. Yet according to popular accounts, Nigeria had grown even more corrupted, leaving its citizens more alienated from the government and its economy more vulnerable to official venality.

In recent years a remarkable feature of many governmental changes of command has been the promise to do something about the corruption of the previous regime. This is even so when one's predecessor is an intimate ally. In his first speech upon assuming the leadership of the Congress Party after his mother's assassination in late 1984, Rajiv Gandhi put government officials in India on notice that the corrupt and dishonest would no longer be tolerated. His overwhelmingly successful election campaign was partially based on promises to fight corruption. In a change of command a leader may even criticize one's own regime. At the inauguration of his successor in 1982, Mexican President José Ló Portillo decried corruption and the lamentable fact that Mexican citizens illicitly "have taken more money out of Mexico in the past two years than imperialists ever exploited during the entire history of our country." The new Mexican president, Miguel de la Madrid, had built his campaign on the need to combat corruption, and among his first acts in office were the promulgation of a new code of conduct for public officials and the creation of a new agency to fight corruption. This phenomenon is not confined to the developing nations. Upon assuming office, leaders ranging from the late Soviet Chairman Andropov to Massachusetts Governor Dukakis called for new measures against corruption.

But what should such measures include? If in Nigeria "ethical revolutions," bureaucratic purges, codes of conduct, and a Ministry of National Guidance were not sufficient, what should or could be done? As policymakers speak out about the evils of corruption, how should they think about designing and implementing measures to control it?

This book is addressed to government officials, especially in developing countries, who are searching for answers to such questions. With such an intended audience, a cynic might respond, the book will not sell many copies. The prevalence and persistence of corruption are discouraging, for they imply that many policymakers and politicians do not want to control corruption. They may use illicit activities to maintain themselves in power, even at the expense of the nation's development, as has been argued in a careful study of Morocco. Of course, corruption has self-serving aspects to those in power, not only as a means for lining one's pockets but as a mechanism for political dealing, forging linkages, and even inducing political participation, as we shall discuss in the next chapter. There are even occasions where corrupt acts may improve economic or organizational efficiency.

That corruption benefits at least some of those in power makes it a difficult problem to tackle. Nonetheless, many leaders and public managers in developing countries want to do better at controlling fraud, bribery, extortion, embezzlement, tax evasion, kickbacks, and other forms of illicit and corrupt behavior. Some of these concerned leaders are top legislators and chief executives. Others hold responsible positions in police forces, customs agencies, tax bureaus, ministries that distribute goods and services, and regulatory agencies. These people see corruption as threatening their agency's mission and the broader goals of national development. They are not naive: they recognize that corruption can never be completely eradicated, and they do not suppose that corruption has a simple cure, as polio has a vaccine. Still these officials would like to reduce many forms of corruption, and their hope is shared by most ordinary citizens in the developing world.

What exactly is the "corruption" they wish to control? It depends. What is corrupt in one society may not be in another. When historian J. S. Furnivall examined why, according to British standards, colonial Burma was so "corrupt," he concluded that in many cases the Burmese were simply following their customary norms of correct conduct. Some of the activities most praised in capitalist economics-private investment, trading and retrading, accumulating resources-may be called "corrupt" in a communist system.

What is lawful, and therefore what is unlawful, depends on the country and culture in question. While this valid insight should not be lost, it must not short-circuit our search for effective anticorruption policies. As a matter of fact, the majority of countries and cultures decry most instances of bribery, fraud, extortion, embezzlement, and most forms of kickbacks on public contracts. Over a wide range of "corrupt" activities, there is little argument that they are wrong and socially harmful.

This point becomes clearer when we get down to specific cases. The following examples display some of the kinds of corruption faced by officials in developing countries. Despite the inevitable peculiarities of their specific contexts, these examples reveal general problems and-as I will try to show in later chapters-general lessons about controlling corruption:

Tax departments. Place yourself in the Philippines in 1975. Imagine that you have just been appointed to head the Bureau of Internal Revenue (BIR), which is notorious for corruption. Among your major problems is arreglo, the practice by which tax examiners take bribes to reduce what taxpayers owe the government.

The opportunity for collusion presents itself in the review of both income and expenditures.... For example, a taxpayer reports a gross income of P100,000 [pesos] but did not report P500,000 which could be gains from capital asset transactions. Extraneous income for activities not directly related to the business or regular activity of a taxpayer cannot be traced easily. However, an enterprising examiner usually has other sources of information. He can conduct investigations and research to get documentary evidence of the unreported income. He accumulates this evidence and confronts the taxpayer. The negotiations begin. If all goes well, the agent may refrain from reporting the discovery of understated income for an "arreglo." You also find that positions within the BIR are being bought and sold; there is embezzlement; fraudulent tax stamps are being issued; and some tax examiners are extorting money from innocent taxpayers unwilling to complain through a costly process of litigation. Moreover, you are working in a national regime noted for its corruption and cronyism. How would you think about designing and implementing countermeasures? in Chapters 2 and 3 we discuss how one particularly able tax commissioner fought corruption in the Philippines Bureau of Internal Revenue.

Police. Put yourself in Hong Kong in the early 1970s. Corruption, especially in the police force, has grown so widespread that the new governor appoints a commission to recommend what could be done. The commission finds evidence of deeply rooted, systematic corruption.

The worst forms are what is described by the Anti-Corruption Office as "syndicated" corruption, that is to say a whole group of officers involved in the collection and distribution of money. For example, it is said that groups of police officers are involved in the collection of payments from pak pai drivers, the keepers of gambling schools and other vice establishments. Frequently the "collection" is far more than corruption in the true sense. It is plain extortion accompanied by veiled threats of violence at the hands of triad gangsters. The "collections" seldom take the form of direct payments to any numbers of the corrupt group of officers. Almost invariably there is the middleman. He is referred to euphemistically as "the caterer." He receives the money: and in some cases, it is said that vast sums are involved.

Many observers believed the Chinese culture in Hong Kong, with its tradition of using public position for private gains and its widespread practices of "gift-giving" and "commissions," provided a fertile ground for corruption. If you were the governor of Hong Kong what would you do to get police corruption under control? The governor's answer and the ensuing success story of fighting corruption are the subjects of Chapter 4.

Customs agencies. In many countries customs bureaus are filled with corruption. Illegal imports are permitted in exchange for a bribe. Legal imports are taxed at lower-than-legal rates, again for a bribe. If you were in charge of a customs bureau, how would you think about reducing such activities? Chapter 5 examines Singapore's successful policies for overcoming corruption in its Customs and Excise Department.

Procurement. Imagine you are a top official in the U.S. Army procurement agency working in Korea in the mid-1970s. You are responsible for hundreds of local procurement contracts every year. You have evidence that Korean contractors are colluding on their bids, leading to exorbitant prices. You have discovered evidence that contractors are bribing your own employees in exchange for altering your agency's supposedly independent cost estimates. What would you do about these problems? The story of the U.S. Army's efforts to overcome corruption in procurement is analyzed in Chapter 6.

Food distribution. You have just assumed command of the regional office of the government agency for distribution of wheat and sugar in a poor province threatened by rebel forces. Your organization is full of corruption. Some officers accept kickbacks from local farmers in exchange for letting the farmers sell half of their wheat on the black market. Other officers steal wheat from your government warehouses; still others substitute bad wheat for good, selling the good for personal profit. Your officers are illicitly issuing ration cards to such an extent that there are almost twice as many cards in circulation as there are eligible citizens. How do you begin to address these problems? The true story of an officer we shall call Rafiq Shabir, in a province we shall call Ruritania, is told in Chapter 7.

The literature on international development is surprisingly silent about such problems. One seldom encounters a practically oriented examination of anticorruption policies. Yet corruption is an issue of first-order importance. Illicit practices are widespread in the developing countries. Obviously it is difficult to generalize, but corruption by public officials probably constitutes one of the three or four most harmful problems facing Third World governments. The harm is hard to measure; as we shall see, it is economic as well as political, moral as well as material. Typical is one Asian country's survey that found graft and corruption to be the major cause of "low respect" for government and the second greatest "national problem." Equally typical, if less statistically precise, are remarks like the following, which were spoken by a poor farmer in Bangladesh who had been victimized by a corrupt permit system of sugar procurement:

To most of the farmers, getting a permit in time is something like getting the moon from the sky, because of the fact that the issuance of permits in a fair way is beyond their imagination. But why? The answer is known to all. Nepotism, trickery, and bribery have become contagious diseases. Stinking, offensive, and loathesome things have become a commonplace influence at the [procurement] center.

Corruption is devouring the economies and polities of many Third World nations. And yet students of development policy tend to ignore it.

That I must immediately restate that such problems are not confined to the developing countries is itself revealing. Corruption in the poor nations has often attracted the wrong sort of Western attention-at the same time that for reasons approaching embarrassment, many serious students of development policy ignore corruption, or dismiss it with a cough and a rolling of the eyes. Early writers on "the backward nations" and colonies sometimes emphasized corruption as a sign of the moral weakness, even inferiority, of the "natives." These moralists included Western and colonialist authors, but they were not the only ones; the ethical condemnation of governmental corruption has a long pedigree in the Islamic world, China, India, and other civilizations. Though the West can claim no monopoly on the abhorrence of bribery, nepotism, and official venality, some Western authors did use allegations of corruption as a blunt instrument. In some cases they mistakenly classified as corrupt the manifestations of different mores and modes of socioeconomic organization; in other cases they used corruption as an excuse for colonial occupation. Later authors have condemned the parochial and self-serving perspective of such Western writers as emblematic of imperialist thinking. Therefore, partly to escape being labeled imperialists, many present-day scholars have simply avoided sensitive topics like corruption. Nobel prize-winning economist Gunnar Myrdal called this an example of "diplomacy in research." "The taboo on research on corruption is, indeed, one of the most flagrant examples of this general bias... [which] is basically to be explained in terms of a certain condescension on the part of Westerners." Corruption expert Stanislav Andreski argued that "the conspiracy of silence on the part of the great majority of European intellectuals, due to inverted racialism, prevents the dissemination of knowledge about this phenomenon."

My interest is not in moral judgments about illicit activities, nor do I wish to argue that corruption is the province of particular cultures or regions.

Continues...

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Table of Contents

Preface to the Paperback Edition

1 . Introduction
2. Objectives
3. Policy Measures
4. Graft Busters: When and How to Set Up an·
Anticorruption Agency
5. Combining Internal and External Policies
6. Corruption When Cultures Clash
7. Implementation Strategies
8. Reviewing and Extending

Index