Different Types Of Graft And Corruption Essay

For other uses, see Corruption (disambiguation).

"Corrupt" redirects here. For other uses, see Corrupt (disambiguation).

Corruption is a form of dishonest or unethical conduct by a person entrusted with a position of authority, often to acquire personal benefit.[1] Corruption may include many activities including bribery and embezzlement, though it may also involve practices that are legal in many countries.[2]Government, or 'political', corruption occurs when an office-holder or other governmental employee acts in an official capacity for personal gain.

It is commonplace in kleptocracies, oligarchies, Narco states and Mafia states.

The Kaunas golden toilet case was a modern real-life example of corruption.

Scales of corruption[edit]

Stephen D. Morris,[3] a professor of politics, writes that political corruption is the illegitimate use of public power to benefit a private interest. Economist Ian Senior[4] defines corruption as an action to (a) secretly provide (b) a good or a service to a third party (c) so that he or she can influence certain actions which (d) benefit the corrupt, a third party, or both (e) in which the corrupt agent has authority. Daniel Kaufmann,[5] from the World Bank, extends the concept to include 'legal corruption' in which power is abused within the confines of the law—as those with power often have the ability to make laws for their protection. The effect of corruption in infrastructure is to increase costs and construction time, lower the quality and decrease the benefit.[6]

Corruption can occur on different scales. Corruption ranges from small favors between a small number of people (petty corruption),[7] to corruption that affects the government on a large scale (grand corruption), and corruption that is so prevalent that it is part of the everyday structure of society, including corruption as one of the symptoms of organized crime.

Increasingly, a number of indicators and tools have been developed which can measure different forms of corruption with increasing accuracy.[8]

Petty corruption[edit]

Petty corruption occurs at a smaller scale and takes place at the implementation end of public services when public officials meet the public. For example, in many small places such as registration offices, police stations, state licensing boards,[9][10] and many other private and government sectors.

Grand corruption[edit]

Grand corruption is defined as corruption occurring at the highest levels of government in a way that requires significant subversion of the political, legal and economic systems. Such corruption is commonly found in countries with authoritarian or dictatorial governments but also in those without adequate policing of corruption.[11]

The government system in many countries is divided into the legislative, executive and judiciary branches in an attempt to provide independent services that are less subject to grand corruption due to their independence from one another.[12]

Systemic corruption[edit]

Systemic corruption (or endemic corruption)[13] is corruption which is primarily due to the weaknesses of an organization or process. It can be contrasted with individual officials or agents who act corruptly within the system.

Factors which encourage systemic corruption include conflicting incentives, discretionary powers; monopolistic powers; lack of transparency; low pay; and a culture of impunity.[14] Specific acts of corruption include "bribery, extortion, and embezzlement" in a system where "corruption becomes the rule rather than the exception."[15] Scholars distinguish between centralized and decentralized systemic corruption, depending on which level of state or government corruption takes place; in countries such as the Post-Soviet states both types occur.[16] Some scholars argue that there is a negative duty[clarification needed] of western governments to protect against systematic corruption of underdeveloped governments.[17][18]

Corruption in different sectors[edit]

Corruption can occur in any sector, whether they be public or private industry or even NGOs (especially in public sector). However, only in democratically controlled institutions is there an interest of the public (owner) to develop internal mechanisms to fight active or passive corruption, whereas in private industry as well as in NGOs there is no public control. Therefore, the owners' investors' or sponsors' profits are largely decisive.

Government/public sector[edit]

Public sector corruption includes corruption of the political process and of government agencies such as the police as well as corruption in processes of allocating public funds for contracts, grants, and hiring. Recent research by the World Bank suggests that who makes policy decisions (elected officials or bureaucrats) can be critical in determining the level of corruption because of the incentives different policy-makers face.[19]

Political corruption[edit]

Main article: Political corruption

Political corruption is the abuse of public power, office, or resources by elected government officials for personal gain, by extortion, soliciting or offering bribes. It can also take the form of office holders maintaining themselves in office by purchasing votes by enacting laws which use taxpayers' money.[20] Evidence suggests that corruption can have political consequences- with citizens being asked for bribes becoming less likely to identify with their country or region.[21]

The political act of Graft (American English), is a well known and now global form of political corruption, being the unscrupulous and illegal use of a politician's authority for personal gain, when funds intended for public projects are intentionally misdirected in order to maximize the benefits to illegally private interests of the corrupted individual(s) and their cronies.

The Kaunas golden toilet case was a major Lithuanian scandal. In 2009, municipality of Kaunas (led by mayor Andrius Kupčinskas) ordered that a shipping container was to be converted into an outdoor toilet at a cost of 500'000 litas (around 150'000 euros). It was to also require 5'000 LTL (1'500 EUR) in monthly maintenance costs.[22] At the same time when Kaunas "golden toilet" was built, Kėdainiai tennis club acquired a very similar, but more advanced solution for 4'500 EUR.[22] Because of the inflated cost of the outdoor toilet was nicknamed "golden toilet". Despite the investment, the "golden toilet" remained closed for years due to the dysfunctionality and was a subject of a lengthy anti-corruption investigation into those who had created it and [22] the local municipality even considered demolishing the building at one point.[23] The group of public servants involved in the toilet's procurement received various prison sentences for recklessness, malfeasance, misuse of power and document falsifications in a 2012 court case, but were cleared of their corruption charges and received compensation, which pushed the total construction cost and subsequent related financial losses to 352'000 euros.

Police corruption[edit]

Main article: Police corruption

Police corruption is a specific form of police misconduct designed to obtain financial benefits, other personal gain, career advancement for a police officer or officers in exchange for not pursuing, or selectively pursuing, an investigation or arrest and/or aspects of the thin blue line itself, where force members collude in lies to protect other members from accountability. One common form of police corruption is soliciting and/or accepting bribes in exchange for not reporting organized drug or prostitution rings or other illegal activities.

Another example is police officers flouting the police code of conduct in order to secure convictions of suspects—for example, through the use of falsified evidence. More rarely, police officers may deliberately and systematically participate in organized crime themselves. In most major cities, there are internal affairs sections to investigate suspected police corruption or misconduct. Similar entities include the British Independent Police Complaints Commission.

Judicial corruption[edit]

Judicial corruption refers to corruption related misconduct of judges, through receiving or giving bribes, improper sentencing of convicted criminals, bias in the hearing and judgement of arguments and other such misconduct.

Governmental corruption of judiciary is broadly known in many transitional and developing countries because the budget is almost completely controlled by the executive. The latter undermines the separation of powers, as it creates a critical financial dependence of the judiciary. The proper national wealth distribution including the government spending on the judiciary is subject to the constitutional economics.

It is important to distinguish between the two methods of corruption of the judiciary: the government (through budget planning and various privileges), and the private.[24] Judicial corruption can be difficult to completely eradicate, even in developed countries.[25] Corruption in judiciary also involves the government in power using the judicial arm of government to oppress the opposition parties in the detriments of the state.

Corruption in the educational system[edit]

Corruption in education is a worldwide phenomenon. Corruption in admissions to universities is traditionally considered as one of the most corrupt areas of the education sector.[26] Recent attempts in some countries, such as Russia and Ukraine, to curb corruption in admissions through the abolition of university entrance examinations and introduction of standardized computer-graded tests have largely failed.[27] Vouchers for university entrants have never materialized.[28] The cost of corruption is in that it impedes sustainable economic growth.[28][28] Endemic corruption in educational institutions leads to the formation of sustainable corrupt hierarchies.[29][30][31] While higher education in Russia is distinct with widespread bribery, corruption in the US and the UK features a significant amount of fraud.[32][33] The US is distinct with grey areas and institutional corruption in the higher education sector.[34][35] Authoritarian regimes, including those in the former Soviet republics, encourage educational corruption and control universities, especially during the election campaigns.[36] This is typical for Russia,[37] Ukraine,[38] and Central Asian regimes,[39] among others. The general public is well aware of the high level of corruption in colleges and universities, including thanks to the media.[40][41] Doctoral education is no exception, with dissertations and doctoral degrees available for sale, including for politicians.[42] Russian Parliament is notorious for "highly educated" MPs[43] High levels of corruption are a result of universities not being able to break away from their Stalinist past, over bureaucratization,[44] and a clear lack of university autonomy.[45] Both quantitative and qualitative methodologies are employed to study education corruption,[46] but the topic remains largely unattended by the scholars. In many societies and international organizations, education corruption remains a taboo. In some countries, such as certain eastern European countries and certain Asian countries, corruption occurs frequently in universities.[47] This can include bribes to bypass bureaucratic procedures and bribing faculty for a grade.[47][48] The willingness to engage in corruption such as accepting bribe money in exchange for grades decreases if individuals perceive such behavior as very objectionable, i.e. a violation of social norms and if they fear sanctions regarding the severity and probability of sanctions.[48]

Within labor unions[edit]

The Teamsters (International Brotherhood of Teamsters) is an example of how the civil RICO process can be used. For decades, the Teamsters have been substantially controlled by La Cosa Nostra. Since 1957, four of eight Teamster presidents were indicted, yet the union continued to be controlled by organized crime elements. The federal government has been successful at removing the criminal influence from this 1.4 million-member union by using the civil process.[49]

Corruption in religion[edit]

The history of religion includes numerous examples of religious leaders calling attention to corruption in the religious practices and institutions of their time. Jewish prophets Isaiah and Amos berate the rabbinical establishment of Ancient Judea for failing to live up to the ideals of the Torah.[50] In the New Testament, Jesus accuses the rabbinical establishment of his time of hypocritically following only the ceremonial parts of the Torah and neglecting the more important elements of justice, mercy and faithfulness.[51] In 1517, Martin Luther accuses the Catholic Church of widespread corruption, including selling of indulgences.[52]

In 2015, Princeton University professor Kevin M. Kruse advances the thesis that business leaders in the 1930s and 1940s collaborated with clergymen, including James W. Fifield Jr., to develop and promote a new hermeneutical approach to Scripture that would de-emphasize the social Gospel and emphasize themes, such as individual salvation, more congenial to free enterprise.[53]

Business leaders, of course, had long been working to "merchandise" themselves through the appropriation of religion. In organizations such as Spiritual Mobilization, the prayer breakfast groups, and the Freedoms Foundation, they had linked capitalism and Christianity and, at the same time, likened the welfare state to godless paganism.[54]

Corruption in philosophy[edit]

19th century German philosopher Arthur Schopenhauer acknowledges that academics, including philosophers, are subject to the same sources of corruption as the society they inhabit. He distinguishes the corrupt "university" philosophers, whose "real concern is to earn with credit an honest livelihood for themselves and ... to enjoy a certain prestige in the eyes of the public"[55] from the genuine philosopher, whose sole motive is to discover and bear witness to the truth.

To be a philosopher, that is to say, a lover of wisdom (for wisdom is nothing but truth), it is not enough for a man to love truth, in so far as it is compatible with his own interest, with the will of his superiors, with the dogmas of the church, or with the prejudices and tastes of his contemporaries; so long as he rests content with this position, he is only a φίλαυτος [lover of self], not a φιλόσοφος [lover of wisdom]. For this title of honor is well and wisely conceived precisely by its stating that one should love the truth earnestly and with one’s whole heart, and thus unconditionally and unreservedly, above all else, and, if need be, in defiance of all else. Now the reason for this is the one previously stated that the intellect has become free, and in this state, it does not even know or understand any other interest than that of truth.[56]

Corporate corruption[edit]

See also: Corporate crime

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In criminology, corporate crime refers to crimes committed either by a corporation (i.e., a business entity having a separate legal personality from the natural persons that manage its activities), or by individuals acting on behalf of a corporation or other business entity (see vicarious liability and corporate liability). Some negative behaviours by corporations may not be criminal; laws vary between jurisdictions. For example, some jurisdictions allow insider trading.

Further information: Operation Car Wash

Petróleo Brasileiro S.A. — Petrobras, more commonly known as simply Petrobras (Portuguese pronunciation: [ˌpɛtɾoˈbɾas]), is a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil. The company's name translates to Brazilian Petroleum Corporation — Petrobras. The company was ranked #58 in the 2016 Fortune Global 500 list.[57] It is being investigated over corporate and political collusion and corruption.[58]

Odebrecht is a privately held Brazilian conglomerate consisting of diversified businesses in the fields of engineering, real estate, construction, chemicals and petrochemicals. The company was founded in 1944 in Salvador da Bahia by Norberto Odebrecht, and the firm is now present in South America, Central America, North America, the Caribbean, Africa, Europe and the Middle East. Its leading company is Norberto Odebrecht Construtora (pt).[59] Odebrecht is one of the 25 largest international construction companies and is still lead by Odebrecht family.

The firm's executives were examined during Operation Car Wash part of an investigation over Odebrecht Organization bribes to executives of Petrobras, in exchange for contracts and influence.[60][61][58] Operation Car Wash is an ongoing criminal money laundering and bribes related corporate crime investigation being carried out by the Federal Police of Brazil, Curitiba Branch, and judicially commanded by Judge Sérgio Moro since March 17, 2014.[62][63][64][58]

Arms for cash[edit]

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"Arms for cash" can be done by ether a state sanctioned arms dealer\firm or state it's self to another party it just in regards regards as only a good business partner and not political kindred and\or allies, thus making them no better than regular gun runners. Arms smugglers, who are already in to Arms trafficking may work for them on the ground and\or with shipment. The money is often laundered and records are often destroyed[65][66][67] . It often breaks UN, national and\or international law[65][66][68] . Payment can also be in strange or indirect ways like arms paid for in post-war oil contracts, post-war hotel ownership, conflict diamonds, corporate shares and\or the long term post-war promises of superfus[clarification needed] future contracts between the parties involved in it, etc...

Main article: Mitterrand–Pasqua affair

In 2006 Transparency International ranked Angola a lowly 142 out of 163 countries in the Corruption Perception Index just after Venezuela and before the Republic of the Congo with a 2.2 rating.[69][70] Angola was at 168th place (out of 178 countries) on Transparency International’s Corruption Perceptions Index (CPI), receiving a 1.9 on a scale from 0 to 10.[71] On the World Bank's 2009 Worldwide Governance Index, Angola had done very poorly on all six aspects of governance assessed. While its score for political stability improved to 35.8 in 2009 (on a 100-point scale) from 19.2 in 2004, Angola earned especially low scores for accountability, regulatory standards, and rule of law. The score for corruption declined from an extremely low 6.3 in 2004 to 5.2 in 2009.[72][73]

The country is regarded poorly and that corruption is wounding the economy badly despite the emerging oil industries wealth.[72]

The Mitterrand–Pasqua affair, also known informally as Angolagate, was an international political scandal over the secret and illegal sale and shipment of arms from the nations of Central Europe to the government of Angola by the Government of France in the 1990s. It led to arrests and judiciary actions in the 2000s, involved an illegal arms sale to Angola despite a UN embargo, with business interests in France and elsewhere improperly obtaining a share of Angolan oil revenues. The scandal has subsequently been tied to several prominent figures in French politics.[72]

“Angolagate”, which was carried out and uncovered over the course of the 1990s. 42 individuals, including: 42 people, including Jean-Christophe Mitterrand, Jacques Attali, Charles Pasqua and Jean-Charles Marchiani, Pierre Falcone. Arcadi Gaydamak, Paul-Loup Sulitzer, Union for a Popular Movement deputy Georges Fenech, Philippe Courroye (fr) the son of Francois Mitterrand and a former French Minister of the Interior, were all charged, accused, indicted or convicted with illegal arms trading, tax fraud, embezzlement, money laundering and other crimes.[72][74] "[75]

Methods[edit]

In systemic corruption and grand corruption, multiple methods of corruption are used concurrently with similar aims.[76]

Bribery[edit]

Main article: Bribery

Bribery involves the improper use of gifts and favours in exchange for personal gain. This is also known as kickbacks or, in the Middle East, as baksheesh. It is the common form of corruption. The types of favours given are diverse and may include money, gifts, sexual favours, company shares, entertainment, employment and political benefits. The personal gain that is given can be anything from actively giving preferential treatment to having an indiscretion or crime overlooked.[77]

Bribery can sometimes form a part of the systemic use of corruption for other ends, for example to perpetrate further corruption. Bribery can make officials more susceptible to blackmail or to extortion.

Embezzlement, theft and fraud[edit]

Main article: Embezzlement

Embezzlement and theft involve someone with access to funds or assets illegally taking control of them. Fraud involves using deception to convince the owner of funds or assets to give them up to an unauthorized party.

Examples include the misdirection of company funds into "shadow companies" (and then into the pockets of corrupt employees), the skimming of foreign aid money, scams and other corrupt activity.

Graft[edit]

Main article: Graft (politics)

The political act of Graft (American English), is a well known and now global form of political corruption, being the unscrupulous and illegal use of a politician's authority for personal gain, when funds intended for public projects are intentionally misdirected in order to maximize the benefits to illegally private interests of the corrupted individual(s) and their cronies.

Extortion and blackmail[edit]

Main article: Extortion

While bribery is the use of positive inducements for corrupt aims, extortion and blackmail centre around the use of threats. This can be the threat of violence or false imprisonment as well as exposure of an individual's secrets or prior crimes.

This includes such behavior as an influential person threatening to go to the media if they do not receive speedy medical treatment (at the expense of other patients), threatening a public official with exposure of their secrets if they do not vote in a particular manner, or demanding money in exchange for continued secrecy.

Networking[edit]

Main article: Business networking

Networking can be an effective way for job-seekers to gain a competitive edge over others in the job-market. The idea is to cultivate personal relationships with prospective employers, selection panelists, and others, in the hope that these personal affections will influence future hiring decisions. This form of networking has been described as an attempt to corrupt formal hiring processes, where all candidates are given an equal opportunity to demonstrate their merits to selectors. The networker is accused of seeking non-meritocratic advantage over other candidates; advantage that is based on personal fondness rather than on any objective appraisal of which candidate is most qualified for the position.[78][79]

Abuse of discretion[edit]

Main article: Abuse of discretion

Abuse of discretion refers to the misuse of one's powers and decision-making facilities. Examples include a judge improperly dismissing a criminal case or a customs official using their discretion to allow a banned substance through a port.

Favoritism, nepotism and clientelism[edit]

Main article: Nepotism

Favouritism, nepotism and clientelism involve the favouring of not the perpetrator of corruption but someone related to them, such as a friend, family member or member of an association. Examples would include hiring or promoting a family member or staff member to a role they are not qualified for, who belongs to the same political party as you, regardless of merit.[80]

Some states do not forbid these forms of corruption.[citation needed]

Corruption and economic growth[edit]

Corruption is strongly negatively associated with the share of private investment and, hence, it lowers the rate of economic growth.[81]

Corruption reduces the returns of productive activities. If the returns to production fall faster than the returns to corruption and rent-seeking activities, resources will flow from productive activities to corruption activities over time. This will result in a lower stock of producible inputs like human capital in corrupted countries.[81]

Corruption creates the opportunity for increased inequality, reduces the return of productive activities, and, hence, makes rentseeking and corruption activities more attractive. This opportunity for increased inequality not only generates psychological frustration to the underprivileged but also reduces productivity growth, investment, and job opportunities.[81]

Causes of corruption[edit]

According to a 2017 survey study, the following factors have been attributed as causes of corruption:[82]

  • Higher levels of market and political monopolization
  • Low levels of democracy, weak civil participation and low political transparency
  • Higher levels of bureaucracy and inefficient administrative structures
  • Low press freedom
  • Low economic freedom
  • Large ethnic divisions and high levels of in-group favoritism
  • Gender inequality
  • Low degree of integration in the world economy
  • Large government size
  • Low levels of government decentralization
  • Former French, Portuguese, Belgian or Spanish colonies have been shown to have greater corruption than former British or Dutch colonies
  • Resource wealth
  • Poverty
  • Political instability
  • Weak property rights
  • Contagion from corrupt neighboring countries
  • Low levels of education
  • Low Internet access

Preventing corruption[edit]

R. Klitgaard[83] postulates that corruption will occur if the corrupt gain is greater than the penalty multiplied by the likelihood of being caught and prosecuted:

Corrupt gain > Penalty × Likelihood of being caught and prosecuted

The degree of corruption will then be a function of the degree of monopoly and discretion in deciding who should get how much on the one hand and the degree to which this activity is accountable and transparent on the other hand. Still, these equations (which should be understood in a qualitative rather than a quantitative manner) seem to be lacking one aspect: a high degree of monopoly and discretion accompanied by a low degree of transparency does not automatically lead to corruption without any moral weakness or insufficient integrity. Also, low penalties in combination with a low probability of being caught will only lead to corruption if people tend to neglect ethics and moral commitment. The original R.Klitgaard equation has therefore been amended by C. Stephan[84] into:

Degree of corruption = Monopoly + Discretion – Transparency – Morality

According to Stephan, the moral dimension has an intrinsic and an extrinsic component. The intrinsic component refers to a mentality problem, the extrinsic component to external circumstances like poverty, inadequate remuneration, inappropriate work conditions and inoperable or overcomplicated procedures which demoralize people and let them search for "alternative" solutions.

According to the amended Klitgaard equation, limitation of monopoly and regulator discretion of individuals and a high degree of transparency through independent oversight by non-governmental organisations (NGOs) and the media plus public access to reliable information could reduce the problem. Djankov and other researchers[85] have independently addressed the important role information plays in fighting corruption with evidence from both developing and developed countries. Disclosing financial information of government officials to the public is associated with improving institutional accountability and eliminating misbehavior such as vote buying. The effect is specifically remarkable when the disclosures concern politicians’ income sources, liabilities and asset level instead of just income level. Any extrinsic aspects that might reduce morality should be eliminated. Additionally, a country should establish a culture of ethical conduct in society with the government setting the good example in order to enhance the intrinsic morality.

Enhancing Civil Society Participation[edit]

Creating bottom-up mechanisms, promoting citizens participation and encouraging the values of integrity, accountability, and transparency are crucial components of fighting corruption. The implementation of the ALACs “Advocacy and Legal Advice Centres (ALACs)” has led to a significant increase in the number of citizen complaints against acts of corruption received and documented[86] and also to the development of strategies for good governance by involving citizens willing to fight against corruption.[87] 

Anti-corruption programmes[edit]

See also: List of anti-corruption agencies

The Foreign Corrupt Practices Act (FCPA, USA 1977) was an early paradigmatic law for many western countries i.e. industrial countries of the OECD. There, for the first time the old principal-agent approach was moved back where mainly the victim (a society, private or public) and a passive corrupt member (an individual) were considered, whereas the active corrupt part was not in the focus of legal prosecution. Unprecedented, the law of an industrial country directly condemned active corruption, particularly in international business transactions, which was at that time in contradiction to anti-bribery activities of the World Bank and its spin-off organization Transparency International.

As early as 1989 the OECD had established an ad hoc Working Group in order to explore "...the concepts fundamental to the offense of corruption, and the exercise of national jurisdiction over offenses committed wholly or partially abroad."[88] Based on the FCPA concept, the Working Group presented in 1994 the then "OECD Anti-Bribery Recommendation" as precursor for the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions[89] which was signed in 1997 by all member countries and came finally into force in 1999. However, because of ongoing concealed corruption in international transactions several instruments of Country Monitoring[90] have been developed since then by the OECD in order to foster and evaluate related national activities in combating foreign corrupt practices.

In 2013, a document[91] produced by the economic and private sector professional evidence and applied knowledge services help-desk discusses some of the existing practices on anti-corruption. They found:

  • The theories behind the fight against corruption are moving from a Principal agent approach to a collective action problem. Principal-agent theories seem not to be suitable to target systemic corruption.
  • The role of multilateral institutions has been crucial in the fight against corruption. UNCAC provides a common guideline for countries around the world. Both Transparency International and the World Bank provide assistance to national governments in term of diagnostic and design of anti-corruption policies.
  • The use of anti-corruption agencies have proliferated in recent years after the signing of UNCAC. They found no convincing evidence on the extent of their contribution, or the best way to structure them.
  • Traditionally anti-corruption policies have been based on success experiences and common sense. In recent years there has been an effort to provide a more systematic evaluation of the effectiveness of anti-corruption policies. They found that this literature is still in its infancy.
  • Anti-corruption policies that may be in general recommended to developing countries may not be suitable for post-conflict countries. Anti-corruption policies in fragile states have to be carefully tailored.
  • Anti-corruption policies can improve the business environment. There is evidence that lower corruption may facilitate doing business and improve firm’s productivity. Rwanda in the last decade has made tremendous progress in improving governance and the business environment providing a model to follow for post-conflict countries.[91]

Corruption tourism[edit]

See also: Kleptocracy Tour

In some countries people travel to corruption hot spots or a specialist tour company takes them on corruption city tours, as it is the case in Prague.[92][93][94][95] Corruption tours have also occurred in Chicago,[96] and Mexico City[97][98]

Legal corruption[edit]

Though corruption is often viewed as illegal, there is an evolving concept of legal corruption,[5][99][original research?] as developed by Daniel Kaufmann and Pedro Vicente. It might be termed as processes which are corrupt, but are protected by a legal (that is, specifically permitted, or at least not proscribed by law) framework.[100]

Examples of legal corruption[edit]

In 1977 the USA had enacted the Foreign Corrupt Practices Act (FCPA)[101] "for the purpose of making it unlawful... to make payments to foreign government officials to assist in obtaining or retaining business" and invited all OECD countries to follow suit. In 1997 a corresponding OECD Anti-Bribery Convention was signed by its members.[102][103]

17 years after the FCPA enacting, a Parliamentary Financial Commission in Bonn presented a comparative study on legal corruption in industrialized OECD countries[104] As a result, they reported that in most industrial countries even at that time (1994) foreign corruption was legal, and that their foreign corrupt practices had been diverging to a large extent, ranging from simple legalization, through governmental subsidization (tax deduction), up to extremes like in Germany where foreign corruption was fostered, whereas domestic was legally prosecuted. Consequently, in order to support national export corporations the Parliamentary Financial Commission recommended to reject a related previous Parliamentary Proposal by the opposition leader which had been aiming to limit German foreign corruption on the basis of the US FCPA.[105] Only after the OECD Anti-Bribery Convention came into force, did Germany withdraw the legalization of foreign corruption in 1999.[106]

Foreign corrupt practices of industrialized OECD countries 1994 study[edit]

The Foreign corrupt practices of industrialized OECD countries 1994 (Parliamentary Financial Commission study, Bonn).[104]

Belgium: bribe payments are generally tax deductible as business expenses if the name and address of the beneficiary is disclosed. Under the following conditions kickbacks in connection with exports abroad are permitted for deduction even without proof of the receiver:

  • Payments must be necessary in order to be able to survive against foreign competition
  • They must be common in the industry
  • A corresponding application must be made to the Treasury each year
  • Payments must be appropriate
  • The payer has to pay a lump-sum to the tax office to be fixed by the Finance Minister (at least 20% of the amount paid).

In the absence of the required conditions, for corporate taxable companies paying bribes without proof of the receiver, a special tax of 200% is charged. This special tax may, however, be abated along with the bribe amount as an operating expense.

Denmark: bribe payments are deductible when a clear operational context exists and its adequacy is maintained.

France: basically all operating expenses can be deducted. However, staff costs must correspond to an actual work done and must not be excessive compared to the operational significance. This also applies to payments to foreign parties. Here, the receiver shall specify the name and address, unless the total amount in payments per beneficiary does not exceed 500 FF. If the receiver is not disclosed the payments are considered "rémunérations occult" and are associated with the following disadvantages:

  • The business expense deduction (of the bribe money) is eliminated.
  • For corporations and other legal entities, a tax penalty of 100% of the "rémunérations occult" and 75% for voluntary post declaration is to be paid.
  • There may be a general fine of up 200 FF fixed per case.

Japan: in Japan, bribes are deductible as business expenses that are justified by the operation (of the company) if the name and address of the recipient is specified. This also applies to payments to foreigners. If the indication of the name is refused, the expenses claimed are not recognized as operating expenses.

Canada: there is no general rule on the deductibility or non-deductibility of kickbacks and bribes. Hence the rule is that necessary expenses for obtaining the income (contract) are deductible. Payments to members of the public service and domestic administration of justice, to officers and employees and those charged with the collection of fees, entrance fees etc. for the purpose to entice the recipient to the violation of his official duties, can not be abated as business expenses as well as illegal payments according to the Criminal Code.

Luxembourg: bribes, justified by the operation (of a company) are deductible as business expenses. However, the tax authorities may require that the payer is to designate the receiver by name. If not, the expenses are not recognized as operating expenses.

Netherlands: all expenses that are directly or closely related to the business are deductible. This also applies to expenditure outside the actual business operations if they are considered beneficial as to the operation for good reasons by the management. What counts is the good merchant custom. Neither the law nor the administration is authorized to determine which expenses are not operationally justified and therefore not deductible. For the business expense deduction it is not a requirement that the recipient is specified. It is sufficient to elucidate to the satisfaction of the tax authorities that the payments are in the interest of the operation.

Austria: bribes justified by the operation (of a company) are deductible as business expenses. However, the tax authority may require that the payer names the recipient of the deducted payments exactly. If the indication of the name is denied e.g. because of business comity, the expenses claimed are not recognized as operating expenses. This principle also applies to payments to foreigners.

Switzerland: bribe payments are tax deductible if it is clearly operation initiated and the consignee is indicated.

US: (rough résumé: "generally operational expenses are deductible if they are not illegal according to the FCPA")

UK: kickbacks and bribes are deductible if they have been paid for operating purposes. The tax authority may request the name and address of the recipient."

"Specific" legal corruption: exclusively against foreign countries[

A political cartoon from Harper's Weekly, January 26, 1878, depicting U.S. Secretary of the Interior Carl Schurz investigating the Indian Bureau at the U.S. Department of the Interior. The original caption for the cartoon is: "THE SECRETARY OF THE INTERIOR INVESTIGATING THE INDIAN BUREAU. GIVE HIM HIS DUE, AND GIVE THEM THEIR DUES."
The Kaunas "golden toilet".
Euro bank notes hidden in sleeve.

Political corruption is the use of powers by government officials for illegitimate private gain. An illegal act by an officeholder constitutes political corruption only if the act is directly related to their official duties, is done under color of law or involves trading in influence.

Forms of corruption vary, but include bribery, extortion, cronyism, nepotism, parochialism, patronage, influence peddling, graft, and embezzlement. Corruption may facilitate criminal enterprise such as drug trafficking, money laundering, and human trafficking, though is not restricted to these activities. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is also considered political corruption. Masiulis case is a typical example of political corruption.

The activities that constitute illegal corruption differ depending on the country or jurisdiction. For instance, some political funding practices that are legal in one place may be illegal in another. In some cases, government officials have broad or ill-defined powers, which make it difficult to distinguish between legal and illegal actions. Worldwide, bribery alone is estimated to involve over 1 trillion US dollars annually.[1] A state of unrestrained political corruption is known as a kleptocracy, literally meaning "rule by thieves".

Some forms of corruption – now called "institutional corruption"[2] – are distinguished from bribery and other kinds of obvious personal gain. A similar problem of corruption arises in any institution that depends on financial support from people who have interests that may conflict with the primary purpose of the institution.

Effects[edit]

Effects on politics, administration, and institutions[edit]

In politics, corruption undermines democracy and good governance by flouting or even subverting formal processes. Corruption in elections and in the legislature reduces accountability and distorts representation in policymaking; corruption in the judiciary compromises the rule of law; and corruption in public administration results in the inefficient provision of services. It violates a basic principle of republicanism regarding the centrality of civic virtue.[3]

More generally, corruption erodes the institutional capacity of government if procedures are disregarded, resources are siphoned off, and public offices are bought and sold. Corruption undermines the legitimacy of government and such democratic values as trust and tolerance. Recent evidence suggests that variation in the levels of corruption amongst high-income democracies can vary significantly depending on the level of accountability of decision-makers.[3] Evidence from fragile states also shows that corruption and bribery can adversely impact trust in institutions.[4][5]

Corruption can also impact government’s provision of goods and services. It increases the costs of goods and services which arise efficiency loss. In the absence of corruption, governmental projects might be cost-effective at their true costs, however, once corruption costs are included projects may not be cost-effective so they are not executed distorting the provision of goods and services.[6]

Economic effects[edit]

See also: Economics of corruption and Corporate crime

In the private sector, corruption increases the cost of business through the price of illicit payments themselves, the management cost of negotiating with officials and the risk of breached agreements or detection. Although some claim corruption reduces costs by cutting bureaucracy, the availability of bribes can also induce officials to contrive new rules and delays. Openly removing costly and lengthy regulations are better than covertly allowing them to be bypassed by using bribes. Where corruption inflates the cost of business, it also distorts the field of inquiry and action, shielding firms with connections from competition and thereby sustaining inefficient firms.[7]

Corruption may have a direct impact on the firm's effective marginal tax rate. Bribing tax officials can reduce tax payments of the firm if the marginal bribe rate is below the official marginal tax rate.[6] However, in Uganda, bribes have a higher negative impact on firms’ activity than taxation. Indeed, a one percentage point increase in bribes reduces firm’s annual growth by three percentage points, while an increase in 1 percentage point on taxes reduces firm’s growth by one percentage point.[8]

Corruption also generates economic distortion in the public sector by diverting public investment into capital projects where bribes and kickbacks are more plentiful. Officials may increase the technical complexity of public sector projects to conceal or pave the way for such dealings, thus further distorting investment.[9] Corruption also lowers compliance with construction, environmental, or other regulations, reduces the quality of government services and infrastructure, and increases budgetary pressures on government.

Economists argue that one of the factors behind the differing economic development in Africa and Asia is that in Africa, corruption has primarily taken the form of rent extraction with the resulting financial capital moved overseas rather than invested at home (hence the stereotypical, but often accurate, image of African dictators having Swiss bank accounts). In Nigeria, for example, more than $400 billion was stolen from the treasury by Nigeria's leaders between 1960 and 1999.[10]

University of Massachusetts Amherst researchers estimated that from 1970 to 1996, capital flight from 30 Sub-Saharan countries totaled $187bn, exceeding those nations' external debts.[11] (The results, expressed in retarded or suppressed development, have been modeled in theory by economist Mancur Olson.) In the case of Africa, one of the factors for this behavior was political instability and the fact that new governments often confiscated previous government's corruptly obtained assets. This encouraged officials to stash their wealth abroad, out of reach of any future expropriation. In contrast, Asian administrations such as Suharto's New Order often took a cut on business transactions or provided conditions for development, through infrastructure investment, law and order, etc.

Environmental and social effects[edit]

Further information: Human impact on the environment

Corruption is often most evident in countries with the smallest per capita incomes, relying on foreign aid for health services. Local political interception of donated money from overseas is especially prevalent in Sub-Saharan African nations, where it was reported in the 2006 World Bank Report that about half of the funds that were donated for health usages were never invested into the health sectors or given to those needing medical attention.[12]

Instead, the donated money was expended through "counterfeit drugs, siphoning off of drugs to the black market, and payments to ghost employees". Ultimately, there is a sufficient amount of money for health in developing countries, but local corruption denies the wider citizenry the resource they require.[12]

Corruption facilitates environmental destruction. While corrupt societies may have formal legislation to protect the environment, it cannot be enforced if officials can easily be bribed. The same applies to social rights worker protection, unionization prevention, and child labor. Violation of these laws rights enables corrupt countries to gain illegitimate economic advantage in the international market.

The Nobel Prize-winning economist Amartya Sen has observed that "there is no such thing as an apolitical food problem." While drought and other naturally occurring events may trigger famine conditions, it is government action or inaction that determines its severity, and often even whether or not a famine will occur.[13]

Governments with strong tendencies towards kleptocracy can undermine food security even when harvests are good. Officials often steal state property. In Bihar, India, more than 80% of the subsidized food aid to poor is stolen by corrupt officials.[13] Similarly, food aid is often robbed at gunpoint by governments, criminals, and warlords alike, and sold for a profit. The 20th century is full of many examples of governments undermining the food security of their own nations – sometimes intentionally.[14]

Effects on humanitarian aid[edit]

The scale of humanitarian aid to the poor and unstable regions of the world grows, but it is highly vulnerable to corruption, with food aid, construction and other highly valued assistance as the most at risk.[15] Food aid can be directly and physically diverted from its intended destination, or indirectly through the manipulation of assessments, targeting, registration and distributions to favor certain groups or individuals.[15]

In construction and shelter there are numerous opportunities for diversion and profit through substandard workmanship, kickbacks for contracts and favouritism in the provision of valuable shelter material.[15] Thus while humanitarian aid agencies are usually most concerned about aid being diverted by including too many, recipients themselves are most concerned about exclusion.[15] Access to aid may be limited to those with connections, to those who pay bribes or are forced to give sexual favors.[15] Equally, those able to do so may manipulate statistics to inflate the number of beneficiaries and siphon off additional assistance.[15]

Malnutrition, illness, wounds, torture, harassment of specific groups within the population, disappearances, extra-judicial executions and the forcible displacement of people are all found in many armed conflicts. Aside from their direct effec ts on the individuals concerned, the consequences of these tragedies for local systems must also be considered: the destruction of crops and places of cultural importance, the breakdown of economic infrastructure and of health-care facilities such as hospitals, etc., etc. [16]

Other areas: health, public safety, education, trade unions, etc.[edit]

See also: Police corruption

Corruption is not specific to poor, developing, or transition countries. In western countries, cases of bribery and other forms of corruption in all possible fields exist: under-the-table payments made to reputed surgeons by patients attempting to be on top of the list of forthcoming surgeries,[17] bribes paid by suppliers to the automotive industry in order to sell low-quality connectors used for instance in safety equipment such as airbags, bribes paid by suppliers to manufacturers of defibrillators (to sell low-quality capacitors), contributions paid by wealthy parents to the "social and culture fund" of a prestigious university in exchange for it to accept their children, bribes paid to obtain diplomas, financial and other advantages granted to unionists by members of the executive board of a car manufacturer in exchange for employer-friendly positions and votes, etc. Examples are endless.

These various manifestations of corruption can ultimately present a danger for public health; they can discredit specific, essential institutions or social relationships. Osipian summarized a 2008 "study of corruption perceptions among Russians ... .30 percent of the respondents marked the level of corruption as very high, while another 44 percent as high. 19 percent considered it as average and only 1 percent as low. The most corrupt in people's minds are traffic police (33 percent), local authorities (28 percent), police (26 percent), healthcare (16 percent), and education (15 percent). 52 percent of the respondents had experiences of giving money or gifts to medical professionals while 36 percent made informal payments to educators." He claimed that this corruption lowered the rate of economic growth in Russia, because the students disadvantaged by this corruption could not adopt better work methods as quickly, lowering thereby total factor productivity for Russia.[18]

Corruption can also affect the various components of sports activities (referees, players, medical and laboratory staff involved in anti-doping controls, members of national sport federation and international committees deciding about the allocation of contracts and competition places).

Cases exist against (members of) various types of non-profit and non-government organizations, as well as religious organizations.

Ultimately, the distinction between public and private sector corruption sometimes appears rather artificial, and national anti-corruption initiatives may need to avoid legal and other loopholes in the coverage of the instruments.

Types[edit]

Bribery[edit]

Main article: Bribery

In the context of political corruption, a bribe may involve a payment given to a government official in exchange of his use of official powers. Bribery requires two participants: one to give the bribe, and one to take it. Either may initiate the corrupt offering; for example, a customs official may demand bribes to let through allowed (or disallowed) goods, or a smuggler might offer bribes to gain passage. In some countries the culture of corruption extends to every aspect of public life, making it extremely difficult for individuals to operate without resorting to bribes. Bribes may be demanded in order for an official to do something he is already paid to do. They may also be demanded in order to bypass laws and regulations. In addition to their role in private financial gain, bribes are also used to intentionally and maliciously cause harm to another (i.e. no financial incentive).[citation needed] In some developing nations, up to half of the population has paid bribes during the past 12 months.[19]

The Council of Europe dissociates active and passive bribery and to incriminates them as separate offences:

  • One can define active bribery as "the promising, offering or giving by any person, directly or indirectly, of any undue advantage to any of its public officials, for himself or herself or for anyone else, for him or her to act or refrain from acting in the exercise of his or her functions" (article 2 of the Criminal Law Convention on Corruption (ETS 173)[20] of the Council of Europe).
  • Passive bribery can be defined as "when committed intentionally, the request or receipt by any [...] public officials, directly or indirectly, of any undue advantage, for himself or herself or for anyone else, or the acceptance of an offer or a promise of such an advantage, to act or refrain from acting in the exercise of his or her functions" (article 3 of the Criminal Law Convention on Corruption (ETS 173)).[20]

This dissociation aims to make the early steps (offering, promising, requesting an advantage) of a corrupt deal already an offence and, thus, to give a clear signal (from a criminal-policy point-of-view) that bribery is not acceptable.[citation needed] Furthermore, such a dissociation makes the prosecution of bribery offences easier since it can be very difficult to prove that two parties (the bribe-giver and the bribe-taker) have formally agreed upon a corrupt deal. In addition, there is often no such formal deal but only a mutual understanding, for instance when it is common knowledge in a municipality that to obtain a building permit one has to pay a "fee" to the decision maker to obtain a favorable decision. A working definition of corruption is also provided as follows in article 3 of the Civil Law Convention on Corruption (ETS 174):[21]For the purpose of this Convention, "corruption" means requesting, offering, giving or accepting, directly or indirectly, a bribe or any other undue advantage or prospect thereof, which distorts the proper performance of any duty or behavior required of the recipient of the bribe, the undue advantage or the prospect thereof.

Trading in influence[edit]

Main article: Influence peddling

Trading in influence, or influence peddling, refers a person selling his/her influence over the decision making process to benefit a third party (person or institution). The difference with bribery is that this is a tri-lateral relation. From a legal point of view, the role of the third party (who is the target of the influence) does not really matter although he/she can be an accessory in some instances. It can be difficult to make a distinction between this form of corruption and some forms of extreme and loosely regulated lobbying where for instance law- or decision-makers can freely "sell" their vote, decision power or influence to those lobbyists who offer the highest compensation, including where for instance the latter act on behalf of powerful clients such as industrial groups who want to avoid the passing of specific environmental, social, or other regulations perceived as too stringent, etc. Where lobbying is (sufficiently) regulated, it becomes possible to provide for a distinctive criteria and to consider that trading in influence involves the use of "improper influence", as in article 12 of the Criminal Law Convention on Corruption (ETS 173)[20] of the Council of Europe.

Patronage[edit]

Main article: Patronage

Patronage refers to favoring supporters, for example with government employment. This may be legitimate, as when a newly elected government changes the top officials in the administration in order to effectively implement its policy. It can be seen as corruption if this means that incompetent persons, as a payment for supporting the regime, are selected before more able ones. In nondemocracies many government officials are often selected for loyalty rather than ability. They may be almost exclusively selected from a particular group (for example, Sunni Arabs in Saddam Hussein's Iraq, the nomenklatura in the Soviet Union, or the Junkers in Imperial Germany) that support the regime in return for such favors. A similar problem can also be seen in Eastern Europe, for example in Romania, where the government is often accused of patronage (when a new government comes to power it rapidly changes most of the officials in the public sector).[22]

Nepotism and cronyism[edit]

Main articles: Nepotism and Cronyism

Favoring relatives (nepotism) or personal friends (cronyism) of an official is a form of illegitimate private gain. This may be combined with bribery, for example demanding that a business should employ a relative of an official controlling regulations affecting the business. The most extreme example is when the entire state is inherited, as in North Korea or Syria. A lesser form might be in the Southern United States with Good ol' boys, where women and minorities are excluded. A milder form of cronyism is an "old boy network", in which appointees to official positions are selected only from a closed and exclusive social network – such as the alumni of particular universities – instead of appointing the most competent candidate.

Seeking to harm enemies becomes corruption when official powers are illegitimately used as means to this end. For example, trumped-up charges are often brought up against journalists or writers who bring up politically sensitive issues, such as a politician's acceptance of bribes.

Gombeenism and parochialism[edit]

Main articles: Gombeen man and Parochialism

Gombeenism refers to an individual who is dishonest and corrupt for the purpose of personal gain, more often through monetary, while, parochialism which is also known as parish pump politics relates to placing local or vanity projects ahead of the national interest.[23][24][25][26] For instance in Irish politics, populist left wing political parties will often apply these terms to mainstream establishment political parties and will cite the many cases of Corruption in Ireland, such as the Irish Banking crisis, which found evidence of bribery, cronyism and collusion, where in some cases politicians who were coming to the end of their political careers would receive a senior management or committee position in a company they had dealings with.

Electoral fraud[edit]

Main article: Electoral fraud

Electoral fraud is illegal interference with the process of an election. Acts of fraud affect vote counts to bring about an election result, whether by increasing the vote share of the favored candidate, depressing the vote share of the rival candidates, or both. Also called voter fraud, the mechanisms involved include illegal voter registration, intimidation at polls, voting computer hacking, and improper vote counting.

Embezzlement[edit]

Main article: Embezzlement

Embezzlement is the theft of entrusted funds. It is political when it involves public money taken by a public official for use by anyone not specified by the public. A common type of embezzlement is that of personal use of entrusted government resources; for example, when an official assigns public employees to renovate his own house.

Kickbacks[edit]

Main article: Kickback (bribery)

See also: Anti-competitive practices, Bid rigging, Fraud, and Charbonneau Commission

A kickback is an official's share of misappropriated funds allocated from his or her organization to an organization involved in corrupt bidding. For example, suppose that a politician is in charge of choosing how to spend some public funds. He can give a contract to a company that is not the best bidder, or allocate more than they deserve. In this case, the company benefits, and in exchange for betraying the public, the official receives a kickback payment, which is a portion of the sum the company received. This sum itself may be all or a portion of the difference between the actual (inflated) payment to the company and the (lower) market-based price that would have been paid had the bidding been competitive.

Another example of a kickback would be if a judge receives a portion of the profits that a business makes in exchange for his judicial decisions.

Kickbacks are not limited to government officials; any situation in which people are entrusted to spend funds that do not belong to them are susceptible to this kind of corruption.

Unholy alliance[edit]

Main article: Unholy alliance (geopolitical)

An unholy alliance is a coalition among seemingly antagonistic groups for ad hoc or hidden gain, generally some influential non-governmental group forming ties with political parties, supplying funding in exchange for the favorable treatment. Like patronage, unholy alliances are not necessarily illegal, but unlike patronage, by its deceptive nature and often great financial resources, an unholy alliance can be much more dangerous to the public interest. An early use of the term was by former US President Theodore "Teddy" Roosevelt:

"To destroy this invisible Government, to dissolve the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day." – 1912 Progressive Party Platform, attributed to Roosevelt[27] and quoted again in his autobiography,[28] where he connects trusts and monopolies (sugar interests, Standard Oil, etc.) to Woodrow Wilson, Howard Taft, and consequently both major political parties.

Involvement in organized crime[edit]

An illustrative example of official involvement in organized crime can be found from 1920s and 1930s Shanghai, where Huang Jinrong was a police chief in the French concession, while simultaneously being a gang boss and co-operating with Du Yuesheng, the local gang ringleader. The relationship kept the flow of profits from the gang's gambling dens, prostitution, and protection rackets undisturbed.[citation needed]

The United States accused Manuel Noriega's government in Panama of being a "narcokleptocracy", a corrupt government profiting on illegal drug trade. Later the U.S. invaded Panama and captured Noriega.

Conditions favorable for corruption[edit]

It is argued that the following conditions are favorable for corruption:

  • Information deficits
    • Lacking freedom of information legislation. In contrast, for example: The Indian Right to Information Act 2005 is perceived to have "already engendered mass movements in the country that is bringing the lethargic, often corrupt bureaucracy to its knees and changing power equations completely."[29]
    • Lack of investigative reporting in the local media.[30]
    • Contempt for or negligence of exercising freedom of speech and freedom of the press.
    • Weak accounting practices, including lack of timely financial management.
    • Lack of measurement of corruption. For example, using regular surveys of households and businesses in order to quantify the degree of perception of corruption in different parts of a nation or in different government institutions may increase awareness of corruption and create pressure to combat it. This will also enable an evaluation of the officials who are fighting corruption and the methods used.
    • Tax havens which tax their own citizens and companies but not those from other nations and refuse to disclose information necessary for foreign taxation. This enables large-scale political corruption in the foreign nations.[31][citation needed]
  • Lacking control of the government.
    • Lacking civic society and non-governmental organizations which monitor the government.
    • An individual voter may have a rational ignorance regarding politics, especially in nationwide elections, since each vote has little weight.
    • Weak civil service, and slow pace of reform.
    • Weak rule of law.
    • Weak legal profession.
    • Weak judicial independence.
    • Lacking protection of whistleblowers.
    • Lack of benchmarking, that is continual detailed evaluation of procedures and comparison to others who do similar things, in the same government or others, in particular comparison to those who do the best work. The Peruvian organization Ciudadanos al Dia has started to measure and compare transparency, costs, and efficiency in different government departments in Peru. It annually awards the best practices which has received widespread media attention. This has created competition among government agencies in order to improve.[32]
    • Individual officials routinely handle cash, instead of handling payments by giro or on a separate cash desk – illegitimate withdrawals from supervised bank accounts are much more difficult to conceal.
    • Public funds are centralized rather than distributed. For example, if $1,000 is embezzled from a local agency that has $2,000 funds, it is easier to notice than from a national agency with $2,000,000 funds. See the principle of subsidiarity.
    • Large, unsupervised public investments.
    • Pay disproportionately lower than that of the average citizen.
    • Government licenses needed to conduct business, e.g., import licenses, encourage bribing and kickbacks.
    • Long-time work in the same position may create relationships inside and outside the government which encourage and help conceal corruption and favoritism. Rotating government officials to different positions and geographic areas may help prevent this; for instance certain high rank officials in French government services (e.g. treasurer-paymasters general) must rotate every few years.
    • Costly political campaigns, with expenses exceeding normal sources of political funding, especially when funded with taxpayer money.
    • A single group or family controlling most of the key government offices. Lack of laws forbidding and limiting number of members of the same family to be in office .
    • Less interaction with officials reduces the opportunities for corruption. For example, using the Internet for sending in required information, like applications and tax forms, and then processing this with automated computer systems. This may also speed up the processing and reduce unintentional human errors. See e-Government.
    • A windfall from exporting abundant natural resources may encourage corruption.[33](See Resource curse)
    • War and other forms of conflict correlate with a breakdown of public security.
  • Social conditions
    • Self-interested closed cliques and "old boy networks".
    • Family-, and clan-centered social structure, with a tradition of nepotism/favouritism being acceptable.
    • A gift economy, such as the Soviet blat system, emerges in a Communist centrally planned economy.
    • Lacking literacy and education among the population.
    • Frequent discrimination and bullying among the population.
    • Tribal solidarity, giving benefits to certain ethnic groups. In India for example, the political system, it has become common that the leadership of national and regional parties are passed from generation to generation.[34][35]
    • creating a system in which a family holds the center of power. Some examples are most of the Dravidian parties of south India and also the Congress party, which is one of the two major political parties in India.
    • Lack of strong laws which forbid members of the same family to contest elections and be in office as in India where local elections are often contested between members of the same powerful family by standing in opposite parties so that whoever is elected that particular family is at tremendous benefit.

Media[edit]

Thomas Jefferson observed a tendency for "The functionaries of every government ... to command at will the liberty and property of their constituents. There is no safe deposit [for liberty and property] ... without information. Where the press is free, and every man able to read, all is safe."

Recent research supports Jefferson's claim. Brunetti and Weder found "evidence of a significant relationship between more press freedom and less corruption in a large cross-section of countries." They also presented "evidence which suggests that the direction of causation runs from higher press freedom to lower corruption."[36] Adserà, Boix, and Payne found that increases in newspaper readership led to increased political accountability and lower corruption in data from roughly 100 countries and from different states in the US.[37]

Snyder and Strömberg found "that a poor fit between newspaper markets and political districts reduces press coverage of politics. ... Congressmen who are less covered by the local press work less for their constituencies: they are less likely to stand witness before congressional hearings ... . Federal spending is lower in areas where there is less press coverage of the local members of congress."[38] Schulhofer-Wohl and Garrido found that the year after the Cincinnati Post closed in 2007, "fewer candidates ran for municipal office in the Kentucky suburbs most reliant on the Post, incumbents became more likely to win reelection, and voter turnout and campaign spending fell.[39]

An analysis of the evolution of mass media in the United States and European Union since World War II noted mixed results from the growth of the Internet: "The digital revolution has been good for freedom of expression [and] information [but] has had mixed effects on freedom of the press": It has disrupted traditional sources of funding, and new forms of Internet journalism have replaced only a tiny fraction of what's been lost.[40]

Size of public sector[edit]

Extensive and diverse public spending is, in itself, inherently at risk of cronyism, kickbacks, and embezzlement. Complicated regulations and arbitrary, unsupervised official conduct exacerbate the problem. This is one argument for privatization and deregulation. Opponents of privatization see the argument as ideological. The argument that corruption necessarily follows from the opportunity is weakened by the existence of countries with low to non-existent corruption but large public sectors, like the Nordic countries.[41] These countries score high on the Ease of Doing Business Index, due to good and often simple regulations, and have rule of law firmly established. Therefore, due to their lack of corruption in the first place, they can run large public sectors without inducing political corruption. Recent evidence that takes both the size of expenditures and regulatory complexity into account has found that high-income democracies with more expansive state sectors do indeed have higher levels of corruption.[3]

Like other governmental economic activities, also privatization, such as in the sale of government-owned property, is particularly at the risk of cronyism. Privatizations in Russia, Latin America, and East Germany were accompanied by large-scale corruption during the sale of the state owned companies. Those with political connections unfairly gained large wealth, which has discredited privatization in these regions. While media have reported widely the grand corruption that accompanied the sales, studies have argued that in addition to increased operating efficiency, daily petty corruption is, or would be, larger without privatization, and that corruption is more prevalent in non-privatized sectors. Furthermore, there is evidence to suggest that extralegal and unofficial activities are more prevalent in countries that privatized less.[42]

In the European Union, the principle of subsidiarity is applied: a government service should be provided by the lowest, most local authority that can competently provide it. An effect is that distribution of funds into multiple instances discourages embezzlement, because even small sums missing will be noticed. In contrast, in a centralized authority, even minute proportions of public funds can be large sums of money.

Governmental corruption[edit]

If the highest echelons of the governments also take advantage from corruption or embezzlement from the state's treasury, it is sometimes referred with the neologismkleptocracy. Members of the government can take advantage of the natural resources (e.g., diamonds and oil in a few prominent cases) or state-owned productive industries. A number of corrupt governments have enriched themselves via foreign aid. Indeed, there is a positive correlation between aid flows and high levels of corruption within recipient countries.[43][44]

A corrupt dictatorship typically results in many years of general hardship and suffering for the vast majority of citizens as civil society and the rule of law disintegrate. In addition, corrupt dictators routinely ignore economic and social problems in their quest to amass ever more wealth and power.

The classic case of a corrupt, exploitive dictator often given is the regime of Marshal Mobutu Sese Seko, who ruled the Democratic Republic of the Congo (which he renamed Zaire) from 1965 to 1997. It is said that usage of the term kleptocracy gained popularity largely in response to a need to accurately describe Mobutu's regime. Another classic case is Nigeria, especially under the rule of General Sani Abacha who was de facto president of Nigeria from 1993 until his death in 1998. He is reputed to have stolen some US$3–4 billion. He and his relatives are often mentioned in Nigerian 419 letter scams claiming to offer vast fortunes for "help" in laundering his stolen "fortunes", which in reality turn out not to exist.[45] More than $400 billion was stolen from the treasury by Nigeria's leaders between 1960 and 1999.[46]

More recently, articles in various financial periodicals, most notably Forbes magazine, have pointed to Fidel Castro, General Secretary of the Republic of Cuba from 1959 until his death in 2016, of likely being the beneficiary of up to $900 million, based on "his control" of state-owned companies.[47] Opponents of his regime claim that he has used money amassed through weapons sales, narcotics, international loans, and confiscation of private property to enrich himself and his political cronies who hold his dictatorship together, and that the $900 million published by Forbes is merely a portion of his assets, although that needs to be proven.[48]

Judiciary corruption[edit]

There are two methods of corruption of the judiciary: the state (through budget planning and various privileges), and the private. Budget of the judiciary in many transitional and developing countries is almost completely controlled by the executive. The latter undermines the separation of powers, as it creates a critical financial dependence of the judiciary. The proper national wealth distribution including the government spending on the judiciary is subject of the constitutional economics.[49] Judicial corruption can be difficult to completely eradicate, even in developed countries.[50]

Opposing corruption[edit]

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Mobile telecommunications and radio broadcasting help to fight corruption, especially in developing regions like Africa,[51] where other forms of communications are limited. In India, the anti-corruption bureau fights against corruption, and a new ombudsman bill called Jan Lokpal Bill is being prepared.

In the 1990s, initiatives were taken at an international level (in particular by the European Community, the Council of Europe, the OECD) to put a ban on corruption: in 1996, the Committee of Ministers of the Council of Europe,[52] for instance, adopted a comprehensive Programme of Action against Corruption and, subsequently, issued a series of anti-corruption standard-setting instruments:

  • the Criminal Law Convention on Corruption (ETS 173);[20]
  • the Civil Law Convention on Corruption (ETS 174);[21]
  • the Additional Protocol to the Criminal Law Convention on Corruption (ETS 191);[53]
  • the Twenty Guiding Principles for the Fight against Corruption (Resolution (97) 24);[54]
  • the Recommendation on Codes of Conduct for Public Officials (Recommendation No. R (2000) 10);[55]
  • the Recommendation on Common Rules against Corruption in the Funding of Political Parties and Electoral Campaigns (Rec(2003)4)[56]

The purpose of these instruments was to address the various forms of corruption (involving the public sector, the private sector, the financing of political activities, etc.) whether they had a strictly domestic or also a transnational dimension. To monitor the implementation at national level of the requirements and principles provided in those texts, a monitoring mechanism – the Group of States Against Corruption (also known as GRECO) (French: Groupe d'Etats contre la corruption) was created.

Further conventions were adopted at the regional level under the aegis of the Organization of American States (OAS or OEA), the African Union, and in 2003, at the universal level under that of the United Nations Convention against Corruption.

Whistleblowers[edit]

Main article: Whistleblower

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Measuring corruption[edit]

Measuring corruption accurately is difficult if not impossible due to the illicit nature of the transaction and imprecise definitions of corruption.[57] Few reliable measures of the magnitude of corruption exists and among those there is a high level of heterogeneity. One of the most common ways to estimate corruption is through perception surveys. They have the advantage of good coverage, however, they do not measure corruption precisely.[6] While "corruption" indices first appeared in 1995 with the Corruption Perceptions Index CPI, all of these metrics address different proxies for corruption, such as public perceptions of the extent of the problem.[58]. However, over time the refinement of methods and validation checks against objective indocators has meant that, while not perfect, many of these indicators are getting better at consistently and validly measuring the scale of corruption. [59].

Transparency International, an anti-corruption NGO, pioneered this field with the CPI, first released in 1995. This work is often credited with breaking a taboo and forcing the issue of corruption into high level development policy discourse. Transparency International currently publishes three measures, updated annually: a CPI (based on aggregating third-party polling of public perceptions of how corrupt different countries are); a Global Corruption Barometer (based on a survey of general public attitudes toward and experience of corruption); and a Bribe Payers Index, looking at the willingness of foreign firms to pay bribes. The Corruption Perceptions Index is the best known of these metrics, though it has drawn much criticism[58][60][61] and may be declining in influence.[62] In 2013 Transparency International published a report on the "Government Defence Anti-corruption Index". This index evaluates the risk of corruption in countries' military sector.[63]

The World Bank collects a range of data on corruption,[64] including survey responses from over 100,000 firms worldwide[65] and a set of indicators of governance and institutional quality.[66] Moreover, one of the six dimensions of governance measured by the Worldwide Governance Indicators is Control of Corruption, which is defined as "the extent to which power is exercised for private gain, including both petty and grand forms of corruption, as well as 'capture' of the state by elites and private interests."[67] While the definition itself is fairly precise, the data aggregated into the Worldwide Governance Indicators is based on any available polling: questions range from "is corruption a serious problem?" to measures of public access to information, and not consistent across countries. Despite these weaknesses, the global coverage of these datasets has led to their widespread adoption, most notably by the Millennium Challenge Corporation.[57]

A number of parties have collected survey data, from the public and from experts, to try and gauge the level of corruption and bribery, as well as its impact on political and economic outcomes.[4][5] A second wave of corruption metrics has been created by Global Integrity, the International Budget Partnership,[68] and many lesser known local groups. These metrics include the Global Integrity Index,[69] first published in 2004. These second wave projects aim to create policy change by identifying resources more effectively and creating checklists toward incremental reform. Global Integrity and the International Budget Partnership[70] each dispense with public surveys and instead uses in-country experts to evaluate "the opposite of corruption" – which Global Integrity defines as the public policies that prevent, discourage, or expose corruption.[71] These approaches compliment the first wave, awareness-raising tools by giving governments facing public outcry a checklist which measures concrete steps toward improved governance.[57]

Typical second wave corruption metrics do not offer the worldwide coverage found in first wave projects, and instead focus on localizing information gathered to specific problems and creating deep, "unpackable"[clarification needed] content that matches quantitative and qualitative data.

Alternative approaches, such as the British aid agency's Drivers of Change research, skips numbers and promotes understanding corruption via political economy analysis of who controls power in a given society.

Reformers like the American Joseph Keppler depicted the Senate as controlled by the giant moneybags, who represented the nation's financial trusts and monopolies.

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