Anti-Corruption Institutions: Some History and …dixitak/home/IEAConf_Dixit_Rev.pdfAnti-Corruption...
Transcript of Anti-Corruption Institutions: Some History and …dixitak/home/IEAConf_Dixit_Rev.pdfAnti-Corruption...
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July9,2016
Anti-CorruptionInstitutions:SomeHistoryandTheory*
AvinashDixit,PrincetonUniversity
Abstract:
Corruptionisamulti-dimensionalproblemthathasbeenpervasivethrough
history.Attemptstofightcorruptionmustlikewisebemulti-directional.The
institutionsthathavebeendesignedindifferentsocietiesforthispurposeinclude
formallaws,specialagencies,communityorganizations,andcombinations;their
recordofsuccessisvaried.Thispaperexaminessomeprominentexamplesofsuch
effort,withspecialattentiontocampaignsliketheonesledfromthetopthat
transformedHongKongandSingapore,andthebottom-upAddiopizzomovement
thathasforthelastdecadeorganizedresistanceagainsttheSicilianMafia’s
extortion.Thepapersuggestssomerequisitesforsuccessofanti-corruption
institutionsbyanalogywiththeconditionsforsuccessofotherself-governing
institutionsthataddressotherissueslikecontractenforcement,andplacesthese
ideaswithinageneraltheoreticalframeworkofcollectiveaction.
____________________
*ThisisarevisionofapaperdeliveredattheInternationalEconomicAssociation
RoundtableonInstitutions,GovernanceandCorruption,Montevideo,Uruguay,May
26-27,2016.IthankmydiscussantStutiKhemani,otherparticipantsinthe
conference,KarlaHoff,andChiaraSupertiforvaluablecommentsandsuggestions.
ThefirstdraftofthepaperwaswrittenduringaverypleasanttermasSanjayaLall
VisitingSeniorResearchFellowatGreenTempletonCollegeandtheDepartmentof
Economics,Oxford.IthanktheCollegeanddepartmentcolleaguesfortheir
generoushospitalityandusefuldiscussions.
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1.Introduction
Corruptionisacomplex,multidimensionalproblem.Evenitsdefinitionis
elusiveandamatterofdisagreementamongthosestudyingit.Manyattemptsto
defineityieldsomevariantof“useofpublicofficeforpersonalgain.”Iwillbroadly
followthisusageinthispaper.1
Corruptioncomprisesarangeofsuchmalfeasance.Startwithpettybribery,
whichcantaketwoforms.Thefirstentailsextortingmoneyorotherfavorsasa
priceforsomegoodorservice(suchasrationedfoodormedicalcareundera
nationalhealthservice)oradocumentorpermit(suchasapassportordriving
license),towhichthecitizenisentitledforfreeoratalowprice.Variantsofthis
includedelayingdeliveryofthegoodordocumentunlessthepriceispaid.The
secondformofpettybriberyinvolvesextractingapricetoconveyafavorforwhich
theapplicantdoesnotqualify;forexampleacustomsofficerwaivingimportdutyin
exchangeforapaymentorkickback.Andthereisaspectrumspanningthese
categorieswherethequalificationisamatterofdiscretionorjudgment;forexample
aninspector’sdecisionastowhetherarestaurantmeetssanitarystandardsthatare
notpreciselyquantitativelymeasurable.Corruptionalsoincludeslargerdeals,
whereinexchangeforbribesorkickbacks,politiciansorbureaucratsaward
governmentcontractsforsupplyorconstruction,overpayprovidersofpublic
services,givepublicpropertyincludinglandandtheairwavespectrumforfreeorat
alowprice,andgrantwaiversorexemptionsfromregulations.Finally,thereis
grandcorruption:contributionstantamounttopurchaseofpoliticiansinorderto
securemonopoliesorlawsthatcreateprivateprofit.Somedefinitionsalsoinclude
politicians’andofficials’useofinsideinformationaboutfuturepublicprojectsto
1Therecanbesimilarmisuseofauthorityinprivateenterprise;forexample,afirm’spurchasingmanagermayoverpayinexchangeforakickbackfromthesupplier.Firmsattempttodetersuchbehaviorusingefficiencywagesandsimilarstrategies,andpresumablytheydosotoanoptimalextenttradingoffcostsofdetectionandbenefitsofdeterrence.Thisisbasicallyaprincipal-agentproblemincorporategovernance,thereforeIwillleaveitasideandfocusoncorruptioninexerciseofpublicauthority.
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makeprivateprofitbyacquiringlandsorbusinessesthatstandtobenefitfromthe
projects,butwhenthisisnotexplicitlyprohibitedbylaw,otherscallit“legal
corruption”or“honestgraft”.Alltheseformsofcorruptionarefacilitatedifthe
judiciaryisalsocorrupt,forexampleifjudgesarecomplicitinviolationofproperty
rightsorletoffanyprosecutedofficialsorpoliticianslightly.
Someoralloftheseformsofcorruptionhaveexistedinmostcountriesand
throughouthistory.2PerhapstheearliestmentionisinKautilya(alsoknownas
Chanakya)inhisArthashastra,whichwaswrittenmorethan2000yearsago.The
followingisnoteworthy:“Justasitisimpossiblenottotastethehoneyorthepoison
onthetipofthetongue,soitisimpossibleforagovernmentservantnottoeatupat
leastpartoftheking’srevenue.Justasafishmovingunderwatercannotpossibly
befoundouteitherasdrinkingornotdrinkingwater,soservantsemployedin
governmentworkcannotbefoundoutwhiletakingmoneyforthemselves.”
(Kautilya,1992[translation],chapterIX).Thisnicelycapturesboththetemptation
ofofficialswhohavethepowertocreateordistributeeconomicrents,andthe
difficultyofdetectingtheircorruptactions.
ActuallymanyofKautilya’sremarkspertaintoembezzlementfromthestate
treasury,whichwemayormaynotregardascorruption.Mungiu-Pippidi(2016,
p.63)observesthesameaboutEuropeinthemiddleagesunderfeudalismand
monarchy.Herexplanationisasfollows.Mostmodernsocietiesprofessethical
universalism–applicationofthesameimpersonalandimpartialrulestoeveryone–
andpracticeittovaryingdegrees.Inpre-modernEurope,“sincenoone…even
aspiredtothenormofethicaluniversalism,onecouldhardlyspeakofcorruptionin
themodernsense.”Whenallallocationisattheruler’swhim,creationand
misappropriationofrentsbyhisofficialsisatworstaprincipal-agentproblem
betweenthethoseparties.
Totheextentthatcorruptionactslikeataxonbusiness,itdetersproduction,
investmentandinnovation.Worse,totheextentthatitisataxleviedatarbitrary
ratesatthewhimofapoliticianorofficial,itcreatesuncertainty,whichhas2TherecentleakofPanamaPapersshowshowmuchcorruptionathighpoliticallevelspersists,eveninadvancedandsupposedlysqueaky-cleancountries.
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particularlyharmfuleffectsoninvestmentandgrowth.3Theeconomiccostsof
corruptionhavebeenwelldocumentedintheliteratureandneednotberecounted
here.Itissometimesarguedthatbriberyenablesfirmstogetaroundbadrulesand
regulationsandtherebyreducesthedistortionarycostsofthese.4Butthisisatbest
a“second-best”argument;itwouldbebettertogetridofthebadrules.
Corruptionbeingcomplexandmultidimensional,anti-corruptionpolicies
andstrategiesneedtotackleitsmanydifferentaspects.Atitsbroadest,thewhole
cultureofasocietyneedstochange,fromregardingcorruptionasawayoflifeto
thinkingittobeunacceptableandshamefulorevenevil.5Eachsuchcultureis
sustainedbyitsownsetofbeliefs,expectationsandactions.Thereforethedesired
changeentailsshiftingfromoneequilibriumtoanother.Thereisnocleargame-
theoreticprescriptionfordoingso.InthispaperIexamineasmallselectionofsuch
attemptsinhistory.Theyarevaried,withanequallyvariedrecordofsuccessesand
failures.Theysuggestafewnecessaryconditions,butnotaclearsetofsufficient
conditions,forshiftingawayfromacorruption-riddenequilibrium.ThenIbriefly
touchonsomerelatedtheory.IntheconcludingsectionIdrawonthehistoryand
thetheorytooffersometentativesuggestionsandlessonsforcurrentandfuture
anti-corruptionefforts.
3Seee.g.DixitandPindyck(1994).4FindingsofsomerecentresearchonRussia(MironovandZhuravskaya2016)contradictthis“greasingthegearsofbureaucracy”hypothesis.5Theconceptofcultureisevenmorecomplexthancorruption!TheMerriam-Websterdictionarydefinesitinseveralparts:a:theintegratedpatternofhumanknowledge,belief,andbehaviorthatdependsuponthecapacityforlearningandtransmittingknowledgetosucceedinggenerations;b:thecustomarybeliefs,socialforms,andmaterialtraitsofaracial,religious,orsocialgroup;alsothecharacteristicfeaturesofeverydayexistence(asdiversionsorawayoflife)sharedbypeopleinaplaceortime;c:thesetofsharedattitudes,values,goals,andpracticesthatcharacterizesaninstitutionororganization;d:thesetofvalues,conventions,orsocialpracticesassociatedwithaparticularfield,activity,orsocietalcharacteristic.(http://www.merriam-webster.com/dictionary/culture,accessedMay13,2016.)Formypurposehere,thekeyfeatureisthesharingofvalues,practices,etc.Thiscreatesthecommonknowledge–everyoneknows,everyoneknowsthateveryoneknows,andsoon–thathelpssustainequilibriaingames.
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2.EuropeandtheUnitedStates
Mungiu-Pippidi(2016,chapter3)givesagoodaccountofcorruptioninpre-
modernEuropeandthedifferentroutesbywhichdifferentcountriesreducedit.
EspeciallyinstructiveisthecaseofmanyItaliancity-states,whichtookelaborate
stepstodesigntheirgovernancesystemstopreventcorruption.They“optedfor…a
citymanager,aprofessional…Itwasmandatoryforthismanager,orpodestà,to
comefromadifferentcitysothatnolocalcandidatescouldbefavored.Hebrought
hisownstaffwithhim,includinglawenforcers,clerks,andmagistrates.Hepaida
securitydepositatthebeginningofhistermandafterhisfinalmanagementreport
wasaccepted,hereceivedhismoneybackalongwithhisfees,lessanyfines
incurred.Hewasusuallyappointedforaone-yearterm.”Hewasconfinedtoa
(luxurious)palaceinordertoinsulatehimfrombeinginfluencedbylocalfamilies.
“[N]either[he]nor[his]staffwereallowedtoperformanyactivityotherthan[the
management]service.…Continuouscontrollingandauditingwereregularfeatures
ofgovernment.…Manyservicesprovidedbythestatetoitscitizenswerefundedby
feesthatpasseddirectlyfromtheconsumertotheprovider,withoutactually
circulatinginthetreasury.”Allthispointsto“theItalians’understandingthat
conflictsofinterestareubiquitous.”(Mungiu-Pippidi2016,p.65.)Someofthese
practiceswerecopiedbycitiesandrepublicsofnorthernEurope,especiallyifthey
hadtraderelationswithItaly.However,“[b]yagradualdiminutionofpower,andby
inter-cityconquest,theofficegraduallydisappeared”(Born,1927,p.869).The
underlyingreasonsarenotclear;werethereanybasicdefectsinthesystemordid
bettergovernanceinstitutionsevolve?
Norisitclearhowandwhythesystemwasdevelopedandsustained.6
Mungiu-Pippidi(2016,pp.66-67)arguesthatthreeimportantfeaturesunderlaythe
6AncientChinahadasomewhatsimilarsystemof“guest”officialswithsupervisoryrole(Parker1903,p.234).AndPaulRomer’sideaof“chartercities”(seee.g.FullerandRomer2012)hassomeparallelswiththepodestàsystem.Thereforeabetterunderstandingofthatsystemcanhavebroaderuseandapplication.
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governancesystemofthesecity-states:participationinpublicaffairsbyahigh
proportionofthecitizenry;theconceptthatpublicofficewasnotaprivilegebuta
civicduty;andequalitybeforethelaw.
Insomecountriestheroadtocombatingcorruptionpassedthroughacrisis.
InDenmark,amajormilitarydefeatin1658wasacrisisthatforcedthenoblesto
transferpowerandprivilegestoaking.Heconsolidatedhispositionbyreplacing
aristocraticadministratorswithbureaucratshiredfromthebourgeoisie.Thesehad
toswearloyaltydirectlytotheking,andhavingnoprivatefortunes,werealso
reliantontheirpositionsfortheirincomes.Graduallythisservicebecamemore
professional,withmeritocraticappointmentsbasedonobjectivecriteriaof
education.OthermilitarydefeatsalsoledDenmark,BritainandFrancetomove
awayfromsellingofficers’commissionsinthearmedforces.(Mungiu-Pippidi2016,
pp.69-72.)Thehistoricalaccountsdonotexplainwhythereactiontothecrisesand
thesubsequentdevelopmentstookthispath,ratherthansomeotherpaththat
mighthaveledtosomeworseauthoritarianrulewithitsown,perhapsworse,form
ofcorruption.Inanycase,onehesitatestorecommenddefeatinwarasawayto
improvegovernance!
InBritainandFrance,manyreformsintheappointmentandfunctioningof
publicadministrationfollowedrevolutions:theGloriousRevolutionof1688inthe
formerandthebloodieroneinFranceacenturylater.However,theprocesslasted
manydecades.Britaininmid-andlate18thcenturywasregardedashighlycorrupt,
bothbyBritishthinkersandbyAmericanfightersforindependenceandframersof
theconstitution(Teachout2014,chapter2).Thepathofrevolutionistooriskyand
tooslowtoserveasananti-corruptionpolicy,hardlytoberecommendedtotoday’s
Asian,AfricanandLatinAmericancountries.
IntheUnitedStates,corruptionwaswidespreadinmid-19thcentury.The
economyandtheroleofgovernmentwerebothexpandingrapidly;thatcreated
opportunitiesandincentivesforallformsofcorruption.Butitdeclinedinsome
quiterapidspurtsfrom1870to1920.Howdidthishappen,anddoesitholdany
lessonsfortoday’santi-corruptionefforts?Wefindusefuldescriptionsandanalyses
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inabookeditedbyGlaeserandGoldin(2006).7Theyidentify,notonedefinitive
answer,butseveralactionsandmovementsthatcontributedtotheoutcome.
Theyrecognizethreedistincttheoriesofinstitutionalchange.First,asocial
welfaremaximizingpersonorpartyorcoalitioncomeintopowerandenactand
enforcethenecessaryreforms.Second,powerfulspecialinterestsfindittotheir
benefittoreducecorruptionandinfluencepolicymakerstobringthisabout.Third,
politicalentrepreneursmanipulatepublicopinionandtoolsofgovernmenttoward
reform.Theyfindinstanceswhereeachofthethreeplayedapart.
Theriseofanindependentpressandinvestigativejournalismprovedvery
important.Thisinturnwaslinkedtorisingstandardsofliteracyinthepopulation,
andtothedecreaseinthecostsofcommunicationandtransportfollowingthe
spreadofthetelegraphandofrailways.Newspaperscouldbedeliveredpromptlyto
muchlargerreaderships.Theresultingeconomiesofscalemadeitpossibleforthe
presstobefreeoftheneedtoplacatepoliticiansandseekpatronage.Thesechanges
alsointeractedpositivelywiththeriseoftheProgressiveMovementinpolitics.
Producerinterestshaveoftencapturedtheregulatoryprocessandagencies
undervariouspretextsofappealingtoconsumerinterests.Thismayhavehappened
inworkplacesafetyregulations,whichweresupportedbylargemanufacturing
firmstoraisethecostsanddetersmallerfirms.Whenopportunitiestoderegulate
arose,aby-productwastheirroleasanti-corruptionweapons.Forexample,
reductionincharteringrequirementsofNewYorkbanksinthelate1830sincreased
competition.
Corruptionintheprovisionofpublicrelief,welfareandunemployment
compensationtooktheformofclientelismpracticedbylocalpoliticalparty
machines.Movingthesefunctionstothefederallevelandbasingbenefitson
objectivecriteriareducedthisproblem,especiallybecausetheRoosevelt
administrationneededtoacquireandmaintainareputationforefficiencyand
credibilityinthefaceofpoliticaloppositionthatwouldhaveexploitedanyevidence
7Foranarrativeaccountoveralongerspanoftime,togetherwithanargumentforabroaddefinitionofcorruption,namelysystemicuseofpublicpowertoserveprivateendsinsteadofthepublicgood,seeTeachout(2014).
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ofcorruption.Thisobservationrunscountertothebelieffrequentlyassertedthat
“empowerment,”placingthehandlingofprojectsandbenefitsinthehandsoflocal
governments,willreducecorruption.
Politicalcompetitionhelped,butcorruptpoliticianswereoftenableto
remaininpoweronthebasisofethnicorotherfactionalsupport.Anotoriouscase
inpointwasJamesMichaelCurley,whoremainedmayorofBostonformanyyears
byappealingtoIrish-Catholicjingoism.Hewasdefeatedonlywhenpolitical
challengersemergedwithacleanimagebutthesameHibernianism.
ThusthedeclineofcorruptionintheUnitedStateshadmultiplecauses.Some
weretop-down,othersbottom-up.Somewereexplicitlytargetedtocombat
corruption;otherswereapartoranincidentalaspectofmovementsaimingtoclean
upotherdimensionsofthesocietyandtheeconomy.Therewasundoubtedlysome
synergybetweenthemultipleforcesactingtowardthesamegoal,buttheredoesnot
seemtohavebeenmuchexplicitcoalition-buildingorcoordinationbetweenthem.It
isnotclearthattheinterestsoftheemergingnewspaperindustrywouldbealigned
inexposingcorruption.Investigativejournalistsprobablybenefitedfromdoingso,
butownersmighthavebeenonthesideofthestatusquo.Thusthereductionin
corruptionseemstohavebeenafortuitouscombinationofsynergyofreforming
forcesandgoodluck.
Evenwithalltheforcesofimprovingeducationandtechnology,thepress,
politicalmovementsandcompetitionoperatingintherightdirection,ittookseveral
decadesforcorruptionintheUnitedStatestofalltorelativelylowlevels.Andeven
nowthecountrydoesnotrankveryhighlyforbeingcorruption-freeamongthe
world’sadvancedeconomies;seeTable1.Thisisacautionarylessonfordeveloping
countriesandtransitioneconomiesinthe21stcenturythataretryingtoreduce
corruptionmuchmorerapidly.
3.HongKongandSingapore
AmoreoptimisticperspectivecomesfromSingaporeandHongKong,bothof
whichhadhighlevelsofcorruptionandaculturethataccepteditasafactoflife,and
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turnedthisaroundrapidlyandthoroughly.Todaybothcountriesrankveryhigh,
betterthanmanywesterncountries.Table1showssomesuchcomparisons.The
secondcolumnshowstheWorldBank’s2014WorldGovernanceIndicatorsfor
“Controlofcorruption”(labeledWB-WGI-CC2014inthetable),andthethird
columnshowsTransparencyInternational’s2015“Corruptionperceptionindex”
(TI-CPI2015).Ineachcase100isbestand0wouldbeworst.Nocountryattains
100,butitisamusingtonotehowthingshavechangedsinceShakespeare’stime–
nowalmostnothingisrotteninthestateofDenmark.
TABLE1:Cross-countrycomparisonsofcorruption
Country WB-WGI-CC2014 TI-CPI2015
Singapore 97.12 85
HongKong 92.31 75
Denmark 99.52 91
Germany 94.71 81
UnitedKingdom 92.79 81
UnitedStates 89.42 76
Italy 55.29 44
Howwasthisturnaroundachieved?Ineachcase,thewake-upcallresulted
fromabigscandal.Thereaftertwotooksomewhatdifferentapproachesbutthe
ultimateandexplicitaimwastochangethewholeequilibrium.
CorruptionwasprevalentinSingapore’sadministrationandpoliceforcefor
almostacenturyofBritishcolonialadministration;attemptstocounteritwere
weakandineffective.8ThesituationbecameevenworseduringtheJapanese
occupationinWorldWarII.Thebigscandalcamein1951,whenthepoliceforce
8MyaccountisbasedonQuah(2007).
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wasfoundtobeinvolvedinanopiumhijackingoperation.Thisledtothe
establishmentofaCorruptPracticesInvestigationBureau(CPIB),whichwas
independentofthepoliceforce.Itgoteffectivebackingfromthetop.Itspowers
wereincreasedafterself-governmentin1959whenLeeKwan-YewbecamePrime
Minister;infacttheCPIBcametobelocateddirectlyinhisofficeandanswerable
onlytohim(Quah2007,p.23).Thestrategywas“tominimizeorremovethe
conditionsofboththeincentivesandopportunitiesthatmakeindividualcorrupt
behaviorirresistible”(Quah2007,p.17).
Thestrategyontheincentivesideseemstohaveconsistedofimprovingthe
detectionprocessandimposingmuchstricterpenaltiesuponconviction(Quah
2007,pp.20-21).Astheeconomygrew,civilservicesalarieswereimproved
substantially,creatingonemoreweaponontheincentiveside,namelyefficiency
wages(Quah2007,pp.27-29).Asforopportunities,thegovernment’sgeneralpro-
marketeconomicpoliciesmayhavereducedthemagnitudeofrentsavailable.
ExceptforspeechesandstatementsbythePrimeMinisteremphasizingthe
importanceofbeingfreefromcorruption,thisstrategydoesnotseemtohavebeen
backedupbymucheducationalorpublicityefforts;infactsurveyspointtothisas
oneweaknessoftheCPIB(Quah2007,pp.33-34).However,overtimethestrictand
impartialenforcementseemstohavesufficedtochangethepublicperceptionand
culturetothepointwherecorruptionisregardedasunacceptable.
HongKongshowssomesimilaritiesbutalsoimportantdifferences.9The
BritishcolonialandJapaneseoccupationhistoriesweresimilar,andrapideconomic
changesandlowcivilservicesalariesafterWorldWarIIsustainedmuchcorruption
anditsacceptancethroughthe1960s.Therewasananti-corruptionunitinthe
policeforce,butitwasitselfapartnerinthecrimes.Thejolttothisprevailing
cultureagaincamefromabigscandal.ABritishseniorpoliceofficerPeterGodber,
whohadamassedafortuneof4.3millionHongKongdollars,cameunder9TheICACwebsitehttp://www.icac.org.hk/en/about_icac/bh/givesagoodaccount.SeealsotheWikipediaarticle:https://en.wikipedia.org/wiki/Independent_Commission_Against_Corruption_%28Hong_Kong%29Somerecentdevelopmentsarerecountedinanewsarticlehttp://www.cnn.com/2013/10/15/world/asia/china-hong-kong-corruption/
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investigationin1973andfledtotheUK.(Hewaslaterextraditedback,tried,and
convicted.)ThepublicoutcryledtotheestablishmentoftheIndependent
CommissionAgainstCorruption(ICAC).IthadstrongbackingfromanewGovernor,
MurrayMacLehose,andwasanswerabledirectlytohim.Itsstrategiescombined
whistleblower-protection,amnestiesandforcedretirementsforsmalleroffenses,
andsomeprominenttrialsandsentencesforbiggerones.Itgraduallyachieveda
reputationforbeingcleanandeffective.Todayithasastaffofmorethan1,000
dedicatedprofessionals.Alongtheway,ithadtoovercomestrongresistance
(includingphysicalconfrontationsandpunch-ups!)fromcorruptelementsinthe
policeforce.Italsohadtoensureitsownintegrity,quicklytacklinganyscandals
withinICAC,evenonesunrelatedtocorruption.Itsactivitieswerehelpedbysome
policiessuchaslegalizationofoff-trackbetting,whichreducedthescopefor
corruption.
TheICACcombinestheseenforcementstrategieswithonesfocusingon
publicrelationsandeducation.Itsofficersactivelyreachouttocompaniesand
organizationstohelpthemputintoplacesystemsandprocedurestoprevent
corruptpracticestakinghold.Italsoconductspublicity,andeducationstartingat
thekindergartenlevel:childrenaretoldstoriesandshownfilmswherecharacters
faceethicaldilemmasandthehonestoneswin.ToquotefromtheCNNnewsstory
citedinfootnote5above:“Wedon'tteachthemaboutlawsbutweteachthemabout
values,”saidMonicaYu,executivedirectoroftheHongKongEthicsDevelopment
Centre,anICACdivision.
HongKongenjoysoneotheradvantage:itslargelyfreeandopeneconomy
createsmuchlessrentatthedisposalofofficials,therebyreducingthetemptation
forcorruption.Legalizationofoff-trackbettingwasanimportantstepinthis
direction.However,landsalesandpublichousingareexceptionstothegeneralrule,
andcorruptionscandalsinthesedoeruptfromtimetotimedespitetheICAC’s
strongenforcementefforts.
BothHongKongandSingaporehadtheadvantageofbeingsmallcity-states
wherepowerwaseffectivelycentralized,andgettingstrongbackingfromthetop
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forthedrivetoeliminatecorruption.InSingaporethisseemstohavesufficed;in
HongKongabroaderefforttochangethesociety’sculturehelpedtheprocess.
Onefurtherremarkofcautionshouldbeaddedtothisaccount.Although
thesestatesgethighratingsforfreedomfrombriberyintheirpublicadministration,
theyarefarfrombeingopenaccesssocieties:insidersgetfavoredtreatmentand
accesstorents,withoutexplicitquidproquobribes.InTheEconomist’sindexof
cronycapitalismSingaporestandsverypoorlyatNo.4(therankinggoesfrom
worsttobest),China(whichincludesHongKonginthisindex)isnotmuchbetter,at
No.11.10UsingthebroaddefinitionadvocatedbyTeachout(2014)ortheconceptof
grandcorruption,perhapstheyshouldranklowerinthecorruptionindexes,and
theirtransformationsregardedasmuchlesssuccessful.
4.Italytoday
SubstantialcorruptionofallkindspersistsinmodernItaly.Itsscoreand
rankinginTable1areverypoorincomparisonwiththeotherEuropeancountries,
HongKongandSingapore.Inanotherunfavorablecomparison,Transparency
InternationalgivesItalythesamescoreasLesotho,Senegal,andSouthAfrica.But
thissectionisaboutasomewhatdifferentformofcorruption,namelyextortionby
theSicilianmafiafromlocalbusinesses.Thisisnotstrictlywithinthedefinitionof
corruptionasthemafiadoesnotholdapublicofficethatitexploitsforprivategain.
Butthedifferenceisonlyofdegree,notkind,betweenextortionunderathreatof
burningdownastoreandextortionunderathreatofdenyingtheownersome
licenseorcertificationcrucialforstayinginbusiness.Also,perhapsthedifference
betweenofficialandprivateextortionisminorinthiscontextbecausethemafiahas
enjoyedclosepoliticalconnections.Thebiggerdifferenceisthatthedrivetocombat
extortioninthisinstanceisalmostentirelyabottomupsocialmovement.
Pizzoisthenameforprotectionmoneythemafiaextortsfromlocal
businesses;thiswasbelievedtoinvolve160,000businessesandtoyieldthemafia
10“Thepartywindsdown”,TheEconomist,May7,2016.
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morethan10billioneurosperyear(Superti,2009).Battistietal.(2015,p.3)report
thattheextortionpaymentsmayreach40%ofSicilianfirms’grossprofits.
In2004aninitiallyanonymousgroupofyoungpeoplestartedamovement
theycalledAddiopizzotofightthemafia’sextortion.11Theybeganbyplasteringall
overPalermosmallstickersthatread“uninteropopolochepagailpizzoe’un
popolosenzadignitá”(“anentirepopulationthatpaysthepizzoisapopulation
withoutdignity”).Thiswasaclever“counter-hijacking”oftheconceptof“dignity”,
whichtheMafiahadpreviouslyhijackedtoconnoteconformingtotheMafia’srules
andtoitscodeofsilence(VaccaroandPalazzo2015,pp.1079,1083.)
Ayearlaterthegroupsheditsanonymityandlaunchedathree-folddrive.
First,theyrecruitbusinessesthatpromisenottopaypizzo;thesegetcertificatesand
bannerstopostontheirstorefronts.Theyinvestigatememberswhomighthave
secretlypaidpizzo,andhaveexpelledafewsuch“double-game”players.(Battistiet
al2015,p.7.)Second,theyseektoconvinceconsumerstopatronizeonlythose
businessesthatparticipateinthisventure.Theyalsoorganizepubliceventsand
educationprogramsinschoolstodiscusstheMafiaandtheharmitcauses.(Vaccaro
andPalazzo2015,p.1080.)Morerecentlytheyhavestartedventureslikepizzo-free
tourism,organizedtoursthatuseonlyAddiopizzo-certifiedhotels,restaurantsand
travel(Superti2009,p.9).
In2012“Addiopizzocouldcountonthesupportof56activists,10,143
consumers,154schools,29localassociations(e.g.,theSicilianbranchof
Confindustria,thehighlyinfluentialConfederationofItalianIndustry),andmore
than700affiliatedfirms(over10%oftheentrepreneursintheProvinceof
Palermo).”(VaccaroandPalazzo2015,p.1080.)Thisisasmallbutsignificantdent
inthepoweroftheMafia.Itisallthemoreremarkablebecausethemovementhas
nothadmuchsupport,letaloneleadership,fromthepoliticalelite.However,ithas
benefitedfromsomesupportfromthepolice,atleastthechiefandotherhigh-level
officials(Superti2009,p.7).
11ThefirstscholarlystudyofAddiopizzopublishedinEnglishknowntomeisSuperti(2009).MorerecentandmoredetailedquantitativeandsociologicalstudiesincludeBattistietal(2015)andVaccaroandPalazzo(2015).
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Superti(2009,pp.4-5)identifiesresistingtheMafiaasacollectiveaction
problem.AnindividualfirmorstoreishelplesswhentheMafiademandspizzo;the
businesswouldbeburneddown,ortheproprietorkilled.Butcollectivelythe
victimshavepower.12“Retaliationwould…havethepotentialtocreateunrestinthe
population.…Moreover,byattackingrepresentativesofapopulargrassroots
movementthecriminalorganizationmighttransformthevictimsintonewpopular
heroes,furtherfertilizingtheenvironmentforageneraluprising.Activediscontent
amongPalermitanswoulddamagetheMafia’sinterestsmorethanthecurrent
decreaseinprofitfromAddiopizzo’scampaign.”(Superti2009,p.5.)Toreinforce
this,themovementkeepsthenamesofitsleadersandmemberbusinessespublic
andvisible:“sincemediacoverageofanattackonAddiopizzowouldbeasgreatas
theorganization’scurrentpopularityandwouldbringthesituationtotheforefront
oftheentirepopulation’smind.ThisisnotintheinterestsoftheMafia.”(Superti,
p.8.)Indeed,secretinterceptionsoftelephoneconversationshaveshownMafiosi
rantingagainstAddiopizzo,buttheyhavegenerallyrefrainedfromviolenceagainst
volunteersofthemovementorbusinessesadoptingthecredo.“CosaNostrachiefs
appeartounderstandthatwithpublicopinionsolidlybehindthegroup,targetingits
volunteerscouldbackfiredisastrously.”13
Addiopizzohasthususedgoodstrategiesinmobilizingpublicopinion,
buildingcoalitions,andstartingcollectiveactionamongbusinessesandconsumers.
However,itisfartoosoontodeclarevictory.Themovementmustovercomemany
difficultiesifitistomaintainandexpanditsfoothold.Itssystemofdetectingand
expelling“double-gamers”whopledgenottopaypizzobutdosoinsecretneedsto
beimproved.Ithasyettodemonstratewhetherandhowitcansurvivearetaliatory
lashingoutbytheMafia.Superti(2009,p.9)identifiessomeotherweaknesses.The12AsimilarphilosophymotivatesIndia’s“zero-rupeenote”movementtocombatpettybribery.Whenacoporofficialasksfor100or500rupees,offeringthisnoteinsteadofmerelyrefusing“showsaperson’saffiliationwithalargermovement.”(“Smallchange,”TheEconomist,December7,2013.)13Seehttp://www.newsweek.com/2014/09/26/addiopizzo-grassroots-campaign-making-life-hell-sicilian-mafia-271064.html.
15
movementhassofarreliedonidealism,andaManicheandichotomybetweengood
andevil.ItisnotclearwhetherthiscanscaleupbeyondthelimitedcontextofSicily.
Norisitclearwhetherthemovementcanincludepoliceandpoliticalelitesinits
broadsocialalliance.
Finally,ithastoovercomeunderstandablehesitancetojoinonpartof
businesses.Battistietal(2015)conductastatisticalanalysisoffirms’decisionsin
thismatter.Theyfindseveralcorrelatesthatmakeintuitivesense.Olderfirms,and
firmswithmorephysicalassets,arelesslikelytojoin;theyhavemoretolosefrom
anyMafiaretaliation.Also,theymayhavegreaterneedforcredit,andbanksseemto
restrictcredittoAddiopizzomembers,perceivinghigherrisks(Battistietal2015,
p.7).Firmswithmoreemployeesandoneswithhigherlevelsofhumancapital,and
oneslocatedindistrictswithhigherlevelsofsocio-economicdevelopment
(includinghighereducationlevels),aremorelikelytojoin;theyareprobablymore
influencedbythesocialcoalitionthatthemovementhasbuilt.Thispointstoa
hopefulfuture;aseconomicdevelopmentproceedsinSicily,perhapsitselfassisted
byAddiopizzo’sinitialsuccess,itmaysetinmotionavirtuouscircleofhigher
education,humancapital,socio-economicdevelopment,andentryofnewfirms,
leadingtogreaterparticipationinAddiopizzo,andinturnfurtheraccelerating
growth.
Andifaprivatelyorganizedsocietalcoalitioncannotchupsomesuccess
againsttheSicilianMafia,similarcollectiveactionshouldbeabletofaceuptomere
bureaucratsandpoliticians!
5.Anti-corruptionagenciesacrosscountries
Manycountrieshaveestablishedanti-corruptionagencies(ACAs)invarious
forms,giventhemdifferingmandatesandpowers,andobtainedequallymixed
results.Recanatini(2011)offersagoodsummaryofthiscross-countryevidence,
andsomeinitialpolicyrecommendations.
Shestartsbylisting“thefourtraditionalanti-corruptionfunctions”andthe
proportionsofACAsassignedtocoverthese:“prevention,includingeducationand
16
publicawareness(82percent);investigationofcorruptioncases(78percent);
prosecutionofcorruptioncases(58percent);andpolicy,researchandcoordination
(52percent).”AsmostACAsdonothavesoleorcomprehensiveresponsibilitiesfor
allfour,theymustcoordinatewithotherpublicinstitutions:“[those]responsiblefor
investigationandprosecution…,theauditauthority,theombudsman,thefinancial
intelligenceunit,taxauthorities,regulatoryauthorities,ministriesandagencies
acrossthepublicsector.”PropercoordinationrequiresaclearmandatefortheACA,
andwell-specifiedenablinglegislation.
ManyACAsfaceseriousbudgetaryandstaffingproblems;insomecases
politicianscuttheirbudgetsduringhigh-profileinvestigations.Politicianscanalso
affecttheindependenceandimpartialityoftheworkofACAsthroughtheirpowers
ofappointingandreappointingtheirleadership.
ThebestACAsmaintaingoodcommunicationandinformationlinkswiththe
publicthroughtheirmediaandwebstrategies,andestablishpartnershipswith
publicsectorandcivilsocietyorganizations.Almostallofthemarerequiredtoissue
annualreportslistinginvestigationsconductedandconcluded.
ThusweseesomefactorsthatdetermineanACA’seffectiveness:(1)political
supportfromthecountry’sleadership,especiallyinappointinggoodheadsforthe
agencyandgivingthemsecuretermsoftenure,(2)aclearandcomprehensive
frameworkoflegislationthatdelineatesitspowersandrelationshipswithother
policyagencies,(3)guaranteeofadequateresourcesandindependence,and(4)
accountabilityandrelationshipwiththecitizenryandthemedia.
ApublicpolicyresearchprogramatPrincetonUniversityconducteda
comparativecasestudyofACAsineightcountries,Botswana,Croatia,Ghana,
Indonesia,Latvia,Lithuania,Mauritius,andSlovenia(InnovationsforSuccessful
Societies(ISS),2014).Thedifferentcircumstancesinthesecountries,thedifferent
strategiespursuedbytheagencies,andtheirdifferentdegreesofsuccess,have
yieldedsomeusefulsuggestiveinsights,eventhoughtherearetoomanyvariables
17
andtoofewdatapointsforanydefinitivestatisticallysignificantconclusions.14The
studyemphasizedfour“keylessons”:
“1.Stronginternalcontrolsandaccountabilitymechanisms
playimportantrolesinpreservingintegrityandprotectingACAsfrom
beingsubvertedordiscredited.
2.ACAsoftencanoutflanktheirantagonistsbybuilding
allianceswithcitizens,stateinstitutions,media,civilsociety,and
internationalactors.
3.Preventiveeffortsthatdisruptcorruptionnetworks,
togetherwitheducationaleffortsthatreshapepublicnormsand
expectations,canenableanACAtomakelong-termgainswithout
triggeringoverwhelmingpushback.
4.Undercertainconditions,ACAspursuinghigh-level
corruptioncanovercomeretaliationbycarefullymanagingtiming,
resources,andexternalsupport.”
ObservethatallfourpertaintotheneedforACAstodeter,counter,and
overcomeoppositionfromthebeneficiariesofcorruption.Theopposition’stactics
rangefrommaligningACApersonnel,tobehind-the-sceneslobbying,toopen
legislativebattles.Tocounterthis,ACAshavetodeploymultiplestrategiesand
balancesometradeoffsacrossthesestrategies.
First,ACAsshouldstrivenottoleavethemselvesopentovalidcriticisms.
Theyshouldideallyhavehighlyqualifiedandcompetentstaffswithtopintegrity,
cohesion,andmorale.Whenstartingfromscratch,thisrequirestimetobuild,andin
themeantimetheagencycanbecriticizedfordoingnothing,ashappenedtotheone
inIndonesia.Iftheagencyrushestorecruitandstartwithsomehigh-profilecasesto
showitsactivism,thatcancreateitsowninternalproblemsandscandals,as
14OneproblemwiththestudyisthatalleightACAsinthesample“wereconsideredbyexpertstoperformwellrelativetopeeragencies.”Understandingdeterminantsofsuccessrequiresasamplewithsufficientlymanyandvariedinstancesoffailure!
18
happenedtotheoneinLatvia.Ifandwhensuchcriticismshithome,itisessentialto
improvetheproceduresandrecoverfromthesetbackquickly,asbothdid.
Thehigh-profilestrategygalvanizespublicopinion,butalsoattractsstrong
politicalopposition.Thelow-profilestrategymutessuchopposition,butmayalso
renderthepublicapathetictowardtheanti-corruptionmovement,andlullthe
corruptofficialsintoatruesenseofsecurity!
TocounterthepowerfulelitewhostrategizetoweakenACAs,theagencies
mustbuildcoalitionswithmedia,civilsociety,andtheinternationalcommunity,as
wellassympatheticelementsinpoliticalpartiesandotheradministrativeagencies.
Indonesia’sKPKdidthiswell;whenthegovernmenttriedtoreduceitspowersand
arrestitscommissioners,theiralliesincitizens’movementsheldmassprotestsand
foreigndiplomatslobbiedbehindthescenesontheirbehalf.Suchsupportisbest
wonbyacquiringareputationforboldness,impartialityandcompetence,but
shouldbeenhancedbygoodcommunicationandpublicrelations.TheACAsof
MauritiusandLithuaniafailedtocultivatejournalistsandcivilsocietygroups;they
sufferedfrompublicmisperceptionsanddistrustdespiteobjectivelyreasonable
performanceattheirtasks.Ifthecountrydoesnothaveanti-corruptioncivilsociety
groups,theACAcanitselffostertheirdevelopment,astheoneinGhanadid.
TwolaterISScasestudies(2015a,b)alsoillustratethevalueofmaintaining
goodpublicrelations.InSlovakia,anopendatainitiativewashavingsomesuccess
untilachangeofgovernmentin2012,whenitlostsupportofthenewPrime
Minister’soffice.ByworkingwithNGOactivists,theofficeinchargeoftheinitiative
wasabletocontinueandevenexpanditsscope.InElSalvador,integritypacts
servedtofocuscollaborationbetweenthegovernment,theprivatesector,andcivil
society,andcountersomeinternaloppositionfromthebureaucracy,toreduce
corruptionandimprovethecultureattheMinistryofPublicWorks.
TheACA’sproceduresshouldalsobedesignedtominimizetheriskoffalse
accusationsandpublicdistrust.Transparencyisimportant,asareclearguidelines
andpromptandfullhandlingofcomplaints.AsaformercommissionerofHong
Kong’sICACsaid:“Ifacitizenhasscreweduphiscouragetocomeandtellyou
19
something,ifyoutreathimorhiscomplaintasinsignificant,hewillnevercometo
youagain.You’velosthim,andyou’veprobablylostallhisfriendsaswell.”
Preventiveandeducationalefforts,bytheACAsthemselvesorinalliance
withothersocialorganizations,areveryhelpful,andalsohardforopponentsto
opposeopenly.High-profileinvestigationsandlow-profileeducationhaveproved
complementaryinchangingpublicperceptionsandculture.
Someagenciespubliclyrankedgovernmentoffices;“Nohead…wouldwant
theirministrytobelabeledasthemostcorruptministry,”saidRoseSeretse,headof
Botswana’sDCEC.InthenextsectionIsuggestasimilarrankingschemeonthe
“supplyside”ofcorruption,toratefirmsbytheircleanpracticesinthisregard.
IncontrasttotherelativelyoptimisticconclusionsoftheISSreport,Heeks
andMathisen(2012)flatlydeclare:“Mostanti-corruptioninitiativesindeveloping
countriesfail.”Theyattributethistoalargegapbetweendesignandreality,i.e.abig
mismatchbetweenexpectationsbuiltintothedesignandrealitiesofground-level
contextofimplementation.Theyrecommend“amoveawayfromgranddesigns
developedbytechnocratstoafocusoninterventionsthathavelocalfitandstrategic
fit.”
ThekeydifficultytheyidentifyisthesameasthatemphasizedbytheISS
report:“fewifanyoneinapositionofpowerandbenefitingfromcorruptionwould
liketoseetheopportunitiesforextractionreduced.”Thestrategyandtacticsofthe
oppositiondependontheirlocalpowerandcontext,andleadersofanti-corruption
initiativesmustcounter-strategizeaccordingly.15TheISSreportoffersasomewhat
selectivesampleofACAsthatsuccessfullydidthis;HeeksandMathisenlookat
severalothersthatdidnot.
InherdiscussionofHeeksandMathisen,Mungiu-Pippidi(2015,pp.208-9)
suggestsamorefundamentaldifferenceofphilosophies.Shearguesthatmany
Westernscholarsanddonorstakeapuristline:corruptionisadiseaseorsocial
15Unfortunatelyanti-corruptionmovementsandtheirleadersareoftendrivenpurelybyidealismandenthusiasm;theylackorganizationalandstrategicskills.AnnaHazare’sLokpal(ombudsman)movementandArvindKejriwal’sAamAadmiPartyinIndiaaregoodexamplesofthis.
20
pathology,andtheonlysolutionistocureit.Thereforetheyregardpartialprogress
asessentiallynoprogress.Shebelievesthiszero-toleranceapproachismistaken:“in
developingcountriescorruptionisnotadeviation,butratherthenorm.”Thetaskis
thentochangebeliefsandthenorms,whichentailschangingthewholeequilibrium.
Thisisalwaysaslowprocess,andpartialsuccessshouldnotbedismissed.
6.SomeTheory:Prisoner’sDilemmaorAssurancegame?
PrimeMinisterLeeKuanYewinSingaporeandGovernorMurrayMacLehose
inHongKongprovidedstrongleadershipandbackingforanti-corruptionlaws,
agenciesandactionsinthosecountries.Butwecannotgenerallyexpectpoliticians
andbureaucratstodoso;afterall,theyarethemainbeneficiariesinacorrupt
system.Rather,weshouldexpectthemtopasslawsthatareweakandhave
loopholes,toenforcethemasslowlyandfeeblyaspossible,andtoobstructthe
workingsofanyindependentanti-corruptionagencytheymayhavebeencompelled
tocreate.Coalitionsofthevictimsofcorruption,liketheAddiopizzomovement,
havestrongerincentivestofightit.Theirmainproblemisorganizingcollective
action,andgame-theoreticanalysiscanhelpusunderstandtheissues.
Forthebusinesscommunityasawhole,mostformsofcorruptioncreatea
gameofprisoner’sdilemma.Inbiddingforgovernmentcontractsorlicenses,each
firmstandstogetabetterdealbyofferingahigherbribe.Butwhentheyalldothis,
theyaremerelytransferringmoreoftheirprofitstothebureaucratsorpoliticians
whohavethepowertoawardthesefavors,sointheaggregatetheylose.Worse,to
theextentthatcorruptionactslikeatax,andworsebecauseitisoftenleviedat
uncertainandarbitraryrates,itdampensincentivestoinvestandinnovate,sothe
dynamiclossesexceedthepurestatictransfercosts.Thissituation,wherepursuitof
individualincentivesleadstoacollectivelybadoutcome,istheclassicPrisoner’s
Dilemmagame.
Somearguethatbusinesswillsimplypassonsuchataxtoconsumers
throughhigherprices.Butsuchrecoverywillingeneralbemuchlessthanfull.Ifthe
bribeisforapermittooperatethebusinessperse,thatisafixedcost,anddoesnot
21
alterthepricingdecision.Anymarketpowerwouldalreadyhavebeenexercisedto
thesameextentandreflectedinpricesevenwithouttheexistenceofabribe,sothe
bribeisapuresubtractionfromprofit.Abribethatraisesmarginalcostwillimpact
prices.Butiftheoriginalpricewasoptimallychosentomaximizeprofit,theadded
costofthebribecanonlylowerthenetprofit.Insomeunusualcircumstances,
highercostcanactasacollusion-facilitatingdeviceforoligopolists;seeSeade
(1983)andDixit(1986).Butsuchanindustrycansurelyfindsimplerandmore
legalwaystoraiseitscoststhancorruption!Forexample,itcansupportregulation
thatrequiresallfirmsintheindustrytospendtoachievesomegenerallyagreed
sociallydesirablegoalsuchasreducingpollutionorcarbonemissions.
Thereareformsofgrandcorruptionwherebusinesscancolludewith
politiciansorregulatorstocreatemonopoliesfortheirmutualbenefitatthe
expenseofthepublic,andthefollowinganalysisdoesnotapplytothese.However,if
otherformsofcorruptionaretackled,thatcancontributetochangesinoverall
cultureandattitudes,whichinturnmakethisformofcorruptiondifficulttosustain.
Gametheoryhasyieldedseveralwaysthepartiestoaprisoner’sdilemma
canresolveit.Thetwomostpertinentinourcontextare(1)repeatedinteraction
and(2)multipleinteractionsinvolvingdifferentissues.Ifmembersofthebusiness
communityneedtodealwithoneanotherovertimeonseveralmatterssuchas
supply,subcontracting,tradecredit,finance,andmarketing,thentheycancreatea
systemofrewardsforcooperativebehaviorandpenaltiesforselfishdeviations.To
combatcorruption,thecommunityshouldestablishanormthatnomembershall
obtainanadvantagebybriberyinmattersofgovernmentlicensesorcontracts.In
mattersofdealsamongthemselves,eachmembershouldgivepreferencetothose
whoareknowntoadheretothenorm,andavoiddealingwiththosewhoareknown
tohaveviolatedit.Afirmthatisknowntobeanegregiousbriberwillbeostracized
byothers,andtherebyeffectivelyputoutofbusiness.Sinceitisalmostimpossible
forafirmtooperatewithoutanybusinessdealswithothersinanymoderately
complexeconomy,theprospectofsuchostracismshouldsufficetoensure
adherencetothenorm.
22
Suchself-governinginstitutionsbasedonnormsandsanctionshaveoperated
inseveralbusinesscommunitiestoachieveadherencetocontractsamongmembers.
AvnerGreif’sstudyofagroupofJewishtradersinNorthAfricanearly1000years
ago(Greif1993),andLisaBernstein’sstudiesofcontemporarydiamondmerchants
andcottontraders(Bernstein1992,2001)arewellknown.Dixit(2004)constructs
mathematicalmodelstoexplicatetheirworking.
Kingston(2008)andDixit(2015a,b)developsimilarmodelsofcommunity-
basedanti-corruptioninstitutions.Ofcoursetherigorousanalysisrevealsseveral
conditionsnecessaryforsuccessofthescheme.Thecommunitymusthavean
accuratemechanismfordetectingviolationsofthenorm,andmustbecarefulto
catch,deterandpunishfalseaccusations.Itneedssomesupportfromtheformal
stateapparatusinthatverdictsofitsadjudicationforumshouldbeacceptedandnot
double-guessedbycourtsinthesamewaythatthoseofarbitrationtribunalsare.It
mustnotbecomeaninsiders’cliquethatcartelizestheindustryanddetersnewand
innovativeentry.Itneedstogetsomelargeandhighlyrespectedbusinessesas
launchoranchormemberstoattractattentionandbyexampleinduceotherstojoin.
Itmustmaintaingoodrelationsandbuildallianceswithbroadersocialgroups,
NGOs,andmedia.Dixit(2015a,b)discussessuchissuesindetail.
Dixit(2015b)findsthatabusinesscommunityinstitutionofthiskindis
complementaryorsynergistictoanyanti-corruptioneffortsthegovernmentmay
undertake:thetwotogetheraremoreeffectivethanthesumoftheeffectsofeachon
itsown.
Othertheoretical,empiricalandexperimentalworkhasclarifiedthe
requirementsforsustainingcooperationinaprisoner’sdilemma.Perhapsthemost
importantoneisthatmembersofthegroupshouldbewillingtoparticipateinthe
prescribedpunishmentofacheater.Ifthecheaterisbeingostracized,hemayoffer
anextratemptingrewardtoanyfirmthatbreaksthebananddealswithhim.
However,howwouldthisfirmknowthatthecheaterwouldnotcheatitalso?Infact,
thecheaterisalreadyostracizedandotherfirmsarenotdealingwithhim,sohehas
nothingworsetofear.Afirmthatdealswithhimwouldhavetogivehimagreater
shareoftherenttokeephimhonestinanongoingrelationship.Thereforeitis
23
actuallymorecostlytodealwithanostracizedcheaterthantodealwithafirmthat
hasacleanhistory.Greif(1993,p.535)givesaformalproofofthisinProposition2.
Willingnesstoparticipateinpunishmentofacheatertosustainagoodsocial
outcome,evenataprivatecosttooneself,alsoexists.Evidencehasmountedfor
such“altruisticpunishment”(FehrandGächter2002),andithasbeenfoundtobe
ingrainedinsomebasicneuralcircuitryofthebrain(DeQuervainetal.2004).Of
coursewealsoneedthememberstounderstandthatothershavethiswillingnessto
punish,andthecommonunderstandingcreatedbythesociety’sculturecanhelp.
ArecentworkingpaperbyTransparencyInternational(2016)suggestsan
evenmorepromisingavenueforthebusinesscommunityinstitutiontocombat
corruption.16Itarguesthattoday’syoungpeoplewanttheeconomytohavegood
governanceandtobecorruption-free.They,especiallythesmartestamongthem,
prefertoworkforfirmsthataregoodandcleaninthisrespect.Afirmthatcredibly
pledgesandactsinanethicalmannerwillfinditeasiertoattractandretainsuch
workers,andkeepthemhappyintheirwork.Thereforeitwillenjoyhigher
productivityandlowerlaborturnoverrates.Customerswillfavorit;indeedwe
alreadyseethisinthesuccessofsomefirmslikePatagonia.Thereforebeingmore
ethicalisalsobecomingconducivetobeingmoreprofitable.
Ofcourseifmostfirmsarecorrupt,beingarareethicalstandoutdoesnotdo
muchbecausesuchafirmwillloseoutinmostaspectsoftreatmentbybureaucrats
andpoliticians.Butonceenoughfirmsstarttobeethical,therelativeadvantagewill
tipinfavorofgoodbehavior.
Inotherwords,thegamemaynotbeaprisoner’sdilemma,butonecalled
“assurance,”likedrivingontheleftversusright.Ifothercarsdriveontheleft,itisin
yourownbestinteresttodriveontheleft,butifothercarsdriveontheright,itis
bestforyoutodolikewise.Similarly,ifotherfirmsarecorruptitpaysyoutobe
corrupt,butifothersaregoodandclean,thenitisbestforyoutobelikewise.16DiscussionswithsomeprominentIndianbusinesspeopleatarecentconferenceorganizedbytheWorldBankconfirmTransparencyInternational’sclaimsabouttheprivatebenefitoftocorporationsfrombeingnon-corrupt.ExperimentalresearchofGrant(2008)alsofindsthatintrinsicprosocialmotivationhaspositiveeffectonjobperformanceandproductivity.
24
Thusassurancegameshavetwoequilibria;whichoneprevailsdependson
whatcommonknowledgeandexpectationsofothers’actionstheplayershave.Such
knowledgeandexpectationscanbecreatedandsustainedbytheoverallcultureof
thesocietyinwhichtheplayerslive;seeFootnote3onp.4above.
Inthedrivingexampleitmaynotmattermuchwhichofthetwoequilibria
prevails,butinthecaseofbusinessconducttheequilibriumwithgoodbehavioris
betterforeveryone.Thequestionishowthebusinesscommunitycanmovefroma
prevailingbadequilibriumtothegoodone.
Thisisnoteasy,butitiseasierthanresolvingaprisoner’sdilemma.Toget
theprocessstarted,reliableinformationabouttheidentityofgoodandcleanfirms
shouldbemadeavailable,sothesmartyoungpeoplecanseekworkatthesefirms
andcansupportthemascustomers.Asthisstartstohappen,otherfirmswill
recognizetheadvantagesofbeinggoodandclean,andwillstrivetoimprovetheir
behavior.Oncethisvirtuouscirclegathersmomentum,theeventualoutcomewillbe
thepreferredequilibrium.Inotherwords,thewholesocialculturewillchangefrom
onewherecorruptionisexpectedandacceptedtoonewhereitisagainstthtenorms
ofbehaviorandunacceptable.
Thinkoftheinformation-creatingsystembyanalogywiththeMichelinstar
ratingsforrestaurants.Thereareone,twoandthreestarrestaurants.Ownersand
chefstryveryhardtoearnandkeepstars;losingastarisadisgrace.Theideaisto
createasimilarratingsystemforcompanies,withthedifferencethatintheeventual
equilibriumalmosteveryfirmwillhaveatleastonestar,whereasmostrestaurants
nevergetanyMichelinstars.
Ofcourseitiscrucialfortheratingmachineryitselftobeentirelyabove-
boardandfreefromcorruption.Forthat,itshouldbeundercontinuousscrutinyof
anindependentoversightcommitteeconsistingofrepresentativesfromdifferent
kindsandsizesofcompanies,highlyrespectedeldersinsociety,someacademics,
andsoon.
25
7.Lessonsforthefuture Thehistoricalexamplesaswellasthetheoryreviewedabovesuggestseveral
approachestocombatingcorruption.Sometrytodesigntherulesandoperationof
politicsandadministrationsothatopportunitiesandincentivesforcorruptionare
minimized.Othersfocusonenforcement,todetectandpunishthecorrupt,using
independentanti-corruptionagenciesorsimilarbodies.Somearetop-down;others
arebottom-up.Thisvarietyofmethodsproducesanequalvarietyofdegreesof
success,andthehistoricalaccountsdonotgivemuchguidanceaboutthedeeper
underlyingstructuresthatcanexplainorpredictsuccess.Buttakentogether,the
examplesandthetheorydohavesomecommonthemesandoffersometentative
suggestions–strategiestoadoptandmistakestoavoid.
First,weseetheimportanceofleadership,oratanyratesupport,from
amongthetopmosttiersofgovernment:theeliteinthecity-statesinItalywho
participatedinlaunchingandsustainingthepodestàsystem,thekingofDenmark
whogotridofthecorruptbureaucrats,LeeKuanYewwholedthetransformationof
Singapore,andsoon.Purelycitizen-ledbottom-upcoalitions,liketheAddiopizzo
movementinItaly,canachievesuccess,butitwillbelimited.Lackofsupportfrom
thetopmaybethebiggestobstacleanti-corruptionactivistsinmanyLDCswillface.
Next,inmanyinstancesdifferentgroupsandstrategiesappeartobemutual
complements:togethertheyaccomplishmorethanthesumoftheirindividual
effects.Themostsuccessfulcampaigns,liketheoneinHongKong,combinesupport
fromthetopandgoodcoalitionsatthebottom.Casestudiesofanti-corruption
agenciesinseveralcountriesshowthattheireffortshavetobalanceandcombine
differentstrategies,andchoosetherightlevelofaggressiveness,takingproper
accountofthepoliticalandsocialcontext.
Manyepisodesofanti-corruptionactionstartedwithacrisis.Althoughthe
pathfromthecrisistothechangeinthecultureofcorruptionwasnotalwaysthe
sameandoftennotverycleareveninhindsight,anti-corruptionactivistsshouldbe
alertforsuchopportunities.TheyshouldkeepinmindthefamoussayingofRahm
Emanuel(PresidentObama’sfirstChiefofStaffandlaterMayorofChicago):“Never
26
letaseriouscrisisgotowaste.AndwhatImeanbythatit'sanopportunitytodo
thingsyouthinkyoucouldnotdobefore.”
Themainobstaclefacingagroupthatseekstofightcorruption–whethera
governmentagencyoraprivatemovement–willbeoppositionfromentrenched
intereststhataregainingfromthecorruptsystem.Theywilllookforandexploitall
errorsandweaknessesoftheanti-corruptiongroup.Thereforeitisespecially
importantforthesegroupstoavoidanytaintofcorruptionwithinthemselves,or
indeedanyotherscandalsthatcanbeusedbytheopponentstodiscreditthem.
Inthemodernage,coalitionsforanti-corruptionactionmustincludethe
media,includingsocialmedia,schools,andrelatednetworksofinformationand
communication.Theanti-corruptiongroupsshouldactivelypresentthemselvesto
thepublic,usingmodernpublicitymethods,cleverslogans,etc.Theyshoulddevelop
andmaintaingoodrelationswiththemedia,whichwillthentreatdiscrediting
allegationsfromopponentsofthesegroupswithskepticism,andindoubtfulcases
givethegroupsthebenefitofthedoubt.
Whetherthemovementisledfromthetoporthebottom,ithastoworkto
changesocialnormsandculture.TheexperienceofHongKongdemonstratesthe
valueofeducation,especiallyattheearlyschoollevel,forthis.
ManyoftheexamplesIrevieweddemonstratetheimportanceofcontingency
(asdoessomuchofhistorymoregenerally);thereforeevengoodstrategiesneedto
besupportedbygoodluck.17JustasLouisPasteursaidinmattersofscientific
observation,“chancefavorsthepreparedmind,”infightingcorruptionchanceis
likelytofavorthepreparedalliance.Eventhen,asthehistoricalepisodessketched
aboveshow,progressislikelytobeslow,andsuccessmuchshortof100%.Activists
andcriticsalikeshouldnotdisdainpartialsuccess,orcriticizeattemptsatreform
becausetheydonotyieldaperfectoutcome;waitingforperfectionmerelyensures
thestatusquo,whichamountsto0%success.
17SeeDixit(2008)formoreonthethemethat“strategiccomplementaritiesplusluck”isthebroadlyvalidrecipefordevelopmentsuccess.
27
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