Building Integrity To Fight Corruption:‎‎

By Abdirahman Ibrahim Abdillahi

A general definition of corruption is the use of public office for private gain. This includes bribery and extortion, which necessarily involve at least two parties, and other types of malfeasance that a public official can carry out alone, including fraud and embezzlement. Appropriation of public assets for private use and embezzlement of public funds by politicians and high-level officials (associated with "grand" corruption in various countries, some of which are beset by kleptocracies) have such clear and direct adverse impacts on a country's economic development that their costs do not warrant sophisticated discussion. The analysis of bribery of public officials by private parties--and, in particular, its impact on private sector development--is, however, more complex. In unbundling bribery, it is useful to consider what private parties can "purchase" from a politician or bureaucrat.

The incidence of corruption varies enormously among different societies, ranging from rare to widespread to systemic. If it is rare, it may be relatively easy to detect, punish, and isolate. Once it becomes systemic, however, the likelihood of detection and punishment decreases, and incentives are created for corruption to increase further. This pattern of an initially rising, but then falling, cost of engaging in corrupt acts can lead to multiple equilibriums: one holding in a society relatively free of corruption, the other holding in a society where corruption is endemic. Moving from the latter toward the former is likely to be harder than controlling corruption when it has become prevalent but not yet systemic. Where there is systemic corruption, the institutions, rules, and norms of behavior have already been adapted to a corrupt modus operandi, with bureaucrats and other agents often following the predatory examples of, or even taking instructions from, their principals in the political arena.

The notion that corruption and lack of economic and public sector reform go hand in hand, with causality running in both directions. Therefore, one should have made more progress in implementing broad reforms as corruption and vested financial interests are key reasons for slow progress. In sum, corruption is a symptom of fundamental economic, political, and institutional causes. Addressing corruption effectively means tackling these underlying causes. The major emphasis must be put on prevention--that is, on reforming economic policies, institutions, and incentives. Efforts to improve enforcement of anticorruption legislation using the police, ethics offices, or special watchdog agencies within government will not bear fruit otherwise.

The following are only some of the major economic policy changes that will unambiguously reduce opportunities for corruption: lowering tariffs and other barriers to international trade; unifying market- determined exchange rates and interest rates; eliminating enterprise subsidies; minimizing regulations, licensing requirements, and other barriers to entry for new firms and investors; de-monopolizing and privatizing government assets; and transparently enforcing prudential banking regulations and auditing and accounting standards. The reform of government institutions may include civil service reform; improved budgeting, financial management, and tax administration; and strengthened legal and judicial systems. Such reforms should involve changing government structures and procedures, placing greater focus on internal competition and incentives in the public sector, and strengthening internal and external checks and balances. As a complement to these broader reforms, the careful and transparent implementation of enforcement measures, such as prosecuting some prominent corrupt figures, can also have an impact.

A comprehensive list of all possible anticorruption measures might include many not mentioned above. Emphasis should be placed on selecting the key measures to be implemented, in line with a country's implementation capabilities, during the first and subsequent stages of an anticorruption campaign. The entrenched nature of systemic corruption requires boldness in implementation--incrementalism is unlikely to work. Since windows of opportunity to take action against corruption have recently opened up in many countries, reformers will want to move quickly beyond the general first principles usually listed in the literature on corruption and instead demand practical, country-specific advice.

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