Baksheesh in Egypt, dash in Kenya, mordida in Mexico – corruption is everywhere, and ancient: Mercury probably ran a crooked messenger service on Mount Olympus. Anti-corruption laws are just as old: ““Neither shalt thou take bribes,’’ God told Moses, ““which blind the wise and pervert the words of the just.’’ But in the last year the politics and economics of graft have absorbed businessmen and policymakers to an extent rarely seen before. In Italy and France, crusading judges have cut a swath through the ranks of politicians. In Britain, two ministers resigned amid widespread allegations of sleaze. Yet the real focus on corruption is in the developing economies and in the countries making the transition from communism to capitalism. Quite simply, the scale of graft in such countries is so great that it risks political unrest or – just as bad – a backlash against free-market reform.
The corruption crisis has caught some observers by surprise. A recent academic paper by Robert Vishny of the University of Chicago and Andrei Shleifer of Harvard University admits that ““economic studies of corruption are rather limited’’ (which, given the pervasiveness of the practice, tells you all you need to know about economists). In a speech last year Jeffrey Sachs, a Harvard professor and adviser to reform programs in Latin America, Eastern Europe and Russia, dismissed the ““excess focus’’ on the supposed corruption of the mafia in Russia, arguing that ““many of those who are called mafia are simply traders.’’ The older school of development economists, challenged on the effects of graft, trot out the ““Australian defense’’: Australia was settled by convicts and rapaciously corrupt British officials, yet within two generations was law-abiding and prosperous.
Times are changing. Some academics used to defend corruption as a useful training for entrepreneurship, but those who were once too timid to attack ““local customs’’ have begun to speak out. In Argentina recently, Michel Camdessus, the managing director of the International Monetary Fund, told his hosts, ““Let’s say it – there needs to be less corruption in several areas of government,’’ and the Clinton administration has put corruption on the agenda for December’s Summit of the Americas in Miami. ““Corruption is a major impediment to development,’’ says Linda Chalker, Britain’s minister for international development. ““I do not accept, as some do, that it is a necessary fact of life that helps the wheels of government and business turn.''
Seventeen years after its own Foreign Corrupt Practices Act, which prohibited bribing foreign officials to secure business, the U.S. government last May finally won promises from other rich countries that they would introduce similar legislation. In developing countries from Thailand to Nigeria, grass-roots campaigns against corruption are gaining strength. And a new lobbying group called Transparency International (TI) has given real visibility to the fight against graft.
Why the change? Partly because people involved in economic development are fed up with seeing aid projects hijacked by graft; it was just such a group that dreamed up TI. And leaner times have given corruption a nastier taste. It was easy to joke about the size of a Rolex watch on the wrist of a general in Lagos when Nigeria’s oil-rich economy was growing. But since 1980 most of sub-Saharan Africa has grown poorer, which has made the sumptuary excesses of the wabenzi that much harder to swallow. It’s merely unpleasant to have to pay $12 to a junior Zimbabwean official for a driver’s license. But even strong stomachs turn when – as happened in Angola – the social-welfare minister imports 300 Mercedes-Benz cars into a country racked by civil war.
Graft is also springing up in countries that used to be relatively clean. Hong Kong, once notorious, won a good name after the establishment of the powerful Independent Commission Against Corruption in 1974. But growing trade with China (where corruption is endemic) has led to a new cycle of graft. Last year, for example, nine customs officers were arrested for allegedly helping smuggle stolen cars and electronic goods into China. Officials worry that after the colony reverts to Chinese control in 1997, its clean reputation will be lost. ““Today, Hong Kong is threatened once again by a rising tide of corruption,’’ said Gov. Chris Patten recently. ““The alarm bells have started to ring.''
Even nickel-and-dime graft can have horrific consequences. Thailand is the classic example. Prostitution is formally illegal there. But thousands of brothels, massage parlors and go-go bars simply put a cop on the payroll, slipping him $120 to $600 monthly; a recent study from Bangkok’s Chulalongkorn University estimates that the city’s 1,000 entertainment houses pay bribes of $600,000 monthly to the local police. That keeps Thailand’s police secure in their suburban villas and BMWs; a retired police colonel was recently found to have $920,000 in his bank account. The alliance between the police and the fleshpots has fueled an AIDS epidemic. Public-health officials say that more than 400,000 Thais have been infected with the AIDS virus, most of them in brothels that an honest police force would long since have closed.
The driving force behind the new attack on graft, however, is the uncomfortable realization that vaunted free-market economic reforms can make corruption worse. Fifteen years ago you didn’t need to be a genius to know that Latin America and the communist world were corrupt. But – if you were a foreign businessman – it was a sort of predictable corruption. Just as you might have done in Mayor Daley’s Chicago, you paid a bribe to the representative of the governing party, communist or otherwise, and, broadly speaking, got what you paid for. In the 1980s the old political and economic systems were stood upside down. New sources of local political power supplemented the central-party apparatus. Each industry got its own set of regulators. And they all wanted their slice of the pie. In today’s Russia, says Harvard’s Shleifer, ““everybody is taking bribes independently. In transition economies, there’s no organized corruption. Everybody is on his own. This makes corruption much more distortionary.''
““Distortionary’’ is a nice economists’ word. Ordinary Russians, watching heavy-shouldered guys hand bricks of dollars around the lobbies of Moscow’s hotels, can be forgiven for being more blunt. Vladimir Kucherenko, a muckraking Moscow journalist, dates his disillusion with economic reform to the moment he saw documents proving that many top city officials – including ““democrats’’ – were on the take. ““This isn’t capitalism,’’ he says. ““It’s only great bribery, and a great stealing of my country.’’ According to a recent World Bank survey, 65 percent of Russians say life was better under the communists. Growing public resentment can be dangerous, and ““people were naive to have been indifferent to that,’’ says Charles Blitzer, the World Bank’s chief economist in Moscow. But those who dreamed up reform programs were indeed naive – and now they fear that the corruption associated with Russia’s reform programs will lead to a political backlash in favor of ““clean’’ nationalists or communists.
Russia isn’t the only country facing that risk. In Venezuela, the government of Carlos Andres Perez introduced a neoliberal economic-reform package in 1989, cutting subsidies and attempting to bring some sanity to public finances. But the old political hacks around Perez quickly found new ways to make their pile. They manipulated new foreign-exchange rules that were meant to assist exporters; they demanded (and got) kickbacks from the foreign investors who rushed into Venezuela’s newly liberalized economy. In 1993 an investigative reporter discovered a $17 million payment made by Venezuela’s Central Bank to a presidential ““discretionary’’ fund. Perez was forced from office last year, and the new government of Rafael Caldera has threatened to junk the whole neoliberal reform agenda. In Africa, one of the most promising recent developments was the 1991 election of reform-minded Frederick Chiluba in Zambia. But several members of his administration have quit in disgust at untrammeled corruption. Now Kenneth Kaunda, the president Chiluba ousted (and the man who wrecked Zambia’s economy), is toying with running for office once more, while a popular song in Lusaka claims that ““Kaunda created wealth, Chiluba destroyed it all.''
What, if anything, can be done to combat such an epidemic? In one important respect, the neoliberal reform agenda helps. From Haiti to Ukraine, nationalized industries have been a traditional source of graft. ““State-owned enterprises,’’ says Lewis Preston, president of the World Bank, ““have been a playground of corruption forever.’’ Privatizing them may lead to a period of what one Russian economist calls ““Wild West capitalism,’’ but the alternative is usually worse. In extreme cases, donor countries can threaten to cut off aid to notoriously corrupt regimes. But as Preston points out, that option can often ““penalize ordinary people for the actions of the guys with the villas in Switzerland.''
In the end, however, the fight against corruption will be won in developing countries themselves – not in the rich world. There are encouraging signs: Thailand, Zimbabwe and other nations have set up anti-corruption commissions, although they don’t always deliver what they promise. From Russia to Venezuela, investigative journalists are risking their lives – quite literally – to chase down corruption stories. In Argentina and elsewhere, lawyers who once took civil-rights cases now fight corruption.
For analysts, the new buzzwords are ““governance’’ and ““the civic order.’’ Sit in on a seminar of development economists and you will hear – as you would not have five years ago – lots of talk on the importance of an independent judiciary, fair voting laws and a free press. Those who campaign against graft in the developing world stress that economists must learn politics, too. ““You can’t dissociate development from good government,’’ says Sergio Aguayo, director of Mexico’s Civic Alliance. And good government isn’t something that can be imposed from local capitals. Jorge Zepeda, editor of Siglo 21, a graft-busting newspaper in Mexico, argues that Costa Rica is ““clean’’ because it has a tradition of local, grass-roots democracy.
That’s probably right. If one book has got the economic-development community buzzing recently, it is a study of Italian politics by Robert Putnam of Harvard. Putnam argues, persuasively, that the regions of Italy have different levels of democracy and prosperity because of roots that go back 600 years. The north had a civic tradition of small associations – choral societies and craft guilds. The south had authoritarian governments and the mafia. The north seems just plain better at building a modern, clean society than the south. Creating such traditions in parts of the world that have known nothing but poverty and dictatorship won’t be easy. Globally, the last two decades have seen astonishing economic growth. Without determined action, the worm of corruption may yet poison that apple.
