Structural Corruption and Reform

As the fall elections approach, the Democratic Party is, quite rightly, trying to make a campaign issue out of the “culture of corruption” that has taken root on Capitol Hill.

How exactly does a corrupt culture emerge? Surely there is no single answer, but cultural norms, in this and many other regards, are established from the top. On Capitol Hill, the departed Tom Delay and the Republican leadership have turned legislative power into a shakedown operation. Access to power is conditioned on provision — legally, quasi-legally or illegally — of money and favors. At the White House and the executive branch, economic, trade and regulatory policy is crafted in response to demands from large donors, or simply drafted by those donors themselves.

All of this hews to a long, bipartisan tradition. But there are degrees. The corrupt vice-grip on Washington knows no recent parallels.

Beyond personality and the current ruling gang, however, lie deeper questions of structure. Formal rules and institutions fundamentally affect the creation of cultural norms. A reform agenda — whether it deals with corruption in the United States, developing countries or elsewhere — cannot rely on changing personalities. It is important to identify the many institutional arrangements that facilitate, encourage or enable corruption, and replace them with new frameworks that promote transparency and democracy.

Recognizing that there are no panaceas in this arena, here are five, varied suggestions:

1. In the political realm in the United States, the most important step forward is obvious: Publicly financed elections. As David Sirota notes in this issue, as long as candidates for office must seek private financing to win elections, elected officials are going to give preferential access to those who can contribute and raise cash. Take the private financing out of the system, and you remove an important institutional incentive for corruption.

2. Public policy debate on numerous issues has been corrupted by an ever growing array of corporate front groups. They skew debate by representing the views of vested corporate interests, without disclosing their financial backing. So long as corporations are going to be permitted to participate in public policy debates — and the extent to which they should maintain such a right deserves scrutiny — they should be obligated to disclose, on a worldwide basis, all of their direct and indirect contributions to politicians, political parties, think-tanks, educational organizations and other charities.

3. Privatization and government contracting work, whether in the United States or elsewhere, create vast opportunities for corruption — it’s a smart investment for corporations to pay government officials to rig deals — and cronyism. This is one reason that there should be a presumption against privatization or contracting out proposals, and why formal and challenging standards should be met before any privatization or contracting out occurs. Where there is to be privatization or contracting, bidding must be transparent and competitive. The Bush administration’s no-bid contracts for Halliburton and others virtually guarantees abuse. When corruption, fraud or misconduct does occur, the sanctions must be severe. Probably the most important is that wrongdoers be debarred — denied the right to new contracts.

4. As the analysts at The Corner House, a UK-based think-tank, explain in an interview in this issue, mega-development projects invite corruption. This is true in industrialized countries, but even more so, and with greater consequences, in developing nations. Smaller projects or more decentralized initiatives — like spending on healthcare or education — may be marred by corruption as well, but don’t offer the same opportunities for large-scale graft. As The Corner House analysts explain, export credit agencies — like the Export-Import Bank and Overseas Private Investment Corporation in the United States, play a key role in facilitating mega-development projects. They should be shut down.

5. Ideological allies of the Republican Congressional leadership have long complained about the “culture of corruption” in many developing countries. They are not wrong, and there are no simple solutions. For many countries, especially the poorest, one dominant and rarely remarked-upon factor is the role of the International Monetary Fund (IMF). Because the IMF effectively dictates economic policy frameworks for these countries, governments must conspire to exclude popular participation — the most important check on corruption. An IMF- and World Bank-mandated process of developing “Poverty Reduction Strategy Papers” (PRSP) is supposed to create a vehicle for civil society to participate in economic policymaking, but the PRSP process has been a sham. One vital step to reducing corruption in poor countries is to restore their sovereignty, by abolishing the IMF, or at least ending its role in prescribing policy for poor countries.

This last point emphasizes how vital it is to eradicate corruption. Corruption is in many ways the inverse of democracy, and the structures of anti-corruption will be the institutions of democracy.