Global Corruption: Money, Power and Ethics in the Modern World
University of Pennsylvania Press, 2012, 288 pp., $24.95
The most pernicious threat to global security and prosperity is hiding in plain sight, though naming and defining it proves deceptively tricky. A provocative new book by Laurence Cockcroft, one of the founders of Transparency International and later the chairman of its UK chapter, helps us understand both the scale of global corruption and the challenges it poses for sustainable economic and social progress not only in newly developing countries, but also in well developed ones.Cockcroft begins by defining corruption as an action that “always involves the acquisition of money, assets or power in a way which escapes the public view; is usually illegal; and is at the expense of society as a whole either at a ‘grand’ or everyday level.” He qualifies this broad definition, noting that “while corruption is usually illegal, there are also forms of it that are technically ‘legal’, but which the most of society regards as corrupt.” Many forms of corruption are performed without much secrecy, and in China “corruption [may be seen] as an integral part of phenomenal economic growth.” His definition of corruption occasionally seems problematic in its overreach. Secret, illegal activities are often not connected with corrupt practices but represent other types of criminal actions. The broad definition allows him to include examples of “corruption” that seem more like straightforward criminality: piracy off the coast of Somalia, the opium production in Afghanistan and the illicit trade in the mineral coltan from Rwanda. As a result, the book reads more about global crime than about corruption per se. This terminological issue is the biggest weakness of the book, but it still has plenty of virtues. When it comes to outright corruption, Cockcroft rightly addresses its most important features, and this aspect of his research deserves keen attention.The book’s central argument is that corruption has political roots, which Cockcroft identifies as the “merging of elites.” Surveying the mechanisms of top-level decision-making from Russia to Brazil, to Peru and India, as well as in many other countries, he discerns a pattern: Politicians today often act as entrepreneurs, surround themselves with sycophants and deputies, and so navigate the entire political process as they would any commercial business. The hallmarks of a corrupt society are the widespread leveraging of wealth to secure public office; the leveraging of such authority to secure various kinds of privileges; and the interplay of both to make even bigger money. Simply put, corruption is a transformation of public service into a specific kind of entrepreneurship.Cockcroft provides many vivid examples of this dynamic. He writes about President Fernando Collor de Mello of Brazil and President Alberto Fujimori of Peru, General Sani Abacha of Nigeria and President Mobutu Sese Seko of Zaire, about Russia’s oligarchs and the Italian mafia. Across these case studies, he illustrates how corruption reproduces itself through politics, how corrupt interests tenaciously “reassert themselves after attempted reform,” and how financial contributions to election campaigns are perceived not as donations, but rather as “‘investments’ in politics as a way of securing business objectives.” These “investments” are huge. During the 2000s, Cockcroft writes, a guaranteed position in the lower house of Russia’s parliament cost more than $2 million. In 1991, Japan’s ruling party held funds of more than ¥900 billion; as little as ¥356 billion originated from registered sources. As the clandestine share of election costs grows, opportunities for corruption widen.Recognizing corruption generally as a by-product of politics that allows money to interfere with the free expression of popular will, Cockcroft then addresses corruption as inherent specifically in both authoritarian and populist regimes. He estimates that the direct cost of corrupt practices in Nigeria and Peru reaches 5–6 per cent of GDP annually, and that in post-Soviet countries the share of the “informal” sector reaches up to 60 percent of economic output. Throughout, Cockcroft emphasizes that corruption originates in the upper echelons of power and then percolates through the bureaucratic hierarchy. Along the way it may become more diffuse but takes on a broader, unprecedented scale. This trickle-down corruption, Cockcroft argues, most harms the poor and vulnerable. Thus it paralyzes the will of the majority and perpetuates itself. It is extremely difficult to break this vicious circle, from without or within.Difficult, but not impossible. According to Global Corruption, the greatest antidotes to corruption are democracy and economic vitality. Cockcroft argues that anti-corruption efforts gathered steam in medieval Europe and continuing to strengthen in the United States through the second half of the 19th century, when representative democracy began to take root at the same time that “corruption came to be seen by some as a source of inefficiency.” Democracy and competitive business became important tools that ensured the victory over corruption in the Western world, although, Cockcroft stresses, this achievement should not be regarded as irreversible and universally attainable. Some form of mafia exists everywhere, he says, stressing that in Milan during the mid-1990s a fierce anti-corruption campaign led to a reduction of construction costs for the railway lines, the underground and the airport—by 50, 57, and 60 percent, respectively. In general, however, in Western countries corruption at any level faces strong resistance on the part of civil society and can no longer be considered, as it was in some not too distant past, a relentless, systemic phenomenon.Whatever the strength of Cockcroft’s prescriptions, his diagnosis of corruption allows us to determine quite accurately where it survives and thrives today: namely, wherever the state has no need to increase society’s overall economic efficiency for its survival. Thus rentier economies, which rely entirely on natural resources, are much more prone to corruption than productive ones, which develop by boosting the industrial sector. And, of course, corruption breeds when most citizens have little awareness of rights and obey any formal authority regardless of its legitimacy or accountability. This doesn’t mean corruption can be contained within such underdeveloped, outlier states; such practices can easily spill beyond their borders and infiltrate countries that for decades have either fought or been free of corruption.This is an extremely important point. Assessing the current situation, Cockcroft suggests that this kind of contagion would be impossible if the “developing” world weren’t engaged in corrupting the developed one: “The question is whether the financial gain is held outside the country in question, or ‘invested, directly or indirectly, within it.” He makes the arresting observation that financial transfers from the banks in the peripheral countries to the Western financial institutions amount to as much as $1 trillion annually. The inability to withdraw corruption-originating money from the country radically reduces the motivation for illegal activity or at least forces its beneficiaries to legalize their funds in one way or another. The latter, in turn, generates demand for modern legal institutions and so lays the foundation for judicial and political modernization. The West, Cockcroft admits, plays a very negative role in this regard. Its institutions fund all sorts of initiatives to improve ”transparency” and talk year after year about fighting corruption. Yet at the same time they build a state-of-the-art infrastructure encouraging financial abuses and money-laundering through offshore schemes.This process was launched back in 1960s by London financiers and went worldwide soon after. Only one American state, Delaware, serving for a long time as a kind of domestic offshore jurisdiction, now houses half of all U.S. publicly traded companies. Among them, more than two thirds are listed in the Fortune 500. As a Russia observer I can add that more than 60 percent of the officially calculated GDP of the Russian Federation is generated by enterprises controlled through different offshore registered holding companies. While more than $290 billion fled the country over the past five years, its economy is formally controlled by “foreign” investors.So I can heartily agree with Cockcroft’s statement that “the combination of huge dual economies in endemically corrupt countries, and the existence of ‘secrecy jurisdictions’, is at the heart of the problem of addressing corruption on a global basis.” He is on shakier ground, however, on several related charges against Western leaders: that they corrupt officials in the peripheral countries (namely, while promoting arms contracts or development assistance); encourage corruption in “pro-Western” countries throughout Asia and Africa; and even shamelessly rob money from the budgets they control directly (as in occupied Iraq). Amid these digressions, Cockcroft moves away from his overarching concern of how the fight against corruption should be organized and how intensive the resistance to this fight may become inside the West itself.This internal tension seems to be the greatest obstacle to anti-corruption efforts today. Cockcroft notes, for example, that the majority of business associations in Europe and the United States opposed the American Foreign Corrupt Practices Act of 1977. Overall, he writes, “While anti-corruption champions and initiative takers make progress on limited fronts, they confront not only embedded networks but also serious institutional and political constraints on international fronts.” He understands quite well that support for individual anti-corruption leaders is limited, in part because of public apathy for such efforts. Government policy also builds a system in which corruption on the middle and lower levels is a pre-condition of “normal” life, while all collective, civic action becomes ineffective.Cockcroft, however, isn’t preoccupied with proposing a clear strategy for the struggle against corruption. He rather urges developed countries to provide the developing ones with help managing anti-corruption campaigns, and mentions the need to increase transparency in mining and in the extractive industries. He also calls for joint efforts to combat corruption in a G-20 framework, and even stands for tracing corrupt officials by the means of the International Criminal Court. (This Statute, was never signed by a majority of corruption-prone countries.) He casts the anti-corruption struggle in four vague frames: reducing the scope of shadow economy; limiting the offshore jurisdictions; tightening the control over international trade in resources; and battling organized crime. He places high bets on the positive impact of new information technologies, which are likewise farfetched prospects.Global Corruption’s most important insights are that modern corruption is a distinctive feature of rentier economies and nondemocratic regimes, and that this evil could not have spread so widely had it not been enabled by the selfsame Western countries who decried it. The book advances a compelling claim that the West, which generally defeated corruption in its own societies, is now obliged to eradicate it throughout the rest of the world.