Brexit and Anticorruption

So… Brexit. I don’t know nearly enough to weigh in on what this startling development means for European politics, British politics, macroeconomics, Donald Trump’s chances in the U.S. presidential election, or the price of tea in China. But since Brexit is such a major development, I felt like I should say something about the implications for anticorruption, even though that probably wouldn’t be on most people’s top-ten lists of important Brexit implications.

Fortunately, in coming up with something to say about Brexit and anticorruption, I don’t have to work too hard, because two excellent recent posts—one from Robert Barrington at Transparency International UK, another from Corruption Watch—have very nice, clear discussions of the issue. I don’t really have much to add, but let me highlight three of the key worries raised in both posts, and then throw in one more, somewhat more speculative and longer-term question:

  • First, Brexit will likely lower UK government’s emphasis on anticorruption as a policy priority. The Cameron government was unusually committed to anticorruption as a foreign policy priority. Yes, the government sometimes muddied or muddled its message, and yes, it wasn’t always clear whether the government’s action would match its rhetoric, but whatever else you think about David Cameron and his government, it does seem like anticorruption was (or was supposed to be) one of his signature foreign policy issues. It’s exceedingly unlikely that his successor will place the same amount of emphasis on this issue—especially given that the main focus of UK foreign policy and the legislative agenda in Parliament over the next several years is likely to be consumed by Brexit-related issues, with all other issues pushed even further to the periphery.
  • Second, Brexit’s adverse impact on the British economy will reduce the resources available for government anticorruption efforts, both at home and abroad. Although the short-term effects of Brexit on the British economy are not entirely clear, most experts seem to agree that Brexit will reduce British GDP, perhaps substantially, which will in turn reduce government revenues for DfID (the British international development agency) and the Serious Fraud Office (SFO), which is responsible for enforcing the UK’s anticorruption laws, including the Bribery Act.
  • Third, Brexit will likely increase the political pressure to weaken anticorruption laws and law enforcement. In an environment of economic uncertainty, the British government is likely to be more solicitous of business interests, and more focused on promoting British exports abroad and attracting inward foreign investment. That may make the UK more likely to weaken (or at least fail to strengthen or enforce) anticorruption and related laws and regulations that businesses and investors find onerous. With respect to UK exports, both Mr. Barrington and Corruption Watch also point out that Brexit may mean that many British exporters shift their focus from the European markets to emerging markets in the developing world—markets with comparatively greater corruption risk. This would likely reinforce the tendency of the British business community to push for weakening and/or under-enforcement of the Bribery Act.

Again, those are the major themes I extracted from the two posts on Brexit, though both contain quite a bit more that’s well worth reading. I did want to throw out one other question/speculation here. Though I’m no expert, a lot of the commentary I’ve been reading about Brexit suggests that, if the UK isn’t able to negotiate the right sort of deal with the EU, the status of the City of London as the world’s preeminent financial center might be threatened. Suppose that’s true. Suppose that a great deal of the business that currently goes to the City of London’s banks and associated institutions goes elsewhere. Is that good or bad from the perspective of anticorruption (and closely related concerns, like anti-money laundering)? On the one hand, the London financial sector has been repeatedly bashed by anticorruption advocates for its role in facilitating corruption abroad. On the other hand, it’s far from clear to me whether things would get notably better or worse if a lot of that business moved elsewhere. I genuinely have no clue how to think about this issue, and I’d be curious if anyone out there has any thoughts. If we presume for the moment that Brexit will indeed reduce the attractiveness of London as a financial center: (1) Where will the business that would have otherwise gone to London go instead, and (2) will that shift be good or bad from the perspective of fighting corruption and money laundering?

9 thoughts on “Brexit and Anticorruption

    • Interesting! Any idea whether there would be implications for AML and anticorruption efforts (good or bad) if any of those four succeed? I don’t have a very strong sense whether France, Germany, the Netherlands, or Ireland might be expected to be better or worse than the UK in their approach to those issues.

        • Ah, I see.

          Here’s another question (for you or anyone else): Would the _competition_ for the financial services businesses currently based in London have any effects, good or bad, on these issues, independent of the current quality of the other competitors? Might we see race-to-the-bottom or race-to-the-top dynamics here? As is probably painfully obvious, I’m largely clueless about this whole area, so it’s possibly the question isn’t even a sensible one. But I’m curious what people think. (That said, I realize all this might be premature and overblown, as I gather many people think that London is likely to retain its status as the #1 spot for financial services.)

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  3. Fully agree that Robert Barrington and Susan Hawley have provided insightful and important assessments of what Brexit may mean for anticorruption in the UK. However, I think it is much too early to make any judgements about the impact on the City of London as a financial centre. But one additional aspect of the Brexit process that is relevant to anticorruption is more insidious and more worrying: the corruption of the UK’s democratic process. It is worth reflecting on how the debate – characterised by extreme exaggerations and even outright dishonesty – and the subsequent behaviour of virtually the entire political class sits with the so-called Nolan Principles that are meant to govern public life in the UK: selflessness, integrity, objectivity, accountability, openness, honesty, leadership. Every single one of these was woefully absent during and after the referendum campaign. What is euphemistically referred to a ‘post-factual’ democracy (for which, read dishonest) is a genuine corruption of the basis on which democratic debate and public life is supposed to operate – and one that could potentially cause much more long-term damage than the fate of the City of London.

    • The point about it being far too soon to speculate about the impact of Brexit on the City of London’s status as a financial center is well taken, and probably right — though I suppose it wouldn’t hurt to speculate.

      On your second point, well, I don’t know… I’m happy to agree with everything you say about the nature of the campaign, though as someone from the other side of the Pond, I’m hesitant to take a strong position on that. But I guess I have a bit of a resistance to characterizing that sort of political dishonesty (exaggerating, distorting, or downright lying about the likely consequences of a policy decision) as “corruption.” That doesn’t mean I approve of it. Maybe in some ways its impact is _worse_ than corruption as conventionally understood. But I think we lose something if we start to define every sort of bad or ethically dubious sort of political behavior as “corruption.” After all, if the Leave campaigners really thought Brexit was really in the UK’s best interests (even if they were wrong), and even if they blatantly lied to the public to convince them to support that result, it’s hard for me to see that as abuse of public office for private gain (as opposed to a sense — possibly a deeply misguided sense — of public interest).

      But ultimately, the semantics matter much less than the substance, and I’m inclined to think you’re probably right on the substance.

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