New Zealand’s Discomfort at the Top of the Corruption Perception Index

Earlier this year, Transparency International released its annual Corruption Perception Index (CPI) and, once again, New Zealand was ranked as the “least corrupt country in the world” – a title it has held thirteen out of the last fifteen years. It may come as something of a surprise, then, that this news was greeted in New Zealand not so much with celebration as with measured caution. Even the most positive New Zealand news outlets led with caveats that New Zealand still faces corruption risks, including “inadequate protection for whistle-blowers, and no register showing who ultimately controls or benefits from companies registered in this country.” Others skipped the congratulatory headlines entirely, preferring headers such as “Government Warned Not to Ruin Corruption-Free Status.” As one New Zealand newspaper succinctly put it: “New Zealand is the least corrupt country in the world, but when that statement is whispered over here it is almost always followed by a ‘however’.”

This near-ubiquitous grimness of New Zealand’s press with regards to anticorruption measures practically begs the outside observer to ask: Why the doom and gloom? What explains the gap between “all major ranking institutions and indexes” and the perception of New Zealand’s citizenry themselves?

As Professor Robert Gregory explained back in 2002, although New Zealand has little in the way of “hard-core corruption,” the final decades of the twentieth century saw the country undergo a series of rapid social and political changes, from market restructuring to a sudden decrease in egalitarianism. These changes, which mirrored a general trend among Western democracies, resulted in New Zealand’s citizens becoming significantly less trusting of both politicians and political institutions, and deeply skeptical that public servants would act in the best interests of the country. Thus, although the classic forms of corruption captured by international indexes like the CPI were (and remain) low in New Zealand, when most of the country’s citizens think about “corruption,” they are more likely to think about general instances of untrustworthy public servants or dishonest behavior in government, whether or not those incidents involved classic forms of unlawful corruption like bribery.

As a result, as Professor Gregory accurately foresaw back in 2002, a significant discrepancy in corruption perceptions has emerged in New Zealand, with international indexes like the CPI and New Zealand’s government itself focusing on the very low levels of corruption as narrowly defined, and a much more cynical public perception that “see[s] corruption everywhere.” While the international anticorruption community may praise New Zealand for its near-absence of bribery or other forms of hard-core corruption, New Zealanders themselves are preoccupied by the government’s “extreme vulnerability to the undue influence of concentrated wealth over political parties, laws, and policies,” and other forms of legalized “rich world corruption,” such as revolving doors and conflicts of interest between the private and public sectors. And while the public’s perception of this sort of corruption may be inaccurate or exaggerated, the perception itself could be a problem, as perception of corruption has been empirically shown to erode the legitimacy of government and lead people to engage in dishonest behavior.

Even more problematic is how slow New Zealand’s government’s has been to respond to public concerns about these more ethically-gray areas. Although New Zealand’s Serious Fraud Office (SFO) has filed charges in cases involving unlawful political donations, the SFO also has complained about inadequate funding and that it is struggling to keep pace with the volume of cases. New Zealand has resisted calls to create an independent anticorruption agency. The country’s conflict of interest legislation is not up to the standard of most OECD countries, nor does it have laws covering “misconduct in public office.”

Ironically, New Zealand’s perpetually positive CPI ranking may be a contributing factor to the government’s inadequate attention to these problems. For one thing, New Zealand’s perennial dominance of the CPI may have created a self-fulfilling loop, in which the experts who assign corruption scores are biased (perhaps unconsciously) not to see existing corruption in “success story” countries like New Zealand. Perhaps more importantly, New Zealand’s government, and many of its politicians and public officials, have strong incentives to ignore or downplay the country’s problems, especially with respect to legal and ethical “gray areas” from which politicians and public servants benefit. Perennial inaction is then annually validated, perhaps subconsciously and certainly unintentionally, by the CPI, which serves as a signal from a neutral observer that any problems aren’t that bad. After all, why should New Zealand’s government invest in costly anticorruption improvements when simply maintaining the status quo is sufficient to preserve the country’s reputation as the least corrupt country in the world?

To be sure, New Zealanders can and should take pride in the extent to which their country has stamped out the hard-core “duffle-bag full of cash” type of corruption that is pervasive in much of the world. Nevertheless, traditional corruption indexes like the CPI, while useful, measure only a narrow definition of corruption. While New Zealand’s citizens may be overbroad in their tendency to label all sorts of unethical or distasteful political behaviors as “corrupt,” the concerns that they raise are real and important. New Zealand needs additional transparency measures to shed light on “dark money” in politics. The country needs to close loopholes in its conflict of interest laws and regulate the revolving door between business and government. The SFO needs better funding, and a separate, independent anticorruption office should be established. Good standing with the CPI is laudable, but should not be an excuse for ignoring areas in need of improvement.

4 thoughts on “New Zealand’s Discomfort at the Top of the Corruption Perception Index

  1. Great post (as usual) Zach. I actually think a lot can be learned from the New Zealand model. The public’s preoccupation with elements of “rich world corruption” seems to be fairly unique — few other rich countries have populace’s that care THAT much about the revolving door between the private and public sectors. In my view, that’s actually a sign of a very healthy and politically engaged society. Hopefully the rest of the developed world can take a lesson from this.

  2. Hi Zach, it’s so interesting to also see the internal discrepancy between the publicly held, broader conception of corruption in New Zealand as compared to the hard “duffel-bag” corruption that is perhaps covered under its laws. Why do you think that might be? Considering that constituents are so worried, their representatives seem remarkably blase about things.

    • Heh, great question Ms Yan.
      Yes, near the eve of no doubt another top-rating performance in the Corruption Perceptions Index, why are our representatives here in New Zealand so “blase” about corruption?
      Or, are they?
      Even after the leaker of the Panama Papers singled out former prime minister John Key, alone among hundreds of world leaders, the country’s most popular leader in decades was able to waltz out the resignation door, pick up a fat contract as chairman for the region’s biggest bank (ANZ), and sell one of his houses for millions to the incoming chief executive of the same bank.
      A man who had once promised to turn New Zealand into “the Switzerland of the South Pacific.”
      All with barely a murmur from news media other than to note how extraordinary that Key would step down at near the height of his popularity.
      Certainly seems blase, doesn’t it?
      Even after all that, though, the subsequent leak of the Pandora Papers forced an admission from the new Jacinda Ardern government that there were still “loopholes” in Foreign Trust laws supposedly fixed after an inquiry under the Key administration.
      For potential answers we have to go back, back in time, waaay back.
      To the once infamous multi-billion Winebox Affair of the 1980s and a subsequent Royal Commission of Inquiry that faced down some of the world’s biggest and most powerful audit companies. It was, in some ways, the financial equivalent of New Zealand standing up to world military powers and declaring a nuclear-free zone.
      Just far less successful.
      So unsuccessful, in fact, that precisely zero people were prosecuted, not even a senior tax official who admitted to the inquiry that he had misled the inquiry in his earlier testimony.
      Still, some loopholes – not so much barn-sized as aircraft carrier size – were closed. Lessons learnt, politicians later approved new loopholes, opened up under the Foreign Trusts Act.
      Enough loopholes to last all the way through to today, enabling billions more to be flushed through New Zealand’s backdoors.
      Point of retelling this ancient history was that the Winebox Affair – centred around dodgy deals in New Zealand’s backyard tax haven in the Cook Islands – would never have got to full inquiry status if not for utterly dogged work by a tiny two-person team at the country’s public broadcaster TVNZ, Television New Zealand.
      Reporter Ian Wishart and producer Carol Hirschfeld spent many months untangling leaked documents that had been dumped on parliament’s floor by maverick politician Winston Peters.
      Before the internet, before even email, they shoe-leathered their way around New Zealand, and flew so many times to the Cook Islands that Wishart’s children would burst into tears as soon as they heard the island state mentioned.
      Somehow, this small team was able to shoe-horn evidence from a thousand or so papers leaked out in – yes – a cardboard winebox, down into a two hour investigative special. But only after Wishart leaked the documentary details to get around a court injunction halting its broadcast, prompting a public outcry so ferocious that it forced the government to step up, and the banks to step down.
      Great story, right?
      Plucky wee TV team trumps the big boys, thanks to sheer gutsiness and the no-nonsense citizens of good ol’ clean, green New Zealand.
      Except that governments are beholden to their funders, and their funders were not happy.
      Especially when TVNZ went on a few years later to broadcast another ripping doco exposing a top-secret meeting between leaders of a party – it barely matters which – and captains of industry.
      Already well corporatised after a decade of neoliberal “restructuring”, from which said captains profited hundreds of millions, that second doco was the last straw for long exasperated politicians, who ordered up another round of restructuring for dear old TVNZ and started sacking people in their droves. So-called “business units” were introduced to improve “efficiency” with millions spent on installing high-tech monitoring systems that ensured, for example, every last photocopy was charged back to its correct unit, down to different desks in the newsroom.
      Much more efficient!
      Especially for politically-installed commissars tasked with keeping a very close eye on the newsroom.
      Instead of exposing high-level corruption rorts in their hundreds of millions, TVNZ was finally thrashed into corporate-correctness and told to not just pay its own way, but start paying government dividends. Millions in dividends. Over a billion in one decade, in a market of barely four million.
      Just to make sure state journalists never got too uppity ever again, corporate change merchants were flown in from the US, to educate ignorant kiwis on how to play the ratings game against private competitors – and win.
      Much less investigation, much more alarmist crime reporting, and endless to-and-fro reporting around the ‘game’ of politics, along with a nightly feel-good story to sweeten the plebs after sports. While Australia’s public broadcaster the ABC continued to expose high-level corruption, at home and around the world, with its decades-old Four Corners investigation unit, TVNZ pumped and dumped a long series of current affairs shows. We even got American style talk show hosts! Instapundits and other side-talking political hacks galore.
      Even overnight broadcasts from the BBC were dumped in favour of endless advertorials that now occupy most channels, most of the day.
      Suitably cowed, New Zealand journalists have never again had the temerity to question anything remotely the scale of the Winebox, or party corruption.
      How cowed?
      The country’s only journalists association was already long gone, holding its last annual general meeting in 1987. Much later, in 2007, the one union still left representing journalists bravely held the first such meeting in 20 years, boldly theming it “Media Matters.”
      A wide-ranging review of “about” 30 different media organisations found problems aplenty, including the fact that staff of only one single news outlet had enough guts to allow its submission to be released publicly. The rest? All demanded anonymity.
      As for the union itself, it quietly dropped promises for a follow-up meeting the next year, ignored questions as to why, and promises of action faded to inaction.
      Down the road at the main competition, privately-owned TV3, other politically-connected efficiency experts were also installed, with one gaining a $20 million bonus for wangling a $43 million tax break and, oh yes, sacking lots of journalists.
      One surviving ray of hope for New Zealand journalism was the country’s other main public broadcaster, Radio New Zealand. An organisation so under-funded under all parties that yet another cost-cutting review ordered by John “Panama Papers” Key? Saw the contracted auditors, KPMG, instead come back and reccommend RNZ funding be increased.
      Yes, you read that right.
      Accountants recommending funding increases, not cuts.
      So yes, outsiders can be forgiven for perceiving a certain blase, blase* quality among our politicians when it comes to corruption.
      After all, they spayed the country’s biggest watchdogs, then replaced them with annoyingly yappy lap dogs.
      No big exposes, no big public pressure – no big worries!
      Oh yes, almost forgot – Wishart and Hirschfeld?
      Whatever happened to them?
      Utterly exhausted, Wishart saw all his hard work come to naught, and eventually retreated to the certitudes of fundamental Christianity, and conspiracy theories.
      Hirschfeld kept up the good fight, helping establish the country’s first indigenous TV station, Maori Television.
      She was on the brink of also helping achieve a bold new era for public broadcasting, as promised in the Ardern election manifesto, when a meeting with the minister responsible – a champion for open government and a strong public media – was seized upon by the new opposition as their first ‘gotcha’ scandal.
      Rather than using its historically huge mandate to stare down an utterly defeated conservative party, the new ruling Labour party turned on its own minister and the broadcaster, securing resignations from both.
      A country long boasting of “100% pure New Zealand” is, once again, left vulnerable to 100% pure New Zealand corruption.
      Sad!

      *Incidentally, the lyrics to one of New Zealand’s biggest world music hits.

  3. I think that Bob Gregory may well have been thinking of the privatisation programme in New Zealand, which was pursued despite public opinion, and continued to favour merchant banks and companies that were later proved to be dodgy. There was also the fact that the Treasury Department knowingly set up a tax haven (through a loophole in trust law) in the 1980s which has still not been adequately addressed. The governing Labour Party were apparently blissfully unaware of this before coming into office again, and the same old people still offer wealth management services to foreigners through trusts and shelf companies, with the company formation process being the really lax area of New Zealand law.

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