Category Archives: Commentary

The Corruption-Security Nexus: Lessons from Afghanistan (Part 2)

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This spring has been a season of reckoning with regard to anticorruption efforts in Afghanistan, with two important reports on that topic released last February. The first report, a study on the relationship between corruption and stability in conflict and post-conflict zones from Transparency International (TI) Germany, was the subject of my last post. The second study, was  the U.S. military published a report prepared by the Joint and Coalition Operational Analysis (JCOA) Division of the Joint Staff. The JCOA study is disheartening, with the report’s key findings amounted to an admission that U.S. forces initially contributed to corruption in Afghanistan. Indeed, the report finds that actions on the part of the International Security Assistance Force, the Afghan government, and the Afghan population fostered a “culture of impunity,” and that even where military taskforces made progress in fighting corruption, lack of unity and a lack of Afghan political will frustrated the taskforces’ headway.

The JCOA report offers recommendations for operationalizing what it refers to as Counter/Anti-Corruption (CAC) in the future term in Afghanistan and suggesting ways to optimize CAC from Day 1 in future missions. One of the major, and potentially fruitful tasks, will be to integrate fully CAC into counterinsurgency (COIN). I would supplement the JCOA Division’s recommendations with several additional suggestions: Continue reading →

Can Federalism Curb Corruption in China?

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Many commentators have credited China’s political decentralization, and the inter-jurisdictional competition it fosters, with suppressing local corruption and promoting economic growth. Other commentators have been similarly enthusiastic about the prospects for Chinese “federalism” to improve both economic and government performance, and urge China to go even further in embracing a federalist model.  For instance, an op-ed in the New York Times a few months back suggests that “[I]f China’s leaders want to ensure their country’s peace and prosperity over the long run, they would do well to chart a course toward a federal future.”

The main argument for why political decentralization, and the associated inter-jurisdictional competition, can improve governance and growth is straightforward: Local officials compete for mobile capital and labor, and this competition disciplines government officials because bad behavior (such as corruption) can cause voters and firms to move to another jurisdiction. The greater the mobility of firms and citizens, the stronger the disciplining effect. And there’s some rigorous recent academic research substantiating the hypothesis that political competition can improve governance, including an excellent recent paper that examines recent data from Vietnam and finds that economic growth, coupled with political decentralization and competition, has indeed reduced local government corruption.

So does this mean that China’s best hope for improving its governance performance is to decentralize even further, granting provinces and municipalities greater autonomy in setting policy within their jurisdictions?

The short answer is likely to be no.

Continue reading →

America’s Pursuit of Absolute Integrity

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Attempts to control corruption have a long history in the United States.  Since the late 19th century numerous laws have been enacted at the federal, state, and local level to end patronage and nepotism in government employment, control conflicts of interest by public servants, and reduce opportunities for bribery and kick-backs.  Although the current corruption landscape differs from that of 20th century America, policymakers considering anticorruption legislation today can profit from a look at the U.S. experience.

A useful, if sobering, place to start is with Professors Frank Anechiarico and James B. Jacobs’ 1997 analysis based on New York City’s century long effort to combat corruption supplemented by the federal government’s more recent experience with ethics laws.  Useful because the authors analyze many of the same interventions now commonly advocated to combat corruption around the globe: conflict of interest legislation, financial disclosure requirements for public servants, whistleblower protection, the creation of inspectors general, the reduction of officials’ discretion.  Sobering, not only because they conclude these reforms have done little to combat corruption, but also because the authors contend that together these laws have contributed to the current dysfunctional state of American government.  In short, they say, America’s effort to suppress corruption has produced little benefit at great cost.

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Let’s Create Sub-National Corruption Perception Indexes for the BRICS

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For all their flaws, the major cross-country corruption indexes—Transparency International’s Corruption Perceptions Index (CPI), the World Bank Institute’s Worldwide Governance Indicators (WGI), and the like—have been quite useful, both for research (at least when used appropriately) and for advocacy.  But one important limitation of these datasets is that by focusing on corruption (or perceived corruption) at the country level, they may obscure the fact that there can be substantial within-country variation in the level of (perceived) corruption.  This variation may occur across government institutions—the same country may have quite different degrees of corruption in the health sector, the police force, the judiciary, customs, etc.  More pertinent here, there may also be significant heterogeneity across regions, particularly in large countries with substantial political decentralization.  Indeed, numerous studies have exploited within-country regional variation in corruption levels to test various hypotheses about corruption’s causes and consequences; such studies include research on Italy, Russia, China, the Philippines, and the United States, among others.  But these studies typically make use of particular data sets that are not reproduced year-to-year.

As we’re starting to see rapidly diminishing returns from the major cross-country corruption datasets, it is high time for those organizations with the resources and capacity to compile information on corruption perceptions on an ongoing basis to turn their focus to within-country regional variation in corruption.  I propose the creation of a sub-national corruption perceptions index (snCPI), starting with the so-called BRICS countries (Brazil, Russia, India, China, and South Africa), which would gather and compile data (primarily perception-based data, perhaps supplemented with more objective data when available) on perceived corruption levels within the major sub-national units (states/provinces, autonomous regions, and municipalities) within each of those countries.

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The Corruption-Security Nexus: Lessons from Afghanistan (Part 1)

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This past February, Transparency International (TI) Germany released a study on the relationship between corruption and stability in conflict and post-conflict zones. Titled “Corruption as a Threat to Stability and Peace”, the report notes that corruption and conflict have a “symbiotic relationship,” in which corruption drives instability by encouraging rent-seeking behavior, undermining state institutions, and fueling social and political grievances, while institutional weakness in fragile or conflict-ridden states allows corruption to take root. (The U.S. military’s Joint and Coalition Operational Analysis (JCOA) Division released a report on a similar theme, focusing specifically on Afghanistan, around the same time. That report will be the subject of my next post.)

The good news, as TI relates it, is that both intervening military forces and peace-builders are taking note of the effects of corruption on security and are starting to implement efforts to fight corruption. The bad news is that the results of those efforts are decidedly mixed, and their long-term success is threatened by countervailing interests, like securing short-term peace agreements. Those observations are not all that surprising. Buried in the report, however, are a few unexpected observations that are worth highlighting.

Continue reading →

Allegations of Corruption and the Qatari World Cup

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Just five days after FIFA voted to award Qatar the 2022 World Cup, Jack Warner, a senior FIFA official (and now a politician in Trinidad), received $1.2 million from a company controlled by the leading proponent for a Qatari World Cup (the proponent, Mohamed bin Hammam, has since been banned from football for life ). Some have argued that this impropriety should cost Qatar the World Cup, and FIFA has created and empowered an ethics committee to investigate potential wrongdoing. The United States FBI is also investigating the payments. If FIFA finds wrongdoing, it might reassign the cup on that basis.

I believe that to reassign the Cup on the basis of corruption in the FIFA vote would be a mistake. The Qatari World Cup is a magnifying glass on unfair labor practices in Qatar, and the Cup’s potential impact on human and labor rights is too great to give up.

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Guinean, American Anticorruption Investigators Tear Up the “Best Private Mining Deal of Our Generation”

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The mining mogul Benny Steinmetz was once feted for the “best private mining deal of our generation,” after his company secured Africa’s richest iron ore deposit in Simandou, Guinea. Today, the deal “lies in ruins.” A two-year investigation by Guinea’s government has found that Steinmetz’s firm BSGR used corrupt practices to win its mining rights from Ahmed Sekou Touré, Guinea’s former dictator, . The company has now been stripped of these rights. Meanwhile, the FBI has Steinmetz on tape authorizing millions of dollars in payments to the wife of a former Guinean dictator. A BSGR associate, Frederic Cilins, has pled guilty to obstructing an FCPA inquiry into the mining deal in a Manhattan court; Swiss prosecutors are looking to question Steinmetz himself. Perhaps unbelievably for Benny Steinmetz, anticorruption authorities around the world have responded furiously to a clandestine deal in an overlooked, West African backwater.

Four takeaways from these incredible developments, after the jump.

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Investigating a Company “As Big as Brazil”

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“Petrobras is bigger than all of us,” declared Brazilian President Dilma Roussef. “Petrobras is as big as Brazil.” Brazil’s federal police had raided the state-run oil company’s headquarters three days earlier, on April 11, and President Roussef was defensive. “No one and nothing,” she said, “will destroy Petrobras.” That the probe proceeds despite President Roussef’s warnings demonstrates the power of the Brazilian people. While it is too early to know whether Brazil will prosecute its biggest company, the investigation, and a separate congressional inquiry, may be testaments to the impact that mass public protests — involving more than 1 million protestors over the course of the last year — have had on prosecutors and government officials.

The Petrobras probe’s initiation months before a presidential election, and the political battle surrounding it, however, raise a red flag: are the people speaking, or are powerful political groups?

Continue reading →

India Votes against Corruption, But Not for Its Anti-Corruption Party

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For perhaps the first time, Indians set aside community and religious divisions to vote against an incumbent government perceived to be corrupt. Nevertheless, the country’s new anti-corruption party performed poorly in this month’s national elections, picking up only four of the five hundred and forty-five seats in the lower house of parliament.

I have written about the Aam Aadmi Party (AAP), a political outfit borne out of anticorruption protests, here. I recently expressed hope that the urban, middle-class party would be able to encourage rural, low-income Indians to vote against corruption, rather than along community or religious lines.

I was partly right–but only partly. India’s vast electorate handed a resounding defeat to the corruption-plagued Congress party. Congress—the party that led India’s independence movement and has ruled the country for most of the past sixty years—won only forty-four seats, its worst showing ever. This would not have been possible if India’s voters had ignored issues like corruption and good governance.

However, AAP was unable to take advantage of this anticorruption sentiment. There are two major reasons for this. Continue reading →

Encouraging More Corruption-Related Litigation?

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On June 28 the Oxford Institute for Ethics, Law and Armed Conflict and the Open Society Foundations’ Justice Initiative will, with the help of this writer, host a one-day conference at the Said Business School entitled Legal Remedies for Corruption to discuss ways civil society can stimulate corruption-related litigation – either by pressuring prosecutors to file more criminal cases or by bringing their own civil actions for damages.

The question mark in the title is for American readers who might be forgiven for asking why such a conference is necessary.  Isn’t there enough litigation already? The U.S. Department of Justice and Securities & Exchange Commission continue to vigorously enforce the Foreign Corrupt Practices Act, while the Justice Department’s Public Integrity Section continues to ferret out corrupt federal, state, and local officials.  In 2012, the last year for which data is available, the section charged more than 1,000 individuals with accepting bribes, criminal conflict of interest, and other corruption offenses. And private parties in the U.S. have also been willing to sue alleged bribe payers, with suits brought by a range of injured parties including competitors, suppliers, partners, shareholders, and employee-whistleblowers.  Even foreign governments have taken advantage of American law’s broad standing rules and generous theories of damages: One alleged bribe payer recently paid a company owned by the Government of Bahrain $85 million to settle a claim it had harmed the company by bribing one of its employees to secure a contract, while the government of Trinidad has brought an action under Florida’s version of the Racketeer and Corrupt Organizations Act against the companies that allegedly rigged bids on an airport construction project in Port of Spain.

It turns out that while there is a great deal of litigation — public and private — over bribery allegations in the United States, this is much less true in most of the rest of the world. Continue reading →