Category Archives: Commentary

Going After the Bribe Takers: Step One

Posted on by
10

Last week I wrote about the gap between prosecutions for transnational bribe paying and transnational bribe taking.  Even after a bribe payer in one state has been convicted or pled guilty, most countries where the bribe was paid have shown little interest in investigating who took the bribe – an often easy inquiry given the evidence unearthed in the bribe payer case.  I also noted that in almost every instance the bribe was paid by a firm in an OECD country to a government official in a developing state.

Continue reading →

Do Anticorruption Blogs Matter? Alexei Navalny’s Example

Posted on by
5

Some blogs, including this one, are devoted to analysis and discussion of anticorruption policy issues.  But a number of anticorruption bloggers are more like investigative journalists—finding and exposing instances of (alleged or apparent) corruption. Do these blogs make a difference?

This question is related to the more general question of whether the modern communications revolution—particularly the spread of internet access—will be helpful in fighting corruption. There’s reason for optimism: there’s already lots of evidence that the spread of traditional media (newspaper and radio) were crucial in the fight against corruption in the 20th century, and the internet (along with other communications technologies, like mobile phones) lowers the cost of both disseminating and accessing information about corrupt activities. In addition to individual anticorruption bloggers and websites, platforms like I Paid a Bribe and Bribespot are emerging that may enable much larger numbers of people to disseminate information. These new technologies have gotten a lot of press, but do they make a big difference?

There’s surprisingly little systematic evidence on the impact of internet on corruption, but a recent paper on the Russian anticorruption blogger (and opposition figure) Alexei Nevalny, co-authored by Ruben Enikolopov, Maria Petrova, and Konstantin Sonin, suggests that this sort of anticorruption blogging may have a real impact. Nevalny is a well-known (and controversial) figure in Russia, and he got a lot of international press last month for his exposé on corruption in the Sochi Winter Olympics. But he got his start blogging about corruption in Russian state-owned companies. And, according to Enikolopov, Petrova, and Sonin, Navalny’s posts made a difference: when he posted about a company on his anticorruption blog, that company’s value took a significant hit. What can we learn from this? Continue reading →

The Economist’s Crony Capitalism Index Does Not Measure Crony Capitalism

Posted on by
10

The Economist’s recent cover story, introducing what it calls the “Crony-Capitalism Index”, has generated a lot of buzz. The study ranks 23 countries (counting Hong Kong separately) based on the Economist’s calculation of the prevalence of politically connected business dealing. The study takes billionaires from the Forbes Billionaires List who are primarily active in certain industries (such as casinos, banking, extractive industries, real estate, utilities, etc.) that the Economist deems “rent-heavy,” and looks at these billionaires’ share of the economic pie in their country. The index has already been used as the basis for media criticism of those countries that scored poorly, such as Hong Kong (1st) and Malaysia (3rd) — indeed, the Malaysian government was so upset that it censored the Economist for the week the index came out.

Some of the results are unsurprising: Russia and India score fairly high in this measure of crony capitalism, whereas Germany bottoms out the list. But other results are more puzzling.  Not only does the index report that Hong Kong has more crony capitalism than mainland China, but also that mainland China has less crony capitalism than either the United States or Great Britain. What gives? Does the United States really have more of a crony capitalism problem than China?

Continue reading →

The OECD Bribery Convention as Cover for US FCPA Enforcement Abroad

Posted on by
8

Both Rick and Matthew’s posts earlier this week discussed the effectiveness of the 1997 OECD Anti-Bribery Convention in combating international corruption. Rick emphasizes the Convention’s success in prosecuting supply-side bribery, noting the hundreds of convictions and settlements since the Convention came into force. But as Matthew pointed out, and as the OECD itself has acknowledged, the impressive-sounding aggregate enforcement numbers mask the fact that enforcement is highly unevenly distributed: the majority of the Convention’s 40 member countries still do not enforce their anti-bribery laws effectively (if at all)–and most of the increase in enforcement that Rick highlights comes has come not from the countries that recently adopted extraterritorial anti-bribery laws, but from the United States, which has had such a law – the FCPA – on the books for more than 35 years.

Continue reading →

Do Companies Benefit from Self-Disclosing FCPA Violations?

Posted on by
7

At last Month’s Chatham House conference on Combating Global Corruption, much of the discussion focused on how to create incentives for corporations to uncover and voluntarily disclose violations of foreign anti-bribery laws like the U.S. Foreign Corrupt Practices Act (FCPA). This is important, because as I noted in last week’s post, most FCPA violations are revealed because of self-disclosures, rather than government or media investigation. During the conversation, a distinguished lawyer (whom I cannot identify by name, because of the Chatham House Rule) made the following argument: Although the U.S. Department of Justice claims to give corporations credit for self-disclosure of FCPA violations, “a careful examination of the evidence reveals” that self-disclosure does not result (on average) in any reduction in penalties.

Continue reading →

What About the Bribe Takers? (1)

Posted on by
8

Yesterday Matthew noted the success of the OECD Anti-Bribery Convention in curbing the bribery of public officials by individuals or firms subject to the laws of the 40 countries that have now ratified it.  The enforcement data is surely impressive.  Reports by Transparency International show a steady increase in investigations and prosecutions by the parties to the convention, and the latest OECD data, from 2012, disclose that since the convention took effect in 1999 over 300 individuals and 200 enterprises have been convicted or pled guilty to bribery-related charges with cases pending against another 150 persons and 20 plus firms.

Continue reading →

Expansion of the OECD Anti-Bribery Convention: A Skeptical View

Posted on by
7

The OECD Anti-Bribery Convention (the unwieldy official name of which is the “OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions”) has proven to be a surprisingly successful international agreement—far more effective than the various regional anticorruption instruments or the U.N. Convention Against Corruption (UNCAC), and indeed far more effective than even the OECD Convention’s proponents had predicted. Of course, it’s hard to know how much one can credit the OECD Convention for changes in anticorruption laws and enforcement patterns, but lots of well-informed people believe it has had a big effect, primarily because of its rigorous peer review system. In contrast to other, weaker review systems associated with UNCAC and some of the regional conventions, members of the OECD Convention must submit to a quite extensive and intrusive form of peer review, in successive phases, and cannot veto or prevent disclosure of the resulting reports. The reports are often quite harsh, even scathing, and the political embarrassment associated with a bad review can shame governments and mobilize public opinion.

Given that the OECD Convention has been so successful, should it be expanded to include more countries? After all, membership in the Convention is not limited to the OECD , and indeed several non-OECD countries (Argentina, Brazil, Bulgaria, Columbia, Russia, and South Africa) are already parties. The OECD’s leadership seems to think the answer is a clear yes. At a recent Chatham House conference on “Combating Global Corruption” (which I was fortunate enough to attend), Ángel Gurría, the OECD Secretary-General, declared that it was “imperative that all G20 countries become Parties to the OECD Anti-Bribery convention,” and specifically noted the importance of bringing China, India, Indonesia, and Saudi Arabia on board.

I’m sympathetic to the general idea, and would certainly like to live in a world where all countries accepted—and respected—the commitments embodied in the OECD Convention. But rapid expansion of the Convention has important drawbacks that deserve more attention than they seem to be getting. So at the risk of being the skunk at the garden party, let me lay out the case for skepticism about rapid expansion of the OECD Anti-Bribery Convention.

Continue reading →

Lessons from Europe for India’s Anticorruption Party

Posted on by
10

Last December, a year-old political party formed by anticorruption activists came to power in India’s capital, after a startling debut performance in Delhi’s local assembly elections. Within days, the new government, led by a former tax man named Arvind Kejriwal, announced a series of anti-graft investigations. Only 49 days into its term, however, Kejriwal and his colleagues resigned, ostensibly because their minority government could not push through an anticorruption bill. The party now has its eyes set on India’s parliamentary elections, set to occur this May.

Much has been written about India’s mercurial Aam Aadmi (“Common Man”) Party (AAP): its origins, its dedicated volunteers, its transparent campaign finance procedures, its vague policies regarding anything but corruption, and its missteps (some of which Russel Stamets discusses in a useful recent post on the FCPA Blog). Despite this, there has been little discussion regarding AAP’s place as a single-issue party in India’s deeply fractured political landscape, and little attempt to draw lessons from the successes and failures of anticorruption parties in other parts of the world.  Yet the experience of anticorruption parties in Central and Eastern Europe–as documented and analyzed by Andreas Bågenholm –offers both hope and important lessons to AAP and its supporters. Continue reading →

Does the Social Value of Corruption Indicators Depend Solely on Their Accuracy?

Posted on by
8

We’ve had a series of posts this week (from Michael, Rick, and Addar) about the vexed question of how to measure corruption–including controversies over whether the popular perception-based measures, like Transparency International’s Corruption Perceptions Index (CPI), do so accurately enough to be useful proxies.

But in addition to that discussion — and picking up on something Rick touched on in the latter half of his post — I think it may be worth raising the questions whether: (1) something like the CPI might have desirable effects even if the CPI score is not a particularly good indicator of true corruption, and (2) whether the CPI might have bad effects even if it’s actually quite an accurate measure. To be clear, my very strong predispositions are that we should try to produce and publicize accurate measures of corruption. But it’s at least worth thinking about the possibility that the social value of an indicator may not depend entirely on the accuracy of that indicator–and about what implications might follow from that observation. Continue reading →

Corruption “Tells” — An Overlooked Factor in Determining Corruption Perceptions

Posted on by
9

Last month, the European Commission released a comprehensive report on corruption in the EU, based on two perception surveys (one of the general population and one of businesspeople) as well as existing public data. One of the report’s most striking findings was the prevalence of perceived corruption among the general public: over 75% of Europeans surveyed thought corruption was “widespread” in their country–even in countries where very few respondents had personally experienced or witnessed corruption.

The EU Report is not the first study to find a sizeable gap between people’s perception of corruption’s prevalence and their reported personal experience with corruption.  What explains this gap?  The two most common explanations are: (1) perceptions of corruption overstate true corruption (as perceptions may be swayed by sensationalistic media reports, and perhaps skewed by factors like ethnic heterogeneity and low social engagement, or because of different understandings of what “corruption” means); (2) self-reported experiences with corruption understate true corruption, because people do not respond truthfully to questions about their personal experience even when anonymity is guaranteed.

But there is another possibility, which highlights a limitation of studies that compare only general perceptions of corruption with direct, personal experience with corruption: These surveys typically fail to account for “tells” – observable indications of potential corruption. Continue reading →