Category Archives: Commentary

Larger Governments Have Less Corruption (Part 1 – The Evidence)

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Many people believe that one of the most important root causes of public corruption is “big government.” This view was perhaps captured most famously and most succinctly by Gary Becker, the late Nobel Laureate economist, who declared (in a couple of memorable op-ed headlines), “If you want to cut corruption, cut government” and “to root out corruption, boot out big government.” Professor Becker was not what you would call cautious or circumspect in advancing this claim: He insisted that “instituting large cuts in the scope of government is the only surefire way to reduce corruption,” and that without such cuts even the most well-intentioned anticorruption reforms and crackdowns would fail, because “corruption always reemerges wherever governments have a major impact on economic conditions.” Though Professor Becker was perhaps the most blunt (and famous) advocate for this view, many others have taken this position. (See here, here, here, and here.) Indeed, a while back I attended an anticorruption conference at which a former senior minister of a European country (whose identity I cannot disclose due to the conference’s confidentiality rules) declared that the key to reducing corruption in his country was the decision to drastically shrink the public sector, slashing taxes, public spending, and the overall size of government–and this ex-official called on other countries to follow that advice as well.

But before we go charging ahead advising countries that the only way that they can get their corruption problem under control is to cut their governments, it might make sense to assess whether the available empirical evidence actually supports Becker’s hypothesis. Is it true that (all else equal) countries with larger governments have more corruption, compared to countries with smaller governments?

The answer is no. If anything, the evidence cuts in the opposite direction. Continue reading →

My Fellow Americans: Please Never, Ever Say (or Imply) That the United States Is the Only Country that Tries To Do Something About Corruption

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In my last post, I cautioned those of us who talk about corruption to be careful to avoid saying – even casually – that “everyone” in this or that country is corrupt, not only because that statement is incorrect, but also because it’s offensive and counterproductive. I realize that it wasn’t the most important of topics, but language matters, and the political sensitivity of corruption means that those of us from wealthier countries should be especially careful about the language that we use. (Think about David Cameron’s “fantastically corrupt” gaffe at last spring’s London Anti-Corruption Summit for an example of how poorly chosen words can get in the way of substantive engagement.) That’s not to say we should shy away from accurately describing and criticizing systemic corruption where it exists; it’s just a caution against careless hyperbole.

In that (perhaps trivial and nit-picky) spirit, I want to call attention to something else I’ve heard now several times from U.S. speakers at anticorruption conferences, which strikes me as extraordinarily arrogant, offensive, and incorrect. It goes like this:

  • American speaker gets up before multinational audience to talk about the U.S. approach to fighting corruption and, in an apparent effort to defuse precisely the risk of condescension that I’m complaining about, says something like, “Now, one thing we learn from the U.S. experience is that we have a corruption problem too. Corruption is a problem everywhere, including in the United States.”
  • OK, so far so good. But then the American speaker says, “The difference is that in the United States, we try to do something about it.”

Ugh. Is it possible to imagine a more ham-handed, condescending thing to say, especially to a multinational audience? I mean, look, I think that the U.S., for all its faults, can be justly proud of its law enforcement efforts to fight domestic corruption, particularly the role of the FBI, Department of Justice, and federal judiciary. While the U.S. is far from perfect, it’s my view that the culture of impunity pervasive in many parts of the world is, as a relative matter, not nearly as bad in the U.S. And I do think other countries can learn from the U.S. experience. But to suggest that the United States stands alone in its willingness to try to do something about corruption is (A) obviously factually incorrect, and (B) insulting to the hardworking, often heroic men and women in other countries who are fighting against corruption every day, and to the governments in at least some of those countries that have made anticorruption a priority, but are having trouble making progress due to a range of factors (severe resource constraints, powerful entrenched interests, complicated political situations, etc).

And really, what purpose is served, substantively or rhetorically, by saying, “The difference is that in the U.S. we try to do something about corruption”? The speech that follows that opening line would be just as effective if the speaker just said, “Now, one thing we learn from the U.S. experience is that we have a corruption problem too. Corruption is a problem everywhere, including in the United States. But the U.S. experience in our struggle with corruption – both the things we’ve done well, and the challenges and limitations of our approach – may provide some useful lessons for others engaged in a similar struggle.”

OK, OK, I know that this is beyond trivial, and I promise in future posts I’ll return to weightier topics. But this has just been bugging me, so I thought I’d get it off my chest.

Watch Your Language: Not “Everyone” Is Corrupt–Anywhere.

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I’ve noticed something about the way many people (including me) sometimes describe the severity of the corruption problem in many parts of the world: When calling attention to the problem of widespread, systemic corruption, it’s not uncommon to hear people say—usually in casual conversation, occasionally in more formal presentations—that in this or that country, or this or that government or department, “everyone” is corrupt, or “everybody” takes bribes, or similar. I’m sure I’ve used this or similar language myself, without even thinking about it. And I understand that when most people say things like “everyone in [X] is corrupt,” they don’t mean that literally. Yet I find myself increasingly bothered by statements like this, for several reasons: Continue reading →

Artful Transactions: Corruption in the Market for Fine Arts and Antiques

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The fascination surrounding art theft and forgery has long been the subject of much exploration. Only more recently, however, has the art market come under increased scrutiny regarding its connection to money laundering and corruption. It’s not just that stolen artworks often end up in the hands of criminals: even the market for non-stolen art is especially vulnerable to money laundering and corruption. With more banks cracking down on illicit activities, art has become an “efficient instrument for hiding cash.” As an article in the New York Times observed, no business seems “more custom-made for money laundering, with million-dollar sales conducted in secrecy and with virtually no oversight.”

Considering the attention paid by anticorruption and anti-money laundering activists to the role of the real estate market and the market for other luxury goods to facilitate money laundering and bribery, it is perhaps a bit surprising that there hasn’t been more attention to the art market—which is perhaps even more deserving of scrutiny. Continue reading →

When Lunch is a Bribe: American and Korean Law Compared

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It is the rare businessperson or lobbyist who takes a politician or bureaucrat they barely know to lunch just for the pleasure of their company.  Lunch-buyers may enjoy the food (particularly if the money comes out a corporate pocket) and not all politicians and bureaucrats are self-centered bores.  But face it: the main reason bureaucrats and politicians world-wide are wined and dined by people they hardly know is because they are in positions of power and the meal-buyers want to influence them — perhaps to persuade them to purchase the lunch-buyer’s product for their ministries, maybe to change their minds about pending legislation.  Yet as obvious as the reason for picking up a lunch the tab is, in the Republic of Korea, and many American jurisdictions as well, on its face the law provides that if lunch-buyers admit why they paid for lunch, they and their luncheon companion go to jail.

That despite these laws Seoul’s upscale restaurants and their counterparts in many American state capitols continue to do a brisk lunchtime business suggests many lunch-buying businesspersons and lobbyists and their government guests regularly deny the obvious.  It would be one thing if lawmakers had intended to turn this group into liars and hypocrites, but they did not.  It is instead an unintended consequence of laws actually meant to permit public servants to take lunch with those having business with them. Continue reading →

Culture Matters: How Indonesia Should Account Culture to Eradicate Corruption

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Corruption in Indonesia is endemic, permeating all levels of society. As I argued in my last post, Indonesia’s culture of corruption is a result of the corruption of culture: Far too many people see corruption as unsolvable and even “normal,” even though they clearly realize its wrongfulness.

To date, Indonesia’s independent anticorruption agency, the KPK, has pursued a main strategy of prosecuting the “big fish”—the high-ranking officials (including numerous parliament members and powerful politicians) whose corrupt behavior has caused massive damage to the country. Laudable though the KPK’s bold enforcement efforts have been, eradicating corruption requires more than prosecutions. Rather, the KPK needs to complement its aggressive law enforcement with preventive measures designed to change Indonesia’s “culture of corruption” to a “culture of anticorruption.” There are several strategies the KPK could pursue to foster such cultural change:

Continue reading →

A Tale of Two Regions: Anticorruption Trends in Southeast Asia and Latin America

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OK, “best of times” and “worst of times” would be a gross exaggeration. But still, when I consider recent developments in the fight against corruption in Latin American and Southeast Asia, it seems that these two regions are moving in quite different directions. And the directions are a bit surprising, at least to me.

If you’d asked me two years ago (say, in the summer of 2014) which of these two regions provoked more optimism, I would have said Southeast Asia. After all, Southeast Asia was home to two jurisdictions with “model” anticorruption agencies (ACAs)—Singapore and Hong Kong—and other countries in the regions, including Malaysia and especially Indonesia, had established their own ACAs, which had developed good reputations for independence and effectiveness. Thailand and the Philippines were more of a mixed bag, with revelations of severe high-level corruption scandals (the rice pledging fiasco in Thailand and the pork barrel scam in the Philippines), but there were signs of progress in both of those countries too. More controversially, in Thailand the 2014 military coup was welcomed by many in the anticorruption community, who thought that the military would clean up the systemic corruption associated with the populist administrations of Thaksin Shinawatra and his successor (and sister) Yingluck Shinawatra—and then turn power back over to the civilian government, as the military had done in the past. And in the Philippines, public outrage at the brazenness of the pork barrel scam, stoked by social media, and public support for the Philippines’ increasingly aggressive ACA (the Office of the Ombudsman), was cause for hope that public opinion was finally turning more decisively against the pervasive mix of patronage and corruption that had long afflicted Philippine democracy. True, the region was still home to some of the countries were corruption remained pervasive and signs of progress were scant (such as Vietnam, Laos, Cambodia, and Myanmar), but overall, the region-wide story seemed fairly positive—especially compared to Latin America where, aside from the usual bright spots (Chile, Uruguay, and to a somewhat lesser extent Costa Rica), there seemed to be precious little for anticorruption advocates to celebrate.

But now, in the summer of 2016, things look quite a bit different. In Southeast Asia, the optimism I felt two years ago has turned to worry bordering on despair, while in Latin America, things are actually starting to look up, at least in some countries. I don’t want to over-generalize: Every country’s situation is unique, and too complicated to reduce to a simple better/worse assessment. I’m also well aware that “regional trends” are often artificial constructs with limited usefulness for serious analysis. But still, I thought it might be worthwhile to step back and compare these two regions, and explain why I’m so depressed about Southeast Asia and so cautiously optimistic about Latin America at the moment.

I’ll start with the sources of my Southeast Asian pessimism, highlighting the jurisdictions that have me most worried: Continue reading →

The Culture of Corruption and the Corruption of Culture in Indonesia

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With over 300 ethnic groups scattered across more than 17,000 of its islands, Indonesia is justly proud of its extremely diverse cultural heritage. But Indonesia is certainly not proud of a different aspect of its culture: a ”culture of corruption” so pervasive that it is not merely associated with grand corruption in the central government, but also infects the daily lives of the citizens through petty corruption, as well as daily harassment by local officials and governmental departments.

When trying to diagnose the root cause of such pervasive corruption, a common knee-jerk response is to focus on the legal system and law enforcement institutions. Yet Indonesia seems to do fairly well on these dimensions: A well-regarded independent anticorruption agency, the KPK, in cooperation with the police and prosecution spearheads enforcement of a comprehensive Anticorruption Law that both considers domestic needs and incorporates principles enshrined in international materials such as the United Nations Convention Against Corruption. Still, corruption persists. Why?

To answer this question, one must look at not only the legal system, but also the society—the people whose conduct the laws are supposed to regulate. Such observation reveals that the “culture of corruption”— society’s permissive, tolerant, and even accepting attitude toward corruption – is perhaps the main culprit responsible for Indonesia’s incurable corruption.

Continue reading →

Fact-Checking the FCPA Scaremongers

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In my last post, I made a disparaging in-passing reference to assertions, by some critics of the US Foreign Corrupt Practices Act (FCPA), that companies could get in FCPA trouble if they do things like buy a foreign government official a cup of coffee, take her to a reasonably-priced business meal, cover her taxi fare, etc. In my view, that’s just wrong, both because the US government would not bring such a case, and because the FCPA wouldn’t cover such isolated, modest benefits. The reason, as the DOJ/SEC FCPA Resource Guide explains, is that such benefits, without more, would not be offered “corruptly”–that is, with the wrongful intent of inducing the official to misuse her official position). I described those who suggest that the FCPA would criminalize such minor benefits as “FCPA scaremongers.”

My use of that the term “scaremonger” seems to have touched a nerve with Professor Mike Koehler–the self-described “FCPA Professor”–who had this to say in his comment my earlier post:

Scaremongering? Recent FCPA enforcement action have included allegations about flowers, cigarettes, karaoke bars, and golf in the morning and beer drinking in the evening.

I responded by asking Professor Koehler to identify the most ridiculous example of an actual FCPA settlement in which a trivial benefit was the sole basis of the enforcement action, as opposed to a small part of a larger scheme to corrupt government officials into misusing their authority. Professor Koehler answered:

The following is a factual statement: recent FCPA enforcement action have included allegations about flowers, cigarettes, karaoke bars, and golf in the morning and beer drinking in the evening.

I take the position that the DOJ/SEC include such allegations in FCPA enforcement actions for a reason and not just to practice their typing skills.

I again asked for an example. Professor Koehler’s response was to send, not the name of any individual case, but rather the links to the DOJ and SEC sites with all enforcement documents, suggesting that I could go through them myself to find “numerous examples of inconsequential things of value” included in the government allegations. He also referred to “several speeches” by SEC enforcement chief Andrew Ceresney (I actually think it’s one speech, given by Mr. Ceresney in November 2015) that supposedly acknowledged the government’s sweeping view of FCPA-prohibited conduct.

Having tried unsuccessfully to get Professor Koehler to point me to a specific example, I did a bit of digging on my own to see if I could find out if it’s really true that the DOJ and/or SEC have brought FCPA enforcement actions in cases that involve nothing more than “flowers, cigarettes, karaoke bars, and golf in the morning and beer drinking in the evening.” What I found makes me even more confident that I was fully justified in my use of the term “FCPA Scaremongers,” with Professor Koehler as perhaps the FCPA Scaremonger-in-Chief. Here are the cases to which I’m fairly sure Professor Koehler was referring: Continue reading →

Public Trust Theory: A Way Citizens Can Combat Resource Corruption?

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Public trust theory derives from the sovereign’s duty to act as the guardian of certain interests for the benefit of the nation as a whole. In the United States it serves as the basis for citizen suits to vindicate environmental rights, and it has been incorporated into the African Charter on Human and Peoples’ Rights which provides in article 21 that the wealth derived from a nation’s resources is for “the exclusive interest of the people . . . [and in] no case shall a people be deprived of it.”  Could it be used by civil society to combat grand corruption in the allocation of land and natural resources?

That is the question Elmarie van der Schyff, a professor of law at South Africa’s North-West University, addresses in a new paper prepared for the Open Society Justice Initiative’s project examining how civil society can help spark more anticorruption enforcement actions.  After carefully parsing South African law governing civil suits for damages, Professor van der Schyff concludes that “public-trust theory has a supportive role to play” in helping South Africans recover damages for injuries sustained when corruption infects the distribution or use of the nation’s natural resources.  Her thoughtful analysis shows how citizens of other states can use the principles that underlie the public trust doctrine to bring damage actions too.

Professor van der Schyff’s paper is the sixth in a series commissioned by the Open Society Justice Initiative on civil society and anticorruption litigation.  It follows earlier ones on i) standing by GAB editor-in-chief Matthew Stephenson, ii) civil society litigation in India by Vidhi Centre for Legal Policy Director Arghya Sengupta, iii) private suits for defrauding government by Houston Law School Professor David Kwok, iv) private prosecution in the U.K. by Tamlyn Edmonds and David Jugnarain, and v) damages for bribery under American law by this writer.