Do Americans Care About Corruption?

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We usually imagine that democratic accountability serves an important anticorruption function: since voters presumably do not approve of corruption, a benefit of democracy is the ability to give untrustworthy pols the boot. Yet in a recent op-ed in the Washington Post, Hilary Krieger provocatively claims that American voters don’t really care if a politician engages in corrupt acts, so long as “a political leader has otherwise furthered the public good.” In addition to this descriptive claim, she also makes the normative argument that Americans voters are right not to reflexively vote out politicians tainted by corruption.

Although both her descriptive and normative claims have some truth to them–elections are multi-faceted, and corruption is not the end-all-be-all issue–both the descriptive and normative arguments have serious flaws.

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Updated Anticorruption Bibliography

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Yet another update of my ever-expanding bibliography on corruption and anticorruption is now available from my website, and a direct link to the pdf is here. I’m always looking for new sources to add, so if you have suggestions for additions, please send them using the Contact page.

Going After the Bribe Takers: Step One

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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.

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Do Anticorruption Blogs Matter? Alexei Navalny’s Example

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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

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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?

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Event Announcement: IBA Mexico City Conference, May 12-13

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For readers who might be interested, the International Bar Association‘s Anti-Corruption Committee (of which I am a new but enthusiastic member) is co-sponsoring a conference on “The Fight Against Corruption in Latin America: Implications for Lawyers” in Mexico City on April 12-13.  Looks like a terrific program, particularly for practitioners dealing with corruption risk management in the Latin American region. You can find out more information about the conference here.

The OECD Bribery Convention as Cover for US FCPA Enforcement Abroad

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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.

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Do Companies Benefit from Self-Disclosing FCPA Violations?

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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.

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What About the Bribe Takers? (1)

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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.

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

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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.

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