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Why fighting corruption helps the poor

(Page 2 of 2)

In Germany, for instance, some key business executives regarded graft as a necessary if unpleasant way of doing business abroad. Then Peter Eigen, chairman of Transparency International, a watchdog group fighting corruption, met with about 20 key executives. Over several meetings, he persuaded them that bribes were by now extremely risky for their companies. If they were caught, consumers of their goods would punish them for their transgressions by withholding purchases.

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As a result, the German government signed on to the 1997 OECD convention and soon thereafter rescinded a law allowing bribes by business made abroad - not in Germany - to be tax deductible.

• The World Bank is promoting "integrity pacts." A group of competitive companies bidding on a major deal, say the privatization of a telecommunications company or a minerals project, will pledge to each other that they will not engage in bribes. If subsequently caught, a bribing firm must pay damages to its competitors without the necessity of them proving damage. And that firm will be blacklisted for future projects.

Some 60 of these pacts now exist involving more than 100 multinational firms.

In a 1996 speech, World Bank president James Wolfensohn placed corruption front and center as a worldwide challenge to development. Today the Bank and other development institutions work to discourage graft, sometimes with success, sometimes with little progress.

"A country needs to have some commitment to help itself," says the World Bank's Kaufmann.

One factor making the worldwide drive to tackle corruption easier has been the end of the cold war. The US and other Western industrial nations are no longer under any strategic pressure to support corrupt governments - thieves on the side of the West.

That change, however, has not ended "political expedience in international relations," cautions Kaufmann.

Another key trend: the spread of democracy across the globe. It makes governments more accountable to their citizenry. "It creates millions of auditors," Kaufmann says.

Moreover, democracy usually includes a more or less free press that can expose corruption.

Another helpful factor is an explosion of data. Economists can now prove the enormous cost of corruption and other elements of poor governance to economic progress. The World Bank even ranks nations on their governance.

When the Bush administration gets its Millennium Challenge Accounts in operation, a new plan to provide more foreign aid to those countries with the better governance that makes economic progress more likely, it will use the bank's ranking of nations, rough as it may be, as a guide.

A fourth factor is the Internet. It makes it easier to disseminate this information. Authoritarian governments have greater difficulty controlling the Web than print or broadcast media.

The World Bank site on corruption gets some 500,000 visitors a month, half from developing countries. Thousands of copies of papers on corruption issues, especially if they include data on the issue, are picked up each month.

When Kaufmann participated in an anticorruption symposium in China two years ago, an official mentioned that a legal-network website highlighting the symposium had 1.2 million visitors. Chinese officials wanted the Chinese people to know about the harm caused by corruption.

All the anticorruption treaties will not do much to limit graft unless nations act on them. They are, in effect, primarily statements of good intentions.

The new UN treaty itself contains no follow-up provisions. But Dmitri Vlassis, a key facilitator of the two-year negotiations leading to the treaty, hopes to get some support from the Nordic nations for a small bureaucracy to help train and advise other nations on how to implement the treaty and call conferences of nations to review progress.

One provision dealing with campaign finance bribery was removed from the treaty at the insistence of the US delegation. Apparently, the US had concerns similar to those expressed in battles over campaign finance at home, that any limitations would restrain free speech.

But the treaty does include a framework for stronger cooperation between nations to prevent, detect, and return the proceeds of corruption. It sets standards, measures, and rules that all countries can apply to strengthen their legal and regulatory anticorruption regimes. It calls for preventive measures and the criminalization of the most prevalent forms of corruption.

"If fully enforced, this new instrument can make a real difference to the quality of life of millions of people around the world," the UN's Annan said.