The three policemen barked "straf", "straf" in unison. It
was a Russianized version of the German word for "fine"
and a euphemism for bribe. I and my fianće were
stranded in an empty ally at the heart of Moscow,
physically encircled by these young bullies, an ominous
propinquity. They held my passport ransom and began to
drag me to a police station nearby. We paid.
To do the fashionable thing and to hold the moral high
ground is rare. Yet, denouncing corruption and fighting it
satisfies both conditions. Such hectoring is usually the
preserve of well-heeled bureaucrats, driving utility
vehicles and banging away at wireless laptops. The
General Manager of the IMF makes 400,000 US dollars a
year, tax-free, and perks. This is the equivalent of 2,300
(!) monthly salaries of a civil servant in Macedonia - or
7,000 monthly salaries of a teacher or a doctor in
Yugoslavia, Moldova, Belarus, or Albania. He flies only
first class and each one of his air tickets is worth the bi-
annual income of a Macedonian factory worker. His
shareholders - among them poor and developing countries
- are forced to cough up these exorbitant fees and to
finance the luxurious lifestyle of the likes of Kohler and
Wolfensohn. And then they are made to listen to the IMF
lecture them on belt tightening and how uncompetitive
their economies are due to their expensive labour force.
To me, such a double standard is the epitome of
corruption. Organizations such as the IMF and World
Bank will never be possessed of a shred of moral
authority in these parts of the world unless and until they
forgo their conspicuous consumption.
Yet, corruption is not a monolithic practice. Nor are its
outcomes universally deplorable or damaging. One would
do best to adopt a utilitarian and discerning approach to it.
The advent of moral relativism has taught us that "right"
and "wrong" are flexible, context dependent and culture-
sensitive yardsticks.
What amounts to venality in one culture (Slovenia) is
considered no more than gregariousness or hospitality in
another (Macedonia).
Moreover, corruption is often "imported" by
multinationals, foreign investors, and expats. It is
introduced by them to all levels of governments, often in
order to expedite matters or secure a beneficial outcome.
To eradicate corruption, one must tackle both giver and
taker.
Thus, we are better off asking "cui bono" than "is it the
right thing to do". Phenomenologically, "corruption" is a
common - and misleading - label for a group of
behaviours. One of the following criteria must apply:
(a) The withholding of a service, information, or goods
that, by law, and by right, should have been provided or
divulged.
To have a phone installed in Russia one must openly bribe
the installer (according to a rather rigid tariff). In many of
the former republics of Yugoslavia, it is impossible to
obtain statistics or other data (the salaries of senior public
officeholders, for instance) without resorting to kickbacks.
(b) The provision of a service, information, or goods that,
by law, and by right, should not have been provided or
divulged.
Tenders in the Czech Republic are often won through
bribery. The botched privatizations all over the former
Eastern Bloc constitute a massive transfer of wealth to
select members of a nomenklatura. Licences and
concessions are often granted in Bulgaria and the rest of
the Balkan as means of securing political allegiance or
paying off old political "debts".
(c) That the withholding or the provision of said service,
information, or goods are in the power of the withholder
or the provider to withhold or to provide AND That the
withholding or the provision of said service, information,
or goods constitute an integral and substantial part of the
authority or the function of the withholder or the provider.
The post-communist countries in transition are a
dichotomous lot. On the one hand, they are intensely and
stiflingly bureaucratic. On the other hand, none of the
institutions functions properly or lawfully. While these
countries are LEGALISTIC - they are never LAWFUL.
This fuzziness allows officials in all ranks to usurp
authority, to trade favours, to forge illegal consensus and
to dodge criticism and accountability. There is a direct
line between lack of transparency and venality. Eran
Fraenkel of Search for Common Ground in Macedonia
has coined the phrase "ambient corruption" to capture this
complex of features.
(d) That the service, information, or goods that are
provided or divulged are provided or divulged against a
benefit or the promise of a benefit from the recipient and
as a result of the receipt of this specific benefit or the
promise to receive such benefit.
It is wrong to assume that corruption is necessarily, or
even mostly, monetary or pecuniary. Corruption is built
on mutual expectations. The reasonable expectation of a
future benefit is, in itself, a benefit. Access, influence
peddling, property rights, exclusivity, licences, permits, a
job, a recommendation - all constitute benefits.
(e) That the service, information, or goods that are
withheld are withheld because no benefit was provided or
promised by the recipient.
Even then, in CEE, we can distinguish between a few
types of corrupt and venal behaviours in accordance with
their OUTCOMES (utilities):
(1) Income Supplement
Corrupt actions whose sole outcome is the supplementing
of the income of the provider without affecting the "real
world" in any manner.
Though the perception of corruption itself is a negative
outcome - it is so only when corruption does not
constitute an acceptable and normative part of the playing
field. When corruption becomes institutionalised - it also
becomes predictable and is easily and seamlessly
incorporated into decision making processes of all
economic players and moral agents. They develop "by-
passes" and "techniques" which allow them to restore an
efficient market equilibrium. In a way, all-pervasive
corruption is transparent and, thus, a form of taxation.
This is the most common form of corruption exercised by
low and mid-ranking civil servants, party hacks and
municipal politicians throughout the CEE.
More than avarice, the motivating force here is sheer
survival. The acts of corruption are repetitive, structured
and in strict accordance with an un-written tariff and code
of conduct.
(2) Acceleration Fees
Corrupt practices whose sole outcome is to
ACCELERATE decision making, the provision of goods
and services or the divulging of information. None of the
outcomes or the utility functions are altered. Only the
speed of the economic dynamics is altered. This kind of
corruption is actually economically BENEFICIAL. It is a
limited transfer of wealth (or tax) which increases
efficiency. This is not to say that bureaucracies and venal
officialdoms, over-regulation and intrusive political
involvement in the workings of the marketplace are good
(efficient) things. They are not. But if the choice is
between a slow, obstructive and passive-aggressive civil
service and a more forthcoming and accommodating one
(the result of bribery) - the latter is preferable.
Acceleration fees are collected mostly by mid-ranking
bureaucrats and middle rung decision makers in both the
political echelons and the civil service.
(3) Decision Altering Fees
This is where the line is crossed from the point of view of
aggregate utility. When bribes and promises of bribes
actually alter outcomes in the real world - a less than
optimal allocation of resources and distribution of means
of production is obtained. The result is a fall in the general
level of production. The many is hurt by the few. The
economy is skewed and economic outcomes are distorted.
This kind of corruption should be uprooted on utilitarian
grounds as well as on moral ones.
(4) Subversive Outcomes
Some corrupt collusions lead to the subversion of the flow
of information within a society or an economic unit.
Wrong information often leads to disastrous outcomes.
Consider a medical doctor or an civil engineer who bribed
their way into obtaining a professional diploma.
Human lives are at stake. The wrong information, in this
case is the professional validity of the diplomas granted
and the scholarship (knowledge) that such certificates
stand for. But the outcomes are lost lives. This kind of
corruption, of course, is by far the most damaging.
Unfortunately, it is widespread in CEE. It is proof of the
collapse of the social treaty, of social solidarity and of the
fraying of the social fabric.
No Western country accepts CEE diplomas without
further accreditation, studies and examinations. Many
"medical doctors" and "engineers" who emigrated to
Israel from Russia and the former republics of the USSR -
were suspiciously deficient professionally. Israel was
forced to re-educate them prior to granting them a licence
to practice locally.
(5) Reallocation Fees
Benefits paid (mainly to politicians and political decision
makers) in order to affect the allocation of economic
resources and material wealth or the rights thereto.
Concessions, licences, permits, assets privatised, tenders
awarded are all subject to reallocation fees. Here the
damage is materially enormous (and visible) but, because
it is widespread, it is "diluted" in individual terms. Still, it
is often irreversible (like when a sold asset is purposefully
under-valued) and pernicious. a factory sold to avaricious
and criminally minded managers is likely to collapse and
leave its workers unemployed.
Corruption pervades daily life even in the prim and often
hectoring countries of the West. It is a win-win game (as
far as Game Theory goes) - hence its attraction. We are all
corrupt to varying degrees. But it is wrong and wasteful -
really, counterproductive - to fight corruption in CEE in a
wide front and indiscriminately. It is the kind of
corruption whose evil outcomes outweigh its benefits that
should be fought. This fine (and blurred) distinction is too
often lost on decision makers and law enforcement
agencies in both East and West.
ERADICATING CORRUPTION
An effective program to eradicate corruption must include
the following elements:
1. Egregiously corrupt, high-profile, public figures,
multinationals, and institutions (domestic and
foreign) must be singled out for harsh (legal)
treatment and thus demonstrate that no one is
above the law and that crime does not pay.
2. All international aid, credits, and investments must
be conditioned upon a clear, performance-based,
plan to reduce corruption levels and intensity.
Such a plan should be monitored and revised as
needed. Corruption retards development and
produces instability by undermining the
credentials of democracy, state institutions, and
the political class. Reduced corruption is,
therefore, a major target of economic and
institutional developmental.
3. Corruption cannot be reduced only by punitive
measures. A system of incentives to avoid
corruption must be established. Such incentives
should include a higher pay, the fostering of civic
pride, educational campaigns, "good behaviour"
bonuses, alternative income and pension plans,
and so on.
4. Opportunities to be corrupt should be minimized
by liberalizing and deregulating the economy. Red
tape should be minimized, licensing abolished,
international trade freed, capital controls
eliminated, competition introduced, monopolies
broken, transparent public tendering be made
mandatory, freedom of information enshrined, the
media should be directly supported by the
international community, and so on. Deregulation
should be a developmental target integral to every
program of international aid, investment, or credit
provision.
5. Corruption is a symptom of systemic institutional
failure. Corruption guarantees efficiency and
favourable outcomes. The strengthening of
institutions is of critical importance. The police,
the customs, the courts, the government, its
agencies, the tax authorities, the state owned
media - all must be subjected to a massive
overhaul. Such a process may require foreign
management and supervision for a limited period
of time. It most probably would entail the
replacement of most of the current - irredeemably
corrupt - personnel. It would need to be open to
public scrutiny.
6. Corruption is a symptom of an all-pervasive sense
of helplessness. The citizen (or investor, or firm)
feels dwarfed by the overwhelming and capricious
powers of the state. It is through corruption and
venality that the balance is restored. To minimize
this imbalance, potential participants in corrupt
dealings must be made to feel that they are real
and effective stakeholders in their societies. A
process of public debate coupled with
transparency and the establishment of just
distributive mechanisms will go a long way
towards rendering corruption obsolete.