Corruption myth flipped but still lands butter side down

“Many international development organisations hold that persistent poverty in the Global South is caused largely by corruption among local public officials. In 2003 these concerns led to the United Nations Convention against Corruption, which asserts that, while corruption exists in all countries, this ‘evil phenomenon’ is ‘most destructive’ in the global South, where it is a ‘key element in economic underperformance and a major obstacle to poverty alleviation and development’.

There’s only one problem with this theory: It’s just not true.”

So says Jason Hickel. He explains:

“According to the World Bank, corruption in the form of bribery and theft by government officials, the main target of the UN Convention, costs developing countries between $20bn and $40bn each year. That’s a lot of money. But it’s an extremely small proportion – only about 3 percent – of the total illicit flows that leak out of public coffers. On the other hand, multinational companies steal more than $900bn from developing countries each year through tax evasion and other illicit practices.”

It is a good point, but here’s the thing: it’s not necessarily the amount of money stolen that matters. Since most of this money is stolen from government coffers this only materially harms a citizen of that country if the government would otherwise have spent the money on services to them. Round here, however, most people are pretty cynical; the government mostly spends money on itself (legalised corruption if you like) and is often pretty useless at actually delivering useful services.

But, as anyone who has spent significant time in the least developed countries will tell you, the bigger problem is the all pervasive, endemic petty corruption. I would wager that economic underperformance happens not so much because some official stole some money from the government, but because someone could not register their business without paying a bribe that they cannot afford; others die or are maimed in road accidents because the police accept small bribes on a daily basis to look the other way; the list goes on … I have no figures to back up this assertion, so could be wrong, and obviously some thievery does have direct economic consequences if it means a new road or power plant is not completed. On the other hand how many business investment opportunities are foregone with investors are put off by their inability to enforce basic contracts due to a justice system that is always on sale to the highest bidder?

Dr Hickel’s moral outrage is well directed. The scale of tax evasion by multinationals is truly disgusting. But it does not detract from the importance of developing country governments putting their own houses in order, and it would be a shame if the crusade against international tax evasion served as a fig leaf for inaction domestically. Alas I doubt a UN Convention will help much with that; real reform will only come when the citizens of these countries demand accountability for themselves.

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7 responses to this post.

  1. […] the issue of corruption is being probed more closely lately, Barongo ba Kafuuzi Ateenyi writes this guest post in response to “Aid, Africa, Corruption, and […]

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  2. The tax evaders can avoid tax through local corruption – the brown envelope.
    Also if they paid more tax – as they should – it would still be sifted in local corruption. E.g. Higher wages paid to government workers as a result of greater tax collection would result in a proportionate increase in police bribes at the road block; or dodgy tenders etc.
    The amount of tax collected is already subject to local corruption to varying degrees. Increase of tax collection would just further increase corruption.
    So corruption is the core issue but tax avoidance is terrible.
    The point also needs to be made about this type of thinking which can be summarised as – solve one problem and everything will be all right from that day forward. Things are more complicated than one problem but I suppose it makes a good headline.

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  3. Posted by David on February 19, 2014 at 1:53 pm

    You describe a huge array of problems in developing countries (governments divert funds to political priorities of little use; police do not enforce speed limits; potential deterrence to investors from extra risk). Most of these arise from problems with the underlying ways societies are run, and the deals their elites use to structure how they will be governed.

    My question is – how is it helpful to assert that these are “corruption” and hence a moral failing? It seems strange to group all these problems under the rubric of corruption, when you seem fully aware that in most cases, what drives them isn’t particularly bad moral failings by “corrupted” officials, but rather a clear and accurate understanding that in place X, this is how things are done. It seems to me that arguing that this is corrupt behavior is a way to point the finger of blame, and to say, “well, if they really wanted to, they could change all this, but they don’t have the moral fiber.”

    That’s also how I took the initial comment to which you’re posting in reply – that the issue of corruption, per se, is overblown, and there are better ways that we can spend our time and money trying to change how things are in developing countries than by launching efforts as part of a “fight against corruption.” Chris Blattman had a good explanation of this a while back (http://chrisblattman.com/2014/01/22/what-we-talk-about-when-we-talk-about-corruption/). Two cents from the peanut gallery.

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    • Ok, I can see where you are coming from, but I think excusing corruption under the blanket of local cultural norms is going a little too far with ones relativism, and it fails the quack test (a bribe is still a bribe, and still corrupt, even if normal practice).

      I do, though, wholeheartedly agree with both you and Chris Blattman on the relative importance of addressing corruption as part of international aid programmes. (My post was not about aid priorities.) There is also something to be said for the argument that plenty of countries have gotten quite rich (China being the obvious modern example, Italy is also often cited, possibly unfairly) whilst remaining pretty corrupt.

      Conversely, however, I think most people would tend to agree that widespread, endemic corruption harms development, and thus if a country can do something about it they should. But I do think that by far the bigger part of the push needs to come from the citizens of that country themselves, demanding more honest government, than anything much donors and other outsiders can offer.

      We can, and should, do our bit on tax evasion. It won’t solve all developing countries’ problems, but it will help. Likewise LDC citizens and governments should do their bit.

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  4. Hello, one and all. Nice blog only discovered yesterday.
    This idea that this is just the way of dealing with things in some places is just not correct. It is a bit off to say that the indigenous people almost like having to pay bribes because it is the norm in particular cultures. Says who that it is the norm. It is abuse of power by those in power whatever the level of the position in power is. That is if the officer is forcing the bribe. If the customer is encouraging the bribe and it is taken then they are both to blame. These points are illustrated below after a wander into the shop to show it is not the norm in ordinary life and would not be tolerated. You pay the price and that is all – nothing more and nothing less.
    Imagine in Nakumatt you filled your trolly with goodies then went to the checkout and the person said that will be 1000 shillings please but you can’t take it out unless you give me something extra. Eh, a little sugar, perhaps. You would be straight up to the manager and complain.
    The government advertises a licence at $500.00 say but you can get it without paying the $500.00 but paying something less a different way without a receipt or a false receipt. He and you are stealing from the government in this instance. That is moral.
    Or you have to pay the $500.00 for the license but something on top or the man won’t give you the licence. He is stealing from you. That is moral.
    Once went into a passport office to get a visa extension. $50.00 thanks said the man in the office. After much pleasant conversation and stamping of the passport he handed me back the passport, now legal again, saying, thanks very much, good day. I said, is there anything else, meaning my receipt, but not saying that expressly. He said, no, good day. Being weak, I walked out with my passport but no receipt. Couldn’t claim my expenses. But the best ever was Nairobi International Airport but that is for another day.
    However since i am in the mood for some stories: here is another one. Please forbear. Got the letter saying your permit application has been successful please come in to have your passport updated etc, etc.. Went in with my letter with some foreboding knowing this could be a difficult situation. Officer took letter from me. Ah I have helped you a lot said she, with a dazzling smile. Went off for the file. Look what I have done for you as she presented the file, grinning broadly. She was really pouring it on. I don’t pay bribes said I, most firmly, and I don’t. But I have helped you. You have just done your job. She buckled. Whack, whack, stamp, stamp. Up to date for two years. She gave me the passport. I said, come with me. Took her round the corner and bought her some meat. Seemed very happy. The gov. got all their money but I shouldn’t have done it because the next time she might think the thank you – which i never told her about until she handed me the passport – was a bribe after the event but it wasn’t. I was so ecstatic at getting my permit I could have taken her for lunch. Ho hum.
    It is a dismissable offence and at certain levels a criminal offence. Western or developed countries are introducing criminal laws to prevent it so that businesses in the UK or rather their representatives with the brown envelope can be brought up on charges in the U.K.
    It is a serious issue. Abacha, Golden Gate or whatever that thing was in Kenya that ruined the country, Diamonds are forever. Get your copper and cobalt here – going cheap. Mutatu crashes with fatalities two km after they pay through the road block. It is all corruption.
    My point, i think referred to in David’s third paragraph, has been misunderstood. I was saying that corruption is the real problem not tax evasion. Meaning: it wouldn’t matter how much tax was collected because it would be eaten by corruption or a lot of it anyway. I do accept that I am contradicting my point about one solution to one problem solves everything. I fall into the same mistake because I believe the main problem is corruption.
    Another thing is that I don’t believe these stats presented on corruption. They are far too low. Ask a Nigerian or a Swiss banker.
    Please excuse my ramblings.

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  5. I can recommend a good book on “grass eater” scale corruption (brown envelops, minor officials and public service personnel) called Everyday Corruption and the State which tries to fill a void of theoretical scholarship on the subject. A more convoluted approach to corruption theory that is interesting but not entirely convincing is Jane Jacobs’ Systems of Survival, which codifies governance ethics and commercial ethics as mutually exclusive codes of conduct and maps corruption as an inevitable product of their intersection (mixed ethical models where the gray areas are exploited for short-term gain in ways that are detrimental to the system of governance or free and voluntary transaction model of stranger ethics, respectively). The latter book is worth browsing for interesting case studies and reflections on how many things can go wrong in professional ethics on a spectacular scale, and includes some well worked critical thinking examples, but leans too heavily on Plato’s Republic for systemizing principles that are more valuable as psychosocial curiosities than as an analytical framework for corruption research.

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