02/11/2010

Corruption is that disease that keeps poor countries poor

This week's Economist (£) has an article about n campaign that reminded me how much I hate corruption and those who excuse it as being something to be excused because of local customs, especially when it comes to aid money:
CONGRESSMEN working late into the summer nights to overhaul America’s system of financial regulation were surprised when Bono started lobbying them. Yet the rocker-cum-campaigner helped to insert a far-reaching change into the legislation they were drafting. It has nothing directly to do with America’s financial mess, but it will push forward the fight against corruption in the developing world, a cause which has made some much-needed progress recently.
The bipartisan amendment to the Dodd-Frank act requires every oil, gas and mining firm listed on an American stock exchange to disclose in detail all the payments it makes to governments. It is the biggest success yet for the “publish what you pay” campaign, a global coalition of anti-corruption groups. It aims to reduce corruption by increasing transparency. The idea is that politicians and officials will think twice about filling their pockets with money from foreign firms if the public knows of the existence of such payments.
I have come across low level corruption first hand in a number of places and it is insidious. The first was in the far east when the taxi I was in was stopped by the local police. The policeman snarled at me sat in the back and then gave the driver a hard time. Following the incident it transpired through broken English that this is a regular occurrence and left the driver with very little of the days takings. His hours would be very  long and hard that day and all he could do was hope he didn't suffer another shakedown.

Its an old saying that fish rots from the head down and corruption at these low levels is a symptom of a rotten state where politicians and those with real power abuse it, to the detriment of all. So I welcome this move to put pressure on industry not to pay bribes because everyone loses, except those receiving the bribes. The company loses by having to pay them, although they receive adequate compensation, their competitors lose out but more importantly the people of the country lose out not just through the rotten fish, but because they pay more for goods that may not be the highest quality available.

Now don't think that this is something that America needs to address because they are all red in tooth capitalists who don't give a stuff about the workers. From my experience US companies have tried to avoid having to pay bribes and have probably lost out to countries and companies with much lower standards.  Indeed the tale I tell above occurred when I was doing some work for a US multinational on a contract bid they eventually lost to a European company.

It is only recently that that  paragon of economic virtue, Germany, has made it illegal for its companies to pay bribes to foreign officials:
The Gesetz zur Bekämpfung der Korruption (KorrBekG – Anti-Corruption Act), enacted in 1997, was the last measure to improve Germany's anti-corruption criminal law that was solely initiated by German political actors. Since then all amendments originated in international legal instruments. Implementing only the minimum requirements of these international provisions has led to inconsistencies within the criminal law dealing with active and passive bribery. Further anti-corruption conventions signed by the German government require additional modifications. This opportunity should be used as a starting point for a thorough reform of Germany's anti-corruption criminal law.
But that hasn't stopped its companies continuing to bribe overseas officials. If a US or UK company had been as corrupt as Siemens:
Ever since the scandal broke in late 2006 the company has been confronted with mounting evidence that officials, perhaps under the blind eye or with the covert connivance of senior managers, used bribes across the globe to win lucrative contracts. It has identified so far €1.3bn (£1bn) in slush funds and put the cost of cleaning out its Augean stables at €1.8bn.
 or Daimler:
But a report released on Tuesday by the United States Department of Justice said German automaker Daimler engaged in a "longstanding practice of paying bribes" to foreign officials in order to win government contracts between 1998 and 2008.
there would have been all hell to pay in the left wing media, and quite rightly, but neither of these cases reached the MSM in any great way. Maybe Germany's economic export miracle is built on putting its competition out of business through corruption?

But that isn't what really gets me going, we can expect that from evil capitalist companies who aren't correctly governed. No, what really winds me up and has me spitting is when I hear that Government aid, either directly or indirectly through NGOs and charities is given to corrupt countries, knowing full well that most it will disappear into some private Swiss bank account.

Even worse, they pass this off as cultural and that it isn't for us to be judgemental. Well, yes it is, its our hard money that is knowingly being given to these corrupt thieves, and that, in my mind makes those doing the giving corrupt thieves as well.

But they try to make it sound as if we should be grateful for giving the money because we have somehow become rich at the expense of those poor countries. No, we became rich because we booted out corrupt rulers and insisted on the rule of law for all. We enforce property rights and freedom, within reason, to go about our daily business without fear of petty corruption sanctioned by even more corruption at the top.

So by all means lets have campaigns to make capitalists tell us where their money is going, but that needs to be supported by a campaign to make Governments and NGOs stop paying bribes as well. Yes, I know they will scream that we are hurting the poor, but we've been sing this argument for years and barely a dent has been made into poverty in most poor countries. So to that argument I say, the poor will suffer in the short term, but that is a small price to pay.



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