“Only Freedom Will Defeat Corruption”: Glittering Generality of the Day

Several organizations – including the World Bank, Transparency International (TI), and Pricewaterhouse Coopers Foundation – have attempted to develop corruption indicators; all of them depend on aggregate surveys of citizens, businesses or experts and therefore base their results on perceptions of the problem as opposed to more objective data. … these measurement approaches have acknowledged reliability and validity problems … “Second generation” governance indicators currently under development may resolve some of the measurement and methodological issues. –Chetwynd, Chetwynd and Spector, “Corruption and Poverty: A Review of Current Literature.” Management Systems International, January 2003.

Media coverage of published corruption rankings may influence people’s perception of corruption in the country. Also, perceived corruption may “overweight” well-publicised corruption scandals compared to more colloquial cases of bribery (“headline bias”). This is true even if the respondents have significant personal exposure to corruption. For instance, in constructing their Bribe Payers’ Index, Transparency International asked business leaders what their main sources of information on corruption, unfair competition and anticorruption treaties were. “The press media” was the preferred response, chosen by 79% of respondents. “Personal experience” was only third at 59%. –Erlend Berg, “How Should Corruption be Measured?” London School of Economics, May 2001

Glittering generalities are emotionally appealing words so closely associated with highly valued concepts and beliefs that they carry conviction without supporting information or reason.

Porfirio Cristaldo Ayala of Spain’s Libertad Digital — “ETA could too have done 11-M!” — comments on the problem of corruption and poverty.

“Only freedom will defeat corruption”

The logic employed is sophomoricallly tortured and all too familiar. It’s that standard Opinion Journal noise-achine editorial No. 1(b), based on the same old gambit that assumes that Transparency International’s Corruption Perception Index is an actual “measure of corruption,” with all conclusions, based on fuzzy, meaningless numbers, proceeding from that premise.

Which is widely recognized as a bogus premise. Transparency International does not even make that claim. But then again, it does not write a lot of letters to the editor correcting this common assumption, either.

The same goes for the World Bank, whose survey along similar lines comes with a red herring warning you that these numbers are not meaningful enough for the World Bank to rely on them in its decision-making. Which makes you wonder why they spend money churning them out in the first place … unless they churn out supplementary numbers that allow you to check perception against realilty, that is. Gallup International has done some interesting studies in that regard, I have that here somewhere … I am collecting literature on the problem of defining, and measuring the actual incidence of, “corruption.”

The problem, argues Porfirio, is that government officials in poor countries tend to be more susceptible to bribery, as witnessed by a supposed correlation, he says, between the “poverty” of a nation and its position on the “corruption index.”

That, he tells us, is because poor countries tend to be “statist,” while rich countries tend to have open economies that do not burden the private sector with undue regulation.

The solution, therefore, is for poor countries to stop regulating the private sector.

No regulation, no regulators to bribe.

If Mexico followed that advice, of course, Zhenli Ye Gon would still be running designer drug and crank precursors into the Port of Manzanillo.

The inefficient and corrupt bureaucracy, designed to prevent Schedule I narcotics from entering the country to be cooked into “redneck cocaine” and shipped off to Miami, would be gone. Free trade would rule the day, and Mexican prosperity would flow from its redneck cocaine-exporting economy.

And consider the Cisco case in Brazil, where importers and resellers of Cisco equipment allegedly bribed official in order to dodge tariffs and duties designed to favor local tech industry.

To do so, they allegedly bribed Brazilian tax auditors and customers inspectors into providing and validating phony import documents, among other things.

Which makes you wonder whether or not, if rich countries have less of a problem with bribe-taking, their wealth may not not in some measure derive from bribe-paying in foreign markets by their multinational corporations.

(The United States is one of the “cleanest” countries on earth.

Iraq is the most corrupt, although it is sort of a hazy question to which nation’s account corruption endemic to the the U.S. military occupation should be credited.

Thanks to Jerry Bremer’s tenure at the CPA, however, Iraq has remarkable economic freedom. In theory. For one thing, the government, which only controls the Green Zone in Baghdad on good days, is in no position to regulate anything — including the ammunition dumps from which an endless supply of bomb-making materials gets cadged. How much more freedom could you possibly want?)

Was that not the concern that led to the Foreign Corrupt Practices Act (1977, amended 1998), so often cited in coverage of the Cisco case here in Brazil, but more honored in the breach than in the observance?

This is, of course, a hypothesis that is excluded by design from the corruption “measure” cited here: the oft-cited Transparency International Corruption Index, which measures the perception of corruption in various countries by surveying multinational business executives.

Translation: If Brazil, for example, would only stop trying to protect its fledgling native tech sector and let the entire country become a Microsoft shop, then multinationals who object to operating under laws they object to would no longer be forced to break those laws, or to bribe government officials in order to gain the full, unfettered access those laws deny them.

“I do not like the laws of the country where I am doing business. So I am going to ignore them, as long as I can get away with it.”

It’s a business strategy common to oil multinationals in Nigeria and Latin American Bolivian marching powder cartels.

La pobreza y la corrupción van de la mano. Los países más pobres son a su vez los más corruptos, como puede observarse año tras año en el índice que publica Transparencia Internacional. Tan importante como encontrar una solución eficaz a este viejo mal es saber qué viene primero, la corrupción o la pobreza.

Poverty and corruption go hand in hand. The poorest countries are at the same time the most corrupt, as can be observed year after year by the Transparency International index. Just as important as finding an efficient solution to this old problem is knowing which came first: Corruption or poverty.

¿Es la corrupción la causa de la pobreza, como suponen muchos, o es a la inversa? Aunque quizá suceda que ambas cosas sean productos de una misma causa: el estatismo predominante en los países pobres. La corrupción no es un problema de las personas, sino del sistema económico en que se registra.

Is corruption the cause of poverty, as many suppose, or is it the other way around? It may be that both are effects of the same cause: the statism that predominates in poor countries. Corruption is not a problem of persons, but of the economic system in which it is recorded.

En América Latina la corrupción sigue siendo una pelea perdida. Al igual que en África, ha arraigado como “la cultura del trámite y la coima”. Haití (puesto 177 de 180), Venezuela (162) y Ecuador (150) figuran entre los países más corruptos del mundo, según el Índice 2007 de TI. El Índice de Percepción de la Corrupción (IPC), que clasifica a los países en una escala de 0 a 10 (en la que cero es “sucio” y diez, “limpio”), otorga un 1,6 a Haití, un 2 a Venezuela y un 7 a Chile, el país más limpio de Latinoamérica. Los países más sucios son los que más cayeron y los que más sufren por falta de inversiones, empleos y oportunidades.

In Latin America, corruption continues to be a lost battle. Like Africa, it has become deeply rooted as “the culture of red tape and the fine.” Haiti (177 of 181 countries in the CPI), Venezuela (162) and Ecuador (150) are among the most corrupt nations in the world, according to the 2007 TI index. The Corruption Perception Index, which rates countries on a scale of 0 to 10, gives a 1.6 to Haiti, a 2 to Venezuela and a 7 to Chile, the cleanest country in Latin America. The dirtiest nations are those … that suffer from lack of investiments, jobs and opportunities.

Chile and Venezuela reported nearly identical unemployment rates in 2006: Around 8.8%. (Source: UNCTAD)

Chile, Uruguay, Costa Rica, El Salvador y Colombia son los más limpios de América Latina, en tanto que Haití, Venezuela, Ecuador, Paraguay, Nicaragua, Bolivia y Argentina son los más corruptos. No importa cuánto ingreso tenga un país, como Venezuela con el petróleo, Bolivia con el gas y Haití con la ayuda externa: si la corrupción es elevada, los ingresos se evaporan en los bolsillos de la elite, mientras la gente se hunde en la indigencia. Unos altos niveles de corrupción quieren decir que gran parte de los impuestos destinados en principio a financiar la educación, la salud, la seguridad y las infraestructuras terminan enriqueciendo a funcionarios, políticos y empresarios “amigos”.

Chile, Uruguay, Costa Rica, El Salvador and Colombia are the cleanest nations in Latin America, while Haiti, Venezuela, Ecuador, Paraguay, Nicaragua, Bolivia and Argentina are the most corrupt.

Anyone who has followed the Chiquita Brands case in Colombia — the firm has allocuted to paying off both the AUC and the FARC, and providing transport for illegal arms shipments to the former — has to wonder what “clean” exactly means in this context.

A”clean” business environment in which union organizers wind up in mass graves and drug-running paramilitaries fix elections so the “pro-economic freedom” candidates will win? Does the “freedom from government” score rise when parts of the country are run by narcoparamilitaries and guerrillas?

On Costa Rica, see also “Costa Rica’s Continuing Fall From Grace” (COHA, 2005), and note its interaction with a firm from squeaky-clean Finland:

In 2001, Finland loaned the Costa Rican social security system $39.5 million with which to purchase advanced medical technology on the condition that San José purchase at least half the equipment it needed in this sector from Finnish corporations. The president of Costa Rica at the time, Rafael Calderón, allegedly received a kickback from the Finnish director of the state-sponsored program. Last April, the Finnish ambassador to Central America pledged to reform the nation’s foreign aid format, acknowledging that the terms of the 2001 loan invited corrupt transactions.

Further reading:

According to an article in the San José daily La Nación, a March report co-sponsored by the OAS and the Swedish-based International Institute for Democracy and Electoral Assistance found Costa Rica’s system of contributions to political campaigns as “linked to practices that go against public interest.” According to the report, individuals and corporations are known to have bribed legislative and executive officials to “‘ease’ appointments, bids, loans, bills, decrees and regulations for the benefit of the donors.”

In does not matter how much income a nation has, as Venezuela with its oil, Bolivia with its gas, and Haiti with its foreign aid.

Are you telling me that the foreign aid that Haiti gets — MINUSTAH tanks and 23,000 rounds fired in the Cite Soleil in a single afternoon — is a valuable natural resource on a par with the mineral resources of Bolivia and Venezuela?

If corruption is high, revenues vanish into the pockets of the elite, while the people wind up begging on the streets.

Read up on Iraq’s current electricity crisis. Huge investments. Not just no progess, but a worsening of the situation.

If my taxpayer dollars are disappearing into this pit, is this a function of Iraqi corruption?

Según TI, los países menos corruptos son Dinamarca, Finlandia y Nueva Zelanda, con un IPC de 9,4. Entre los diez más limpios se cuentan también Suecia, Singapur, Islandia, Holanda, Suiza y Canadá. Pero esta limpieza es relativa. Los países ricos se aprovechan de la corrupción de los pobres. Las multinacionales, coimas mediante, otorgan al Tercer Mundo préstamos para obras innecesarias y compras de equipos caros e ineficientes. Los bancos de los países ricos se sientan sobre el dinero robado en los países pobres.

According to TI, the least corrupt nations are Denmark, Finland, and New Zealand, with an IPC of 9.4. Also among the ten “cleanest” are Sweden, Sinagpore, Iceland, Holland, Switzerland and Canada. But this “cleanliness” is relative. Rich nations take advantage of the corruption of the poor nations.

When an agent of multinational corporation bribes a foreign official, he is taking advantage of the official’s corruption.

But he is not engaging in corruption itself.

He may be engaging in a criminal act.

But he is not corrupt.

Actually, a number of legal codes do distinguish between “active corruption” and “passive corruption,” even if corruption indices do not. They also generally distinguish between being a victim of extortion and actively offering an inducement.

La solución se ha encarado de distintas formas: desde las reformas institucionales y educativas hasta la aplicación de penas más severas. Pero es inútil pretender cambiar la naturaleza humana, crear el “hombre nuevo” e incorruptible. En Irán, los funcionarios corruptos son mutilados, y en China ejecutados; pero la corrupción sigue igual. Un emperador romano hacía castrar a todos los funcionarios para evitar las tentaciones.

Various solutions have been tried, from institutional and educational reforms to the application of harsher penalties. But it is useless to try to change human nature, creating a new, “incorruptible” man. In Iran, corrupt officials are mutilated. In China, they are executed. But corruption continues unabated. One Roman emperor had all of his officials castrated in order to avoid temptation.

Which one was that? I cannot think of the case off the top of my head, and I have read my Plutarch.

And I am not sure I see the relevance. Castration may prevent you from wanting to fuck Caesar’s wife, daughter or concubine, but is it really an effective barrier to illicit self-enrichment? Those Byzantine court eunuchs, they say, were the worst of all.

The Emperor Domitian outlawed the practice of gelding slaves.

El problema está en el sistema, no en las personas. Los latinoamericanos no son más ladrones que los suizos. La cultura es muy diferente, pero la real diferencia está en el sistema. Es el sistema el que corrompe.

The problem is in the system, not in the persons. Latin Americans are not bigger thieves than the Swiss. Their culture is very different, but the real difference is the system. It is the system that corrupts.

El c muestra desde hace más de quince años que los países con mayor libertad económica son los más limpios y ricos, en tanto que los más estatistas y menos libres son los más sucios y pobres. El estatismo es la causa principal no sólo de la corrupción, también de la pobreza. La economía se atrofia en la medida que el Gobierno, actor improductivo, crece a expensas de la producción. Por eso corrupción y pobreza van de la mano.

The [Heritage Foundation?] Index of Economic Freedom shows that for more than 15 years, the countries with the greatest economic freedom have been the cleanest and richest, while the more statist and less free are the dirtiest and poorest. Statism is the principal cause, not only of corruption, but also of poverty. The economy atrophies to the extent that the government, an unproductive actor, increases the cost of production. This is why corruption and poverty go hand in hand.

I am looking at that report. It does make that claim:

Not only is a higher level of economic freedom clearly associated with a higher level of per capita gross domestic product, but those higher GDP growth rates seem to create a virtuous cycle, triggering further improvements in economic freedom. Our 13 years of Index data strongly suggest that countries that increase their levels of freedom experience faster growth rates.

The image “https://i2.wp.com/i113.photobucket.com/albums/n216/cbrayton/freedompercap.png” cannot be displayed, because it contains errors.

The GDP axis has a logarithmic scale. But It kind of looks like at maybe half the nations with per capita GDP of $10,000+ have “freedom scores” under the median of 60. Including the country with the second-highest per capita GDP.

If half the good basketball players are shorter than average, and half are taller than average, maybe basketball is a game in which height is not a factor.

The lowest score achieved — outside of North Korea’s 3 —  being Cuba’s 30; the highest Hong Kong’s 90.

Qatar, with a score of 60, has per capita GDP of maybe $50,000. Colombia, with the same freedom score: about the same as Venezuela, at around $6,500 in 2005.

Venezuela ranks 144th, just below Bangladesh.

It does receive a score of 69.5% in the “freedom from government” category, but only 10% in terms of security of private property. Go figure. It attracted some $3 billion in FDI in the last reported period, while Chile attracted $6.6 billion. Go figure again.

Russia comes in 120th place, just after China and Lesotho. China has enormous amounts of foreign investment, as does, reputedly, Vietnam, down there in 130th place or so.

Iraq is not rated.

Iraq was last graded in 2002, when it received a score of 0 percent.

North Korea currently rates a score of 3.

This guy from the Mises Institute has collected some interesting critiques of the “freedom index” from various schools of “dismal scientific” thought.

Which I will get to eventually. But look: I hated “the dismal science” in college? Why am I torturing myself with it now?

La intervención estatal en la actividad económica promueve la corrupción de los funcionarios, que venden favores con los que evitar excesivas regulaciones, impuestos y trámites. En cambio, en las economías más libres, más capitalistas, donde la intervención es mínima, la corrupción tiene poco o nada que vender. El problema y la solución están en el sistema. Sólo la libertad vencerá a la corrupción.

State intervention in economic activity promotes the corruption of state officials, who sell favors in order to avoid excessive regulation, taxes and red tape. On the other hand, in economies that are more free, more capitalist, where state intervention in minimized corruption has little or nothing to sell. The problem and the solution lie in the system. Only freedom will defeat corruption.

Define “freedom.”

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