Remarks By Robert Klitgaard at the Carter Center Conference
May 3, 1999
The author is Ford Distinguished Professor of International Development and Security and Dean of the RAND Graduate School, Santa Monica, California.
Our task this morning to consider some of the causes and consequences of corruption. My first point will be that the causes come at several levels. Then I will argue that progress in fighting corruption will depend on analysis to help guide and to stimulate political courage and moral activism. The analysis should occur in two domains. How can systems be made less vulnerable to corruption? And if corruption does get established, how can its own systematic weaknesses be attacked and exploited? Finally, I'll provide some examples where I think analysis within and across the countries of our region could help reduce corruption.
To begin, consider an imperfect but suggestive analogy. Corruption is like AIDS. It is a problem in every country, but especially prevalent and damaging in a few. It has aspects of a contagion. It is based on private behavior, usually consenting, which the prevailing moral code usually considers immoral. The social consequences are at many levels, including economic. Finally, the disease itself is difficult to combat, and frighteningly it may adapt itself to efforts to defeat it.
Like AIDS, corruption has moral dimensions and is particularly prevalent in certain subcultures. Our first instinct may be to call for a moral renovation, for a change in mentalities. In a spate of recent books, such as Fabricantes de Miseria, corruption is attributed to Latin American attitudes regarding authority, probity, and the acceptable behavior of political leaders and top public managers. The political culture has been characterized as "the privatization of the State," but referring to the informal and illicit private use of government by the political class and its allies for their own interests. So, given the region's history and the current parlous state of public finances and management, it is no wonder that when corruption is discussed, a kind of fatalism sets in. "What can be done? We can only progress if we have a change in attitudes."
The problem with this level of analysis—the underlying moral and cultural causes—is that we know little about how to engineer a change of mentality. Fortunately, in part thanks to the efforts of many of the people in this room, we do see a sea-change in how seriously corruption is taken as an issue around the world. We do see unprecedented outrage by citizens. We do see increasing numbers of leaders who are elected on anti-corruption platforms. But just as with AIDS, we need to work at many levels. It is fine to decry corruption. It is probably not harmful to preach about its ultimate causes, such as materialism, a "get rich quick" mentality, and a breakdown of social norms and sanctions. But just as with AIDS, we must also work at other levels.
A second level is that of reducing risks. By definition corruption is immoral. It is also illegal: no country has legalized bribery, extortion, embezzlement, fraud, or nepotism. But corruption is also a crime of calculation. Individuals weigh the benefits and the costs of giving and taking bribes. These costs include moral costs, and the weighing takes place in individual consciences that are shaped by social values and cultural norms. But because economic calculations are present, corruption will respond to changes in the benefits that can be gained from the illegal transaction, which in turn depend on the way the system of supplying those benefits is structured. Corruption will also respond to the costs of the illegal transaction, which in turn depend on the risks of being discovered and prosecuted, and the penalties that result from prosecution.
In short, quite apart from an analysis of morals or attitudes, we can analyze systems in terms of their vulnerability to corruption. This is true in the private sector as well as in government; it is also true in NGOs. Competition is less vulnerable to corruption than monopoly. Clear rules of the game are less susceptible to corruption than are systems where official discretion is paramount. Systems with accountability and ample information about results are less vulnerable than systems whose lack of transparency leads readily to clandestine decisions. Corruption, in a quick summary, is more pronounced in systems characterized by the formula C = M + D – A: corruption equals monopoly plus discretion minus accountability.
This approach has practical applications, but time permits only a few examples.
First, promote competition. In particular, if the private sector can competitively provide something that government is now providing monopolistically, consider privatization combined with policies to promote accountability.
A second application concerns public sector wages and incentives. Too many Latin American governments pay accountants and auditors and economists and information specialists salaries that are one half, one third, even one quarter of the salaries in the private sector. In the public sector there are few incentives linked to good performance—unlike the private sector, where in the last decade we have seen a revolutionary swing toward "gain-sharing" and other forms of performance-based pay. And the penalties for corruption are mild. This mixture of low salaries, weak incentives for good performance, and weak penalties for bad, is an invitation to corruption. I believe that civil service reforms will make little progress without resolving these incentive issues.
Third, consider the prevention of corruption within particular agencies. In Hong Kong, as Bertrand de Speville can describe, the Independent Commission Against Corruption has a wing dedicated to prevention. Working with each agency of government, the people working in this wing examine each step in the ways money is allocated, contracts are let, and permits are assigned. At each step they examine monopoly power, discretion, and accountability; and then they make recommendations accordingly. A similar logic is used by Inspectors General in the United States and by public agencies in the United Kingdom, France, and elsewhere.
By analyzing systems in terms of their vulnerability to corruption, we can make those systems more resistant. Promote competition. Clarify discretion. Improve accountability. And take seriously the positive and negative incentives faced by the potentially corrupt.
But what if prevention has failed and systematic corruption has already taken hold? As with AIDS, a third level of fighting corruption attacks the disease itself. It assumes that the risks have been run and now the disease is present. How might systems of corruption themselves be analyzed for their weaknesses, and then be attacked? Here is where I think a lot of valuable work remains to be done. Let me quickly give three stylized examples of corrupt systems in the Americas.
First example. Appointing top officials resembles the spoils system, and the expectation is that contracts will be awarded and funds allocated in ways that favor, licitly as well as illicitly, the local and political interests involved. Such systems have direct costs in the inefficiency and robbery they permit. But they have powerful indirect costs. They sometimes lead to managerial chaos, which in turn results in even wider orbits of corruption and, occasionally, to financial collapse of the organization.
How might such a system be subverted? What are the weaknesses of this system of political appointments? First, the existence of such a system is relatively easy to document. It is also relatively easy to create a kind of map that links the political appointees with the recipients of contracts and public expenditures. Let us do create these maps and insert them into the pubic dialogue. It will not automatically lead to change. But exposure creates new tensions for the corrupt system and generates antibodies, which can eventually lead to change.
Another common system of corruption involves fraud, extortion, and speed money in the allocation of licenses, permits, carnets, etc. What are the weaknesses of these corrupt systems? They are public, not even very secretive. They are easy to uncover and analyze through user surveys and informants. Often you could even film them with a hidden camera. Moreover, it is relatively easy to measure improvement, again by talking with citizens and users and doing spot checks.
A third example is perhaps the most costly form of systematic corruption, public contracts. Here one finds systems of arrangements among politicians, officials, and contractors. These corrupt systems feed on weaknesses in the bidding system, in direct contracting, and in performance appraisal and auditing, in order to create monopoly plus discretion minus accountability. But these corrupt systems have their own systematic weaknesses. Again, one can relatively easily trace out the patterns of the allocations of contracts, and these patterns may reveal places where detailed investigations will be illuminating. Confidential interviews with fifteen or twenty business people can focus on the informal system that parallels, indeed replaces, the formal one.
This conference is dedicated to action. What are some of the recommendations for action that might ensue from the analysis above?
On a regional basis, I recommend international efforts to analyze corrupt systems. Imagine an international study that invited the private sector and civil society to document the abuses and the way informal systems really work. Perhaps we could choose three areas. The appointment of top public officials and subsequent patterns of contracts and expenditures. One or another area where fraud and extortion is taking place in handling eligibility for pensions or health plans. And contracting and procurement with the private sector.
More studies—just what a professor would recommend. But the studies I have in mind are not academic. For example, fifteen confidential interviews with businesses involved in road building or in hospital supplies can uncover the way corrupt systems work, as long as we are not asking these people to name names. Indeed, in my own work in many countries, I find that public officials who are themselves part of corrupt systems will analyze the risks of corruption in systematic terms, if given the chance.
Such studies would be shared first with governments, then with the press, then across countries in an international conference. They would help undermine corrupt systems. Not because politicians would automatically listen and act. The situation is more complicated than that. Thank goodness, we do see a change in attitudes about corruption. I believe that many politicians face a dilemma when corruption has become systematic. They appreciate its harms and wish in the long run for it to be reduced. At the same time, their fragile polities depend on patronage. There is a political schizophrenia about corruption. Politicians will act, but only if there is political cover and if there is a clear, sequenced political strategy that has a chance to succeed.
So this is how analysis can help subvert the corrupt systems that so harm us. Analyze the vulnerability of our public and private institutions to corruption, creating what might be called "maps" of where the risks of corruption are high, and then recommending appropriate preventive measures. But then, too, analyze corrupt systems themselves, attacking their weaknesses through greater transparency.
Peter Eigen and others will have advice for how to use the energies of civil society to create more transparency in our societies. His organization, Transparency International, is admirably named. Transparency not only prevents corruption from taking hold in the first place, but it can be a powerful antidote once systematic corruption has taken hold. The trick is to go beyond witch hunts and anecdotes. Together, we should analyzing the ways that systems are vulnerable to corruption, and analyzing the vulnerability of corrupt systems—and then, together, be subversive against corruption.
At the outset of this talk I asked you to consider the analogy of AIDS. Years back, the first conferences on AIDS included lots of consciousness-raising about the causes and terrible consequences of this disease. Now, in constructive ways, the agenda has progressed. Hundreds and indeed thousands of research projects focus on many levels of analysis, especially prevention and attacking the AIDS virus itself.
Let's hope that we can follow that example. We are all grateful to the Carter Center and to the sponsors of this important conference on transparency and growth. I hope it is the first of many. Just like AIDS, we should not expect a quick win. Instead, we should carry out research at many levels about changing attitudes and values, about reducing risky behavior and vulnerability, and about the disease itself, how to attack its weaknesses. Just as with AIDS, solutions will not come from government alone, nor from political activism alone, necessary as both of these are. They'll also require the most rigorous and comparative analysis we can manage.
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