The truth of the matter is that an increasing number of Sub-Saharan countries in Africa today have more foreign direct investment than foreign aid. They are becoming less and less dependent on the World Bank. The World Bank’s leverage in China for example is zero. Its leverage in India is incredibly marginal and I would argue that is also the case in most of Latin America. If leverage by the Bank is measured by the amount of money it provides then it is not as big as it was 10 or 15 years ago. The only way it can really have leverage is through its “moral” voice as a leader of global development and as a catalyst working with as many partners as possible in promoting transparency and accountability in government. But coalition building against corruption was not something that President Kim mentioned.
Is the World Bank not taking as active a role Is that because they don’t see that corruption as a big issue or for policy reasons they don’t want to upset various people?
It really is neither. It is because at the core of their work, not their research on corruption which has been very good they keep on looking at their projects and their programs as being the defining point for their interventions on good governance. When President Kim talks about investigations these are investigations into the World Bank’s own procurements and whilst they are doing a good job on that it is tiny compared to world trade or world investment. When he announces that the very first decision he had to take was to stop a bridge project in Bangladesh because of alleged corruption that did not change the state of corruption in Bangladesh. I don’t think that he does not mean well and he is absolutely right on the broad issues that he raises, but when it comes to implementation they might want to explore how they can be a good coalition partner rather than going it alone.
Is there something about the structure of the World Bank that they have been organized in such a way that they don’t have a lot of outside people helping them. Has there been a failure to follow up on Jim Wolfensohn’s brave effort to at least mention “the C word” in one of his speeches when he was World Bank President?
Jim Wolfensohn did acknowledge in 1997 that corruption was a big issue and said he would make it a Woprld Bank priority, but a few years later after a lot of criticism that the rhetoric was out of synch with the action, Wolfensohn’s successor Bob Zellick asked Paul Volcker to head an investigation to ask what was going on in terms of effective anti corruption work and he came out with a scathing indictment of the bureaucracy who did not see any real incentives to be tough on corruption. Bob Zellick said he would do something about it. I am not sure how really effective he was, although he created a high level group to look at these things including appointing Huguette Labelle. President Kim now says that he will make corruption a major focal point , he wants to create a whole new entity within the Bank, a department or strategic area to make sure that this becomes a very central part of the Banks’ activities.. That is good, but the key is to see as they move forward that they recognize the point that you cannot reduce corruption on a sustainable basis from outside a country—citizens inside the country have to do it themselves and it is not going to happen top down. When the World Bank tells corrupt leaders that they need to reform they are not going to, even if they do some good things on one project here and one project there. You need to get the citizens of the country to increase the pressure on government for reform and monitoring actual activity. This means that the Bank has to partner with civil society in a far more comprehensive and substantive way, country by country. Until the World Bank understands that clearly, I don’t think its impact on anti corruption can be that great. Having said that, President Kim has declared that his highest priority for the Bank is to end extreme poverty. This demands that that the delivery of basic services to the poor is done within an environment of good governance. It is outrageous that the extremely poor have to pay for basic health services from public hospitals and clinics that are meant to be free. If you are going to get good service delivery to the poor you have to ensure that free services are indeed free and that they are free from extortion by lower level officials and my guess is that in some areas in healthcare, for example, is that the Bank may be able to make some difference in this regard. The current World Bank President has a lot of experience in the area of service delivery of health care to the poor it is an area where he is a great authority and specialist and so my hope is would be as he proceeds with his top priority that he will be very sensitive to the fact that in order to improve service delivery to the very poor the bank will need to work with civil society at the local community levels in very poor countries in order to press for good governance at those levels.
But how can the World Bank play such a role when as you said earlier they have lost a lot of leverage? Isn’t it now much harder for the World Bank to say that we won’t lend to you unless you clean up your act, sign some anti-corruption code and so forth?
It is very complicated. The Bank I believe needs to explicitly and publicly state that it sees a much bigger role for civil society in this particular area in all the countries in which it operates.
This is very complicated because the Bank is owned by governments and under its Articles it can only lend to governments or government entities. So how it manages to bring civil society fully into the picture is complicated, but not beyond the whit of the World Bank. Bad governance has to be taken into account in any anti poverty strategy.
What is your definition of corruption? Because there are so many levels of corruption it seems to be a hard term to pin down, At one level it is theft from the poor as someone once said. There is corruption at the very high levels that does not look that theft from the poor they look like enrichment by govt level officials lining their own purses. Taking money from western contractors for example in order for those contractors to do business in that country. How do you get a handle on this big concept of corruption?
I think at all levels of government, from local to national, the common factor is the very simple definition is the abuse of public office for personal gain. Whether you are a very low level policeman stopping cars on the road and demanding bribes or whether you are a head of state and demanding a major kickback on a multi million dollar deal, in both cases you are abusing the power entrusted to you in order to benefit yourself at the expense of those you are in office to serve.
Your own personal history starts with Watergate. This is when you started to learn more about corruption. One of the most powerful parts of your book, Waging War on Corruption is when you came to the realization that Watergate was only the tip of the iceberg that the real story was much broader and bigger than people had imagined. Can you take us through the story after Watergate and the story you argue that most of the media missed in the aftermath of Watergate scandal?
A really good investigative reporter, such as Bob Woodward will tell you, that the mantra is “follow the money.” One of the major aspects of the Watergate scandal was the slush fund managed by the Committee to Reelect the President, widely known as CREEP, which financed all manner of dirty tricks designed to promote the re election of Nixon in 1972. Many of the reporters who were involved in covering Watergate and the editors who followed that story stopped investigating after Nixon resigned from office. A small number continued. The truth of the matter was that the money trail was to reveal that many corporations were routinely using payments not highlighted on their balance sheets to influence foreign public officials in their procurement decisions. It was the concern about this form of funding, essentially bribe paying that was held secret that triggered the interest of the SEC and it began to say that investors had a right to know where their money was going. That then alerted the interest of the Senate Subcommittee on Multinational Corporations chaired by Frank Church of Idaho and it was its investigation that led to the Foreign Corrupt Practices Act (FCPA) that was signed into law in 1977 by President Jimmy Carter. This was a much more important piece of legislation than many in the media recognized at the time. The law fundamentally says it is a criminal act for corporations to pay off a foreign government official. But, the ability of the SEC and the US Department of Justice to enforce the new law was contrained by the fact that foreign countries did not have a similar law and were reluctant to cooperate with the U.S. authorities in sharing evidence. I think if there had been more media pressure and media attention back then, as well as political pressure, then we would have seen a greater groundswell of action internationally to enact laws similar to the US laws. But as you know, it was not until 1993 that the new Clinton Administration decided to make a real issue of this and campaigned for an international convention based on the FCPA. That convention, the so called OECD Anti-Bribery Convention, after the Organization for Economic Cooperation and Development, was ratified in 1998 and, as a result, today some 40 countries representing the great bulk of international trade have joined the U.S. with laws like the FCPA. This is a major achievement – remember it was not so long ago that German companies, for example, could write off their foreign bribes as tax deductible expenses.
Would not the OECD be a better body to have more leverage to help put pressure on countries that are viewed as widely corrupt if you want to trade with us you had better clean up your act.
Yes of course there is a potentially a role for the World Trade Organization in exactly that context. To be a bit analytical about this, if your question is how do you influence internationally corrupt governments to become less corrupt you have to look at their weak points, what are the areas where you can possibly use leverage and there are indeed a number of vulnerabilities that are very important. One of these key vulnerabilities is the exposure of individuals holding top governmental positions in specific bribery scandals, exposure that comes from investigative journalism and sometimes by courageous public prosecutors, for example, the situation in Turkey today. The second vulnerability is the massive public anger at the scale of the corruption. The sort of public anger that leads to the sort of demonstrations that we have seen in the Ukraine and India, and which in the case of Egypt and Tunisia, saw the overthrow of corrupt regimes. That’s the public pressure side. Another vulnerability is that without exception every single corrupt regime and its leadership recognizes that the time may come when they have to leave office and this leads them to try and ensure that a high proportion of their wealth is invested outside of their home country. To do this they have to use money laundering channels and to the extent that you can close opportunities for money laundering and expose the foreign accounts and foreign assets of corruption then this is another area of vulnerability.
You have mentioned Turkey Ukraine and Egypt these countries that have experienced widespread corruption and public protest. Is this going to spread. Is corruption going to cause these regimes and others like them to topple as they did in Egypt?
The answer is yes but there is a but—we are a long way from any comfort zone that any successor governments will be any better than the ones they replace. We have seen that many opposition politicians campaign on a platform of anti corruption, they get elected and then do the same things as their predecessors We have seen that in Kenya, Banlgadesh and the Ukraine, and in many other countries.
So there is not much hope that these corrupt regimes will be replaced by better ones?
I will not say there is no hope—no guarantee. Hope springs eternal.
But it goes back to your issue around civil society unless there are pressures for governments to behave in a socially accepted manner within a properly engaged civil society there is really no possibility of progress. Is that the root of the issue ?
The real root of the issue I believe centers on justice—people everywhere want the rule of law to be administered fairly with integrity and equality so that no one in the society has a special position of impunity that enables them to operate without risk outside of the law. What we are seeing today, be it in the downfall of former Prime Minister Silvio Berlusconi in Italy, or be it with the enormous public interest in the prosecution of former top politicians in Brazil, or the election of a new anti corruption party to government in the city in New Dehli that recently happened, the common denominator everywhere is the public demand for no impunity and for justice. This is a very important point. The fact is that this does not necessarily mean that everyone in the world believes in Western style democracy or even wants that. But the concept of justice as I have just described it is pervasive. The tolerance of the public for impunity is decreasing in many countries, not all, but in many countries. In India, for example, as a result of civil society activity the parliament passed a law at the end of 2013 for an independent anti corruption commission. In quite a number of countries there have been efforts—not always successful—to ensure an independent judiciary. It was almost the last independent institution of power in Zimbabwe as President Robert Mugabe sought to take control of every element of state power. I am convinced that we are going to be hearing far more about this slogan of no impunity and the broader issues of justice in the future than in the past.
Have we then reached a tipping point stage?
It is universal. In Western countries, for example, we are seeing rising fines and prosecutrions of people in the financial industry for money laundering, for fraud, for insisder trading—people who were once publicly viewedf as acting with impunity; while in Italy, Berlusconi was finally defeated after years of dering the courts and acting with impunity. Then, across the emerging markets and developing world there is a rising tide of actions against powerful politicians. The new leader of China, President Xi Jinping has made anti corruption a major issue and increasing numbers of senior Communist Party officials are being investigated. In Brazil, a precedent has been set with the jailing of former top politicians. All of these actions respond to mounting public outrage over injustice and corruption.
You of course now have the internet which can accelerate transparency and there are ways that now activists can link up and organize protests in a way that was not possible before
Yes absolutely it is a way for generating the anger and frankly the frustration that many ordinary citizens have and that can encourage them to demonstrate.
Would you agree with JW point that there are a few powerful individuals in a few emerging countries that cannot be budged out of their positions of all encompassing power. You mentioned Mugabe who has been allowed to do their damage for long periods of time. Surely the fact that these individuals are allowed to place their money overseas who are allowed to commit awful crimes including genocide. Does that not give you pause that there is limited amount we can do to affect the worst offenders?
Western governments have enormous power to be influential and to address the vulnerabilities of highly corrupt regimes if they so chose. They often do not to so chose. The City of London and the city of Zurich, for example, benefit from the enormous deposits placed by corrupt individuals in their banking systems and I am sure all those lawyers and professionals who are involved with working with those corrupt officials represent a substantial lobby and influence the behavior of the governments of the UK and Switzerland Let me give you a concrete example. The Swiss government did not move to freeze the assets held by the family of former Egyptian President Hosni Mubarak until he was ousted—it is absolutely absurd for them to have suggested in any shape or form that the tens of millions of dollars of money was held in Mubarak accounts in Swiss banks represented his salary as President. Of course it was stolen money and of course the Swiss should have frozen those accounts and impounded that money at the time it was deposited, but the Swiss benefited from the money so nothing was done. Today it is widely known that the Mubarak family owns property in London through an offshore holding company, but the British authorities have argued they can take no action because they do not have sufficient proof of the beneficial ownership of these holdings. The Egyptian people are furious about this, but the British action siognals to a lot of corrupt officials and politicians around the world that the UK is a safe haven and that is good for the UK economy. International sanctions on the sale of diamonds out of Zimbabwe collapsed because there was not enough Western political will to maintain them. The US today is spending tens of millions of dollars a month in aid for reconstruction in Afghanistan even though a lot of that money is disappearing and a considerable amount of that cash supports projects run by cronies or family members of President Hamid Karzai and we do it because we believe that this is necessary to maintain a strategic partnership with the Karzai government. In so doing, we are supporting a regime thaqt ranks according to the Transparency International Corruption Perceptions Index 2013 as the most corrupt in the world, alongside that of North Korea and Somalia. There are many examples of where Western powers have it within their power to work on the vulnerabilities of highly corrupt leaders, but decide instead that it serves their self-interest not to do so.
Are there some examples you can point to where some countries have cleaned up corruption and as a result are experiencing economic progress and improved living standards and so forth?
I think around 20 years ago Chile under President Pinochet was a thoroughly corrupt government system. The transference to a more democratic system, the building of more democratic institutions the strong emphasis on transparency and accountable government over the last 15-20 years has produced one of the most vibrant and successful economies in Latin America. That is one national example that is extremely positive. Or to take another example in the same region—I think there is no doubt that the good governance in Costa Rica and the lack of corruption there stands in sharop contrast to other Central American countries and, as a result, I believe this is a major reason why Costa Rica’s economy is som much stronger than that of its neighbors.
Are the two biggest countries in the world India and China going forwards or backwards in this area. Aren’t their actions going to be vital if we are really going to make progress fighting corruption in the future?
There is more public debate about the impact of corruption in China and India today than probably ever before and that in itself is very positive. That does not mean that levels of corruption are declining, but it does mean that the pressures on the politicians are rising for reform and that does give rise to the hope that reform will in fact take place. But I don’t think you can go further than that with regards to either of those countries. I think it is very important that the massive penetration of smartphones in India and China is making people much better informed on all aspects of governance, while also making even the poorest peoples better educated about the services they are entitled to from the State, In India, for example, after years of campaigning, the parliament 4 or 5 years ago passed the Right to Information Law that is increasingly being taken seriously by the courts across the country and is being used as a lever to enable people to demand their rights, to demand their benefits from the State in ways that they could not before. This places pressure on corrupt officials. Moreover, the ability through new technology to ensure that many payments of basic unemployment, and social security go directly to the individual and cut out all sorts of government middlemen closes opportunities for corruptuion and this is a tremendous step forward in terms of good governance that is just starting in India today.
Do you think the Universities can play a role here in bringing attention to the issue. I have found that a lot of people in the academy may not be quite as aware of the issue of corruption as they need to be.
There is really a huge need for business and law schools in the United States to make courses on ethics, including corruption, mandatory. These should include distinct and individual courses; they should not be just lectures in another sort of course. If you look at the enormous abuse in major financial institutions in recent years that has been exposed by all manor of prosecutions by the SEC and the Justice Department in the US you have to say there is something fundamentally wrong in the corrupt cultures in many of these institutions. The fact of the matter is very few of those people who rise to the top in those institutions took any courses in ethics or corruption. So at this point I am more concerned about the teaching of these issues in graduate and undergraduate institutions in the US than I am with research. I think we have lots of research going on in many institutions about different aspects of corruption around the world and that’s healthy but the teaching of these issues based on the findings of the research, and how it should be applied in the public and private sectors, is something about which academia is not doing nearly enough.
Any predictions for 2014?
2014 will be a banner year in terms of precedent setting prosecution of corporations in terms of violations of anti corruption laws; in terms of the scale of visible public demonstrations against corruption in large numbers of countries; and, in terms of just media investigations of many aspects of corruption in many countries. All of this is powerful in terms of promoting the anti corruption cause but not sufficient to conclude that we are turning the corner. But, a symbol of the enhanced focus on corruption came at the end of 2013 when it was disclosed that investigations are being pursued in China of a former top Politbureau member for alleged corruption – no official of such a rank has been investigated like this in 60 years in China. I believe that across the world the anti-corruption cause, driven by rising public engagement and action, is gathering momentum and there will be increasing evidence of this in 2014.
You have not mentioned TI so far a group you helped co-found. I was there in Berlin when you celebrated the group’s 20th anniversary. How important a player has TI has been over the last 20 years. What is its future role?
Twenty years ago TI was the only global anti corruption group and there were very few national anti corruption groups around the world. Today TI is the largest global corruption group with a 100 national chapters, but there are hundredsd of local and national and civil society groups that have anti corruption as a major part of their agendas, ranging from business to youth groups. What we are going to see in coming years is an increasing blending of all these diverse civil society groups into what amounts to a more coherent global movement against corruption. I believe that TI simply because of its scale and the way in which it operates can continue to build its very important leadership role as a major catalyst for the evolution of such a very powerful global movement.
Do you think think there is a need for public information campaign to link why they are poor and why there are govt officials are immune from prosecution and govt leaders living in gorgeous palaces.
There are many linkages that the public across the world is increasingly aware of: they are seeing the connections between corrupt politicians and organized crime and their common activities in money laundering; they are connecting the failures of governments to deliver promised services promised and the levels of corruption in those governments. The rising awareness fo such connections is a stimulus to increasede anti corruption activity. I will give you just one example. I recently participated in an off the record workshop that brought together about 30 people from government, civil society, business and academia,to discuss the relationships between international security and corruption. This is an issue that has received very little public attention even by those most concerned with security issues, be they in the Pentagon or in the State Department or the US Treasury. So this workshop was a start. I think this is a start that 10 years from now will be seen as a major area of public interest -you have to start somewhere. What is so exciting about this whole field of anti corruption work is that lots of initiatives start small and bring together lots of people from diverse disciplines and different professional areas. They start brainstorming, they move forward, they build research and then build campaigns. Twenty years ago, the campaign to make the World Bank move ahead as a force against corruption was launched by a small group as TI was founded and within a few years major progress had been made. Fifteen years ago another TI group, as well as others in civil society, started to campaign for action against money laundering and today the Group of 20 Summit leaders have embraced a meaningful action plan. Just a few years ago, TI made global public engagenment on a mass scale a cornerstone iof its strategy and today we see this as mainstream for civil society in many countries. New technologuies accelerates the progress in the anti corruption effort and this is a real reason to be encouraged.
Why do you think this issue of the link between corruption and security deserves some attention
For a simple reason. Every single country that the US or NATO perceives to be a global or regional threat to peace is completely and utterly riddled with corruption. You cannot forge international peace and security strategies without taking this fully into account. The three countries that come rock bottom on the TI index 2013 are Afghanistan, North Korea and Somalia and all three pose a major perceived risk to global peace. The countries that come rock bottom of the Global Peace Index 2013 are Somalia Afghanistan and Syria. They overlap, and when you look a the correlation between the two indexes you see the problem. Our international strategies aimed at a more peaceful world need to take into account issues of corruption particularly those at epicenter of global security risks.
American Diplomacy is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to American Diplomacy.
Laurence Peters was born in London, England, and studied at the University of Sussex. After a stint teaching attended the University of Michigan where he received his doctorate in education he took a Law Degree from the University of Maryland in 1986. Subsequently, becoming counsel to the Subcommittee on Select Education & Civil Rights for the US House of Representatives (1986-1993) before serving as Senior Policy Advisor to the US Department of Education (1993-2001). Peters later directed the Mid-Atlantic Regional Technology in Education Consortium (MAR*TEC) at Temple Universoty and has authored numerous publications including Global Education: Using Technology to Bring the World to Your Students (ISTE) 2009. He is currently an Associate Professor at John Hopkins University and directs the UN Association National Captial Area Graduate Fellows Program on the United Nations.