Global Corruption and the Role of Government

First Published: 2008-08-02

Article reprinted with the kind permission of the author, Dr. Richard Ebeling, Senior Fellow, with the American Institute for Economic Research.

Political corruption exists in every society, with surveys around the world showing the extent to which people find it necessary to bribe government officials. But such corruption seems to be greatest where governments are most intrusive in the marketplace, and therefore have the most to “sell” to the citizenry in the form of favors and special interest benefits. The corruption of government officials seems to be as old as recorded history. For example, the ancient Roman senate passed laws against such political corruption in the first century, B.C. They defined a corrupt act as “whenever money is taken and a publicly-conferred duty is violated.”

Local magistrates in the Roman Empire were permitted to legally receive cash gifts of up to 100 gold pieces a year, but anything beyond this amount was considered “filth.” There was also a separate criminal category against what was called concussio, or the “shakedown” and “extortion.” A Roman official might claim to have a legal order against someone, and demand a bribe not to enforce it against the individual’s person or property.

One of the strongest decrees against corruption during this time was issued by Emperor Constantine in A.D. 331. Those found guilty of such crimes might be exiled to an isolated island or a faroff rural area, while others might even be condemned to death. A judge, for example, might be executed if he had acquitted someone guilty of murder for the right price.

Corruption Today in Europe and North America

High levels of corruption remain today one of the major problems confronting people around the world. While most of us think of corruption as primarily impacting the hundreds of millions who live in the underdeveloped and developing parts of the globe, it even touches those of us fortunate enough to live in the industrially developed Western democracies.

According to the latest report on global corruption issued by the Berlin based organization, Transparency International (TI), in December 2007, at least 5 percent of the people living in the European Union (EU) as a whole say that they paid bribes to government officials during the previous 12 months.

The most corrupt nations of the EU, perhaps not surprisingly, are in Eastern Europe, in those countries that had been part of the former Soviet bloc. For example, 33 percent of those surveyed by Transparency International in Romania said they had paid such bribes. In Lithuania, 29 percent of the respondents said they bought off government personnel. In the Czech Republic the number was 13 percent of the population.

Albania had the highest rate of admitted bribery in Eastern Europe, with 71 percent having paid someone in government. Kosovo was a close second, with 67 percent saying they did so. In both Ukraine and Moldova the number was 30 percent, and 17 percent said they paid bribes to members of government in the Russian Federation.

But even in countries that have long been members of the EU bribery was reported. The worst occurred in Greece, where 27 percent of the people said they paid bribes during the preceding year. In most of Western Europe the bribery level was around 2-3 percent of the population, though the number was 6 percent in Luxembourg. (The bribery question was not asked in Germany and Italy.)

In North America, 1 percent of Canadians surveyed said they bribed someone in government. Here in the United States, that reply was given by 2 percent of the people asked.

Corruption in Africa, Asia and Latin America—and What It Has Paid For Corruption is far more endemic in the rest of the world. Africa suffers from political bribery the most, with 42 percent of all those in the countries surveyed saying they had paid bribes. The most extreme case was found by TI in Cameroon, where 79 percent—almost four out of every five people—admitted paying bribes, with the number being 40 percent of the people in neighboring Nigeria.

In Asia, the overall rate of bribe-giving was reported to be 22 percent of the population. The highest rates were found in Cambodia (72 percent), Pakistan (44 percent), the Philippines (32 percent), Indonesia (31 percent), India (25 percent), and Vietnam (14 percent).

Finally, in Latin America, the average bribery rate was recorded at 13 percent of the people. But as in the rest of the world, it varies from country to country. Among the handful of countries surveyed, the highest rate was in the Dominican Republic with 28 percent. Bolivia followed with 27 percent. The level of bribery was 18 percent in Peru, 12 percent in Venezuela, 13 percent in Panama, and 5 percent in Argentina.

Around the globe, the most bribes are paid to the police. In Africa, 47 percent of the respondents said they bribed the police; in Asia, 33 percent; in Latin America, 23 percent; and in Eastern Europe, almost 20 percent. World-wide, about 17 percent of the people in the survey paid bribes to the members of law enforcement.

Bribing people in the judicial system came next, with the global response being about 8 percent of all those surveyed. About the same percentage around the world said they bribed government agents for business licenses and permits, though again the highest rates were in Africa (23 percent) and Asia (17 percent). But even in the United States and Canada around 3 percent admitted paying such bribes.

Interestingly, a high rate of bribery is also paid for access to education. Globally, 7 percent of all respondents said they paid this type of bribe. In Africa, the rate was 32 percent; in Asia, almost 10 percent; in Russia and Ukraine, about 18 percent, and in North America and the EU, around 2-3 percent.

Medical care is also a major area for such corruption. In Africa, 24 percent of the respondents said they paid bribes for access to medical services; in Asia, the response was 10 percent; in Russia and Ukraine, 13 percent; in Eastern Europe, 8 percent; in the EU, almost 5 percent; and in North America, 2 percent.

People’s Perceptions about the Most Corrupt Institutions in Society

Almost 70 percent of those surveyed world-wide considered political parties to be the most corrupt institutions in their countries, with people being pressured to make political “contributions.” Parliaments and legislatures were ranked next most corrupt, with 55 percent of the people giving this response. The police are considered a close third, with 52 percent saying this about law enforcement. Over 45 percent consider the judiciary as being corrupt; followed by the tax authority (45 percent); the media (42 percent); medical services (41 percent); public utilities (35 percent); the education system (34 percent); government licensing and business permit agencies (33 percent); the military (32 percent); religious organizations (30 percent); and non-governmental organizations in general (28 percent).

While the vast majority of those institutions considered to be corrupt are part of, or connected with, the government, globally respondents also considered the private business sector corrupt (48 percent) due to its ties and connections with governments for various favors, privileges, and special-interest benefits.

Additionally, 54 percent of the people surveyed around the world expect corruption to get worse in the future, with only 20 percent saying it will decrease (26 percent think it will remain about the same as now). Even in North America and the EU, about 48 percent said they expect corruption to increase in the years ahead.

Political corruption, clearly, is found everywhere around the world and people, regardless of where they live, do not expect it to go away anytime soon.

Yet, in spite of its global dimension, corruption pervades some parts of the world more than others, and permeates certain corners of society to a greater degree. Why?

Corruption and Government Intervention in the Marketplace

Part of the answer certainly relates to issues surrounding ethics and culture. The higher the degree of personal honesty and allegiance to ethical codes of conduct, the more we might expect people to resist the temptations of offering or taking bribes. However, in his recent analysis, Corruption—the World’s Big C: Cases, Causes, Consequences, Cures (2006), economic and business analyst, Ian Senior, found that there were no significant correlations between high degrees of personal honesty and religious practice and less bribe-taking around the world.

A stronger explanation perhaps may be found in the relationship between the level of corruption in society and the degree of government intervention in the marketplace. In a generally free market society, government is limited to the protection of the citizenry’s life, liberty, and honestly acquired property. The rule of law is transparent and assures impartial justice for all. Any other functions taken on by the government are few in number, such as a variety of public works projects.

Under these circumstances, government officials have few regulatory or redistributive responsibilities, and therefore they have few special favors, privileges, benefits, or dispensations to “sell” to some in the private sector at the expense of others in society. The smaller the range of government activities, therefore, the less politicians or bureaucrats have to sell to voters and special interest groups. And the smaller the incentive or need for citizens to have to bribe government officials to allow them to peacefully go about their private business and personal affairs.

For 14 years the Wall Street Journal and the Heritage Foundation in Washington, D.C., have sponsored an annual Index of Economic Freedom (IEF). (The Fraser Institute in Vancouver, Canada, issues a separate annual volume of similar global trends under the title, Economic Freedom of the World.)

The IEF tracks a series of 10 measured indicators that include the following: (1) business freedom; (2) trade freedom; (3) level of fiscal burden; (4) size of government; (5) degree of monetary stability; (6) investment freedom; (7) financial freedom; (8) protected private property rights and the general rule of law; (9) flexible labor markets; and (10) freedom from corruption.

The premise is that the greater the degree of individual freedom, the more secure property rights, the smaller the size and intrusiveness of government in the marketplace, and the greater the open competitive market environment at home and in foreign trade, then the more likely a society will experience rising prosperity and higher standards of living over time.

No country in the world is free from some degree of government intervention and regulation. The 19th century era of relatively laissez-faire—for good or ill—is long gone. But the extent to which governments intrude into the economic, social, and personal activities of their citizens does vary significantly around the globe. This includes the extent to which citizens are protected by an impartial enforcement of the rule of law, have the freedoms of association, the press, and religion, and the right to democratically participate in the selection of those who hold political office.

The Correlation between Economic Freedom and Freedom from Corruption

The Index of Economic Freedom in its 2008 edition estimates that based on composite scores of all ten indicators, the greatest amount of economic freedom can be found in the following parts of the world (after each is the reported amount of bribery as surveyed by Transparency International): Hong Kong (3 percent), Singapore (1 percent), Ireland (2 percent), Australia (2 percent), the U.S. (2 percent), New Zealand (1 percent), Canada (1 percent), Chile (3 percent), Switzerland (1 percent), and the United Kingdom (2 percent).

Regionally, North America, Western Europe, and Australia/New Zealand are estimated by TI to be the areas of world in which the lowest rates of corruption are to be found. The IEF also ranks these parts of the globe as generally having the greatest amount of economic freedom, or the least intrusion of government intervention (broadly defined) within the marketplace.

On the other hand, Africa, Asia, and Latin America are the parts of the globe with the highest reported amounts of bribery, and are also the areas that IEF estimates as far lower in the global rankings for degrees of economic freedom. Among the 157 countries included in the Index of Economic Freedom, many (though certainly not all) of the ones that Transparency International estimates as having particularly high levels of corruption are ranked at the bottom one-third in terms of freedom from government intrusion.

In Africa, Cameroon, with a rate of bribery of nearly 80 percent, is ranked 117 in the IEF index, and Nigeria, with a 40 percent rate of bribery, is 105 on the IEF index.

For Asia, the respective IEF freedom rankings for the most corrupt nations are: Cambodia (100); Pakistan (93); Philippines (92); Indonesia (119); India (115); and Vietnam (135).

In Latin America, for the reported most corrupt countries in the TI survey, the economic freedom rankings are: Dominican Republic (87); Bolivia (123); Peru (55); Venezuela (148); Panama (50); and Argentina (108).

And in Europe, those countries still in “transition” from socialism in Eastern Europe, and which had the highest rates of reported bribery, are also ranked on the IEF index as lower in terms of economic freedom. For example: Albania (56); Romania (68); Ukraine (113); Moldova (89); Lithuania (26); Russia (134); and Czech Republic (37).

The correlation between a global low ranking in terms of economic freedom and a high reported rate of political corruption is certainly not one-to-one. There are many variables at work, including the extent to which different types of freedom used in the IEF surveys are restricted in the respective countries. Thus, domestic property rights might be legally more secure in one country compared to others, but that country may have a higher rate of price inflation and more restricted labor markets, resulting in it having a lower economic freedom ranking in the index compared to other nations.

But the assertion can be safely made that the greater the degree of government intervention, the greater the likelihood of a higher level of experienced and perceived corruption.

The more the government regulates, controls, and interferes with transactions in the marketplace (e.g., through price and production controls, or import and export restrictions and quotas, or business licensing and permit rules, or high, complex, and arbitrary taxation), the more need and incentive for people to bribe those in political power to free or reduce the heavy hand of government over their lives.

—Richard M. Ebeling, Senior Fellow, AIER

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