Corruption and the Law

Peter Schaefer has an interesting article over on TCSDaily called When ‘The Law’ Means Corruption. For those of you who don’t know Peter, he’s a former USAID official who has worked closely with Hernando de Soto for the past few years. His article focuses on the seeming intractibility of corruption and the difficulty of tackling it with ‘democracy’. He says

The fact is that all developing countries are governed by autocrats, even when they are elected. Some are thugs, some are benign, even well-intended reformers, but all are autocrats. They have no choice because it is impossible to govern by the rules if there is no rule-set.

In fact, it is nearly impossible to get elected without systemic corruption; so in a way, our emphasis on democracy often contributes perversely to a rise in corruption. This prevails for two reasons. First, the nearly total disconnect between people and the government means they don’t much care about the election, and so their votes are for sale. But secondly, election technology is now worldwide and high tech.

Without laws — and the institutions to administer them fairly — people make up their own rules. Society requires predictability to function and so absent national law they create informal rule-sets. But rules without the force of law can only be sanctioned through bribery or physical force. If the beat cop has no rules, he follows the local norms, the neighborhood rule-set. But to use his monopoly of force on behalf of the neighborhood rule-set he will extract a price.

He goes on much more about the role of law and developing the rule of law. It’s a great article, hitting many of the same themes in more colorful tones that I did in my own earlier piece on Building Rule of Law: from Buzzword to Reality.

There is a common problem in many discussions of democracy, however, that bothers me here all the more because otherwise Peter has good points: the problem seemingly equates elections and democracy. His sentence about how ‘democracy perversely contributes to the rise in corruption because the near total disconnect between people and the government means they don’t care’ illustrates this most. I would argue that if it were a true democracy, there would not be such a wide disconnect between the people and the government. True democracy involves a multiplicity of fora in which people have a voice, make their needs known, offer recommendations, participate in policy debates, and influence the decisions that in turn influence their lives.

The very awkward term ‘electoral democracy’ is sometimes used to describe those countries where elected leaders ignore the populace. I think it’s still too charitable a description, because democracy truly has no place in accurately describing those countries. We talk a lot about democratic governance here at CIPE, a term which is gaining traction, because it shifts the emphasis from one-off events to looking at the totality of how the country is run. Democratic governance in CIPE’s definition looks quite different from mere electoral democracy:

Democratic governance comprises the traditions, institutions, and processes that determine how government decisions are made on a daily basis, and addresses the following questions:

• How and to what extent are citizens given a voice in day-to-day policymaking?
• How efficiently are public resources and services managed?
• How are abuses of governmental power prevented?
• How are government officials held accountable for their actions?
• How are grievances redressed?

Sound democratic governance mechanisms help to create functioning democracies.

And therein also lie important insights into combating corruption. CIPE partners around the world are passionate about this topic and see it as one of the most pressing issues facing them. And though elections clearly have a role to play in tossing out corrupt officials, sustainable and more effective solutions aim at changing the system and the incentives that influence the daily interactions. CIPE partners focus on weeding out what sustains corruption: opaque regulations, weak enforcement mechanisms, barriers to business, inefficient government agencies, absence of a public dialogue on corruption, excessive discretionary powers in the hands of public officials, and a lack of checks and balances.

In Russia, for example, INDEM analyzes the “corruption potential” of laws, based on 1) the extent of a laws legal requirements (‘excessive’ ones will be circumvented), 2) the extent of officials discretionary power (the more allowed, the more ‘extracted’), and 3) the use of blanket provisions authorizing lower-level regulations to be promulgated. INDEM then goes on to offer a “Survival Toolkit” that suggests ways that small businesses in particular (as frequent victims), can combat corruption.

In the Philippines, another CIPE partner, the Institute for Solidarity in Asia (ISA), has a terrific Public Governance System (PGS) project. PGS is an integrated, internally consistent framework that adapts the Balanced Scorecard used in the business sector to facilitate good governance and participation at all levels of society – personal, sectoral, firm-wide, regional, and national. It is designed to be practical, realistic, participatory, and have “Measures” that do not take very long so that it can be readily implemented. ISA has several partnerships using the PGS, including a very successful one at the municipal level working throughout Philippines with City Mayors, City Councils, and concerned citizenry.

Peter’s article shows the flair — and the frustrations — of one who’s seen a lot. For example, he’s vocal about wanting to go after some high profile miscreants. Outing high-profile individuals feels great and helps set a new tone. But knowing Peter, I know he also agrees that real change takes more than exposing incidents and outing individuals, it happens by changing the institutions. That requires delving into why things are the way they are, identifying underlying causes and obstacles, and laying the system itself open to scrutiny and change — just as Hernando and the ILD did as early CIPE partners in their groundbreaking work on the informal sector, and just as today’s CIPE partners continue to do.

Corruption is indeed one of the most difficult issues to tackle. But democracy doesn’t give rise to more corruption. True democracy — in the daily governance between elections — is the solution.