Anti-Corruption Strategies

Anti-corruption strategies must go beyond blanket condemnations. Privately, at least, one must be very shrewd about where to begin and how. One must involve local people in the analysis of the costs and benefits of various kinds of corruption in international business transactions in the country in question. When deciding what to do first, one must keep in mind the need to begin with a quick success, and then attack areas with highest benefit-cost ratios.

An anti-corruption effort should not try to do too many things at once, but to launch a campaign that tries to break the culture of corruption. (1 will discuss the principle of the big fish in a moment.)

In short, then, a generic model for a country program would include:

• Participatory diagnoses by local people of the problems, their extent, and their causes (more on how to do this below);

• A combination of a system of structural reforms carefully sequenced with a politically powerful message and some early successes to gain credibility;

• Which areas first: where the public perceives the problem (e.g., extortion in Philippines; licensing bureau in Venezuela; police and courts in many countries); where the economic costs the greatest (actions that distort policies as opposed to who gets a specific contract); where easiest to make a difference in the benefit-cost sense;

• Getting big fish (many ways to get). Illicit wealth as criteria. People know who is corrupt, yet most charges are false in public hot lines etc. Has to be within the ruling party or not credible;

• Reforms of incentives (first the easy ones revenue-raising areas), then systematic reforms beginning with objectives, on to measures, and finally to pay-performance links; and

• Greater transparency.

Denouncing and prosecuting a few big-time perpetrators of bribery, extortion, smuggling, tax evasion, and other illicit activities. But to learn this lesson from recent international experience, people must also learn one more: successful campaigns against corruption do not stop with denunciations. They go beyond the prosecution of individuals to the systematic reform of information and incentives in both the public and private sectors.

First some examples : Hong Kong used to be awash in corruption. Then in 1973 a new Independent Commission against Corruption was formed. It had new teeth, and new eyes. It possessed powers to investigate suspected offenders and had new means for obtaining information about the wealth of public servants. But despite its powers, at first no one believed that the ICAC would succeed any more than previous efforts to rewrite laws and create investigatory bodies. Credibility came when the ex-police chief of Hong Kong, Peter Godber, was extradited from retirement in England and punished in Hong Kong. The ICAC also nailed the ex-number two and scores of other high-ranking police officials.

To a cynical public and a hardened civil service, frying these big fish sent a credible signal: "The rules of the game really have changed."

Mexico is famously corrupt, but most observers believe that things have improved markedly under President Carlos Salinas de Gortari. He, too, created new capabilities of investigation and enforcement. But his efforts too were originally greeted with disbelief. Had not his predecessor Miguel de la Madrid called for a "renovation " but failed to stem corruption? Salinas did not gain credibility until his enforcers pounced on the notorious head of the Pemex syndicate, on a leading narcotics trafficker, and on three high-powered business people who had fiddled with the Mexican stock exchange. One of the latter was the head of Salinas own campaign in one state. The message: If these big fish can be caught and fried, political impunity is a thing of the past.

Italy recent and unprecedented success in attacking corruption has attracted worldwide attention. The crucial first step was frying a top Mafia official, many top business executives, and several major politicians from the ruling party. This told the public that if they came forward and denounced crime and corruption, they could make a difference.

There are more recent examples of big fish being fried, such as Venezuela, Brazil, Japan. Around the world we are witnessing a transformation as important as the democratic reforms of the 1980s. There is an emerging consensus that democracy without good government is a charade, just as privatization without competition is a charade. The 1990s are becoming the decade of institutional adjustment, meaning the improvement of the institutions through which states and markets function. And the first step in this transformation turns out to require dramatic action against high-level abusers of existing institutions.