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What is Corruption?

June 13, 2012

By Ann Hollingshead

Ann Hollingshead is a Financial Transparency Coalition blog contributor, whose posts appear weekly. Formerly a Junior Economist at Global Financial Integrity, Ann is now pursuing a Master of Public Policy (MPP) from the University of California Berkeley. Follow her on Twitter: @AnnHollingshead.

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Corruption is notoriously difficult to measure. It’s not just because it is an illicit activity. In part it’s because the concept itself is undefined and relative. Transparency International found a (brilliant) way around this when they began surveying each nation’s public perception of corruption, rather than trying to define a concrete set of corrupt activities.

So what is corruption?

Transparency International uses the following working definition of corruption: “the abuse of entrusted power for private gain.” I imagine that’s vague on purpose.

So how do we define specific corrupt activities? Corruption isn’t just bribe paying, although that’s often it. It’s not just in business relationships, but also political, social, and even athletic ones. Corruption isn’t necessarily illegal, although it’s often so. And in some cases, while it may be illegal, it isn’t always enforced, which makes it legal in practice.

Then there are activities that would be corrupt in one culture, but are responsible business practices in another. For example, in the West nepotism is associated with lazy relatives of bosses. In Confucian culture, loyalty to the family is paramount and businesses may be able to extract superior work from family members than anyone else. This is not an excuse for a culture of corruption. I’ve argued before on the damages of these systems. Rather I bring up these examples to point out that the enigma that is corruption is poorly defined, subjective, and culturally relative.

The answer to this question is, in fact, more clear when you turn it on its head. Instead of asking: What is corruption? We ask instead: Why is corruption damaging?

Corruption is damaging because it gives an undue advantage: it leads to a less optimum outcome than would exist under a system based on merit. This might be true in a economic outcome (e.g., company X gets a contract because they paid a bribe, even though company Y is better suited to the job), a political one (e.g., candidate X keeps himself in office by buying votes, even though candidate Y would make a better official), or even an environmental one (company X pays a bribe so that it can pollute a local river without enforcement, which results in contaminated drinking water for the town downstream).

When you take this expansive view, many more activities and behaviors fall into the corruption net.

Take power brokering, a common, very legal practice in Washington. Power brokers are individuals with significant political power who use their influence to enrich both themselves and those in their circle, in exchange for, usually, more power. If the power broker involves an elected official, he must be careful his exchanges never involve cash, because that would be highly illegal. But as long as the trades involve power or pork, it’s just considered good politics.

Here’s another one: the revolving door, or the movement of personnel from roles as legislators and regulators to jobs in the industries affected by their legislation and regulation (and back again). For example, Dick Cheney, as Secretary of Defense “oversaw one of the largest privatization efforts in the history of the Pentagon” and then, two years later, left his federal job, and collected millions of dollars as the CEO of Halliburton, “cashing in on the very contracts that he helped initiate.” Other cases include the alarming incidence of officials moving between the Security and Exchange Commission and the very institutions it regulates.

Does power brokering lead to an undue advantage? Yes. How about the revolving door? Absolutely.

But are they corruption? I’ll leave that up to you to decide.


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Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.

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