Finpecia
 

Political and Governmental Corruption

Everyone knows what political corruption is, but it is notoriously hard to define. Different cultures have different conceptions of corruption: what would be considered corrupt in Denmark might be seen as simply polite in Indonesia. This understanding also varies across time: buying office was standard procedure in eighteenth-century Britain but would be inexcusable today. Arnold Heidenheimer has divided corruption into three categories (Heidenheimer et al. 1978). ‘‘White’’ corruption includes acts that a majority of people would not consider worthy of punishment. ‘‘Gray’’ corruption includes acts that ‘‘some elements’’ would want to see punished, but others would not. ‘‘Black’’ corruption includes acts that a ‘‘majority consensus . . . would condemn and would want to see punished on the grounds of principle.’’ Heidenheimer suggests that as societies modernize, behavior that was once seen as ‘‘white’’ becomes ‘‘gray,’’ and may eventually turn ‘‘black.’’ Others have suggested that the concept of ‘‘corruption’’ develops as societies move from seeing governmental offices as private property to believing them to be public trusts.

The American political scientist V. O. Key Jr. (1936) defines graft as ‘‘an abuse of power for personal or party profit.’’ Joseph Nye, another American political scientist, calls corruption:

[B]ehavior which deviates from the formal duties of a public role because of privateregarding (family, close family, private clique) pecuniary or status gains; or violates rules against the exercise of certain types of privateregarding influence. This includes such behavior as bribery (use of a reward to pervert the judgment of a person in a position of trust); nepotism (bestowal of patronage by reason of ascriptive relationship rather than merit); and misappropriation (illegal appropriation of public resources for private-regarding uses) (Nye 1967).

One long-running controversy in political science is whether corruption can serve a useful purpose for society. The most traditional school of thought, the ‘‘moralist’’ school, insists that corruption is always a breach of the public trust and must never be tolerated. Foremost in the ranks of this school were the ‘‘muckrakers,’’ American journalists who wrote books, during the early twentieth century, denouncing big business and public corruption. But in a review of a muckraking classic, Lincoln Steffens’s The Shame of the Cities, the American political scientist Henry Jones Ford (1904, p. 678) argued that corruption was better than ‘‘slackness and decay.’’ If businessmen had to corrupt politicians in order to get things done, that was an acceptable cost of progress. Ford’s heirs, the socalled revisionists, became important in social science during the 1960s. Such revisionists as Nye and Samuel Huntington argued that corruption could serve useful social purposes. Corruption could bridge gaps between otherwise antagonistic groups. It could ease the path to modernization by overcoming bureaucratic inertia. It could foster social integration by binding people closer to the state.

More recently, scholars have returned to emphasizing the ill effects of corruption. It can increase the costs of administration, bloating national budgets. Rather than cutting bureaucracy, corruption tends to expand it, as officials seek more opportunities to shake down citizens. If businessmen must bribe in order to function in a particular country, they may take their investments elsewhere. Corruption can weaken the private sector into dependence and degrade the public sector into banditry. The economic collapse of Indonesia, a country previously seen as an example of the coexistence of corruption and prosperity, has fueled this school of thought. Recent research by Paolo Mauro (1997), an economist at the International Monetary Fund, has shown that highly corrupt countries tend to invest less of their gross domestic product, spend less on education, and have lower economic growth rates than their cleaner counterparts.

Corruption in the United States

The United States is less corrupt than almost all Third World countries. Its capitalist economy and democratic government offer fewer opportunities for massive political graft than the socialist kleptocracies of Africa. American government’s dispersal of power prevents the sort of presidential corruption that has characterized Latin America. The American press, its freedom constitutionally guaranteed, is quick to jump on accusations of malfeasance, often blowing them out of proportion. The American legal system has inherited the English tradition of protecting private property and respecting individual rights.

People protesting against corrupted government

Figure 1: People protesting against corrupted government

But for most of its history, the United States has had a reputation of being more corrupt than most western European countries. British observers such as Lord Bryce expressed this sentiment most often, contrasting the probity of the Victorian era to the iniquity of the Gilded Age. The exuberant democracy of the nineteenth century spawned extensive patronage, widespread vote fraud, and a venal political class. Indeed, Bryce and Alexis de Tocqueville noted that the most able Americans went into business rather than government; when they needed political favors, they bought them from those lesser talents who had won office. Civil servants continue to have a lower status in the United States than in Europe. In addition, the American system is much more permeable than its European counterparts. Its numerous state and local governments encourage popular participation. They also give citizens more chances to corrupt bureaucrats.

As a general rule, corruption in the United States has been greater at the state and local levels than in the federal government. While no president has ever been imprisoned, many mayors and governors have. Fixated on Washington, the media often ignores what happens in city halls or, especially, state capitols. This gives boodlers more confidence that their misdeeds will go unpunished. Since city governments conduct most law enforcement, more scandals take place in local police departments than in the Federal Bureau of Investigation (FBI). Since state and local governments conduct most construction, contractors develop more shady relationships with governors or mayors than with presidents. Many defense firms, however, have cozy ties with Congress members and Pentagon officials.

While there was corruption in colonial America (even George Washington used liquor to buy votes during his candidacy for the Virginia legislature), municipal graft did not truly take off until the nineteenth century. Powered by the Industrial Revolution, and fed by waves of immigration, American cities boomed during this period. While governmental institutions were weak, a new form of organization filled this gap: the political machine. Michael Johnston defines a political machine as a ‘‘party organization within which power is highly centralized, and whose members are motivated and rewarded by divisible material incentivesather than by considerations of ideology or long-term goals of public policy’’ (1982, p. 38). While they would sometimes advocate social reform if they believed it would win votes, machine politicians were primarily interested in the spoils of office: jobs and favors for their supporters and graft for themselves. Machines developed close ties to business interests seeking contracts or other concessions: construction contractors, real estate developers, insurance agencies, law firms, organized crime. Ward leaders mobilized machine supporters, often the immigrant poor, through small favors such as Christmas baskets; the fixing of minor crimes; or, for the most loyal, undemanding government jobs.

While the stereotypical machine was Democratic, there were many Republican machines until the New Deal made urban workers loyal Democrats. City machines were the most common, but there were rural machines (most notably in southern Texas), suburban machines, and even statewide machines. While one normally associates machine politics with the inner-city poor, one of the strongest remaining machines in the country is the Republican organization of Nassau County, New York—a New York City suburb that is one of the wealthiest counties in the United States. (It is probably best known as the political base of former U.S. Senator Alfonse D’Amato.)

Probably the most famous machine was Tammany Hall, which dominated Manhattan’s Democratic organization from the early nineteenth century until the early 1960s. Descended from the Sons of Liberty of the Revolutionary era, it rose to supremacy after the Civil War under the leadership of William ‘‘Boss’’ Tweed and Richard Croker, and reached its zenith of power around World War I under the guidance of the unusually shrewd Charles F. Murphy. In the 1930s, Murphy’s successors made a series of miscalculations that crippled Tammany. They alienated both President Franklin D. Roosevelt and Governor Herbert Lehman, and they supported John O’Brien, an inept hack, as the successor to the discredited Mayor James J. Walker.O’Brien lost the 1933 mayoral race to Fiorello LaGuardia, a nominal Republican, staunch New Dealer, and sworn Tammany foe. LaGuardia’s three terms in office helped pound the nails into Tammany’s coffin. Other Democratic organizations in New York City, particularly those in the Bronx and Brooklyn, became more important. While Tammany enjoyed a brief comeback in the 1950s under Carmine DeSapio, its fate was sealed when DeSapio lost his race for Democratic district leader in 1961. Manhattan had become gentrified, and its new, wealthier residents had no interest in Tammany-style politics.

Many cities had machines. Until the New Deal, Chicago had rival Democratic and Republican organizations whose battles for power occasionally turned violent. After the New Deal, the Democratic organization dominated Chicago and some of its leaders, especially Mayor Richard J. Daley (1955—1976), became national figures. Philadelphia had a Republican machine of legendary rapaciousness that managed to hold onto City Hall until 1951. Once it became clear that the GOP would not return to power, many longtime Republican ward bosses switched parties and built a powerful Democratic machine. Kansas City had its Pendergast organization, which produced President Harry Truman. Jersey City’s two machine mayors, Frank ‘‘I Am the Law’’ Hague and John V. Kenny, dominated its politics from 1917 to 1971. Machines were not confined to the North: Edward ‘‘Boss’’ Crump ruled Memphis for many years, while San Antonio became notorious for its vote buying and graft.

Political machines have declined throughout the twentieth century. Prompted by Lincoln Steffens’s The Shame of the Cities (1904), Progressive reformers strengthened the civil service and reduced machine influence in city government, sometimes by making elections nonpartisan or by replacing elected mayors with the council-manager system. While Franklin D. Roosevelt rewarded those machine Democrats who backed him (most notably Chicago Mayor Edward Kelly and Edward Flynn, ‘‘the Boss of the Bronx’’), some observers have argued that his New Deal eventually undermined machines by replacing their handouts with bureaucratic programs (although Richard J. Daley could show them how those could be turned to a machine’s advantage).

The postwar years brought many changes to American cities that hurt machines. Television gave candidates a means to reach voters without the help of local bosses. Court decisions greatly restricted the amount of patronage leaders could bestow upon their followers. The rise of public sector unions further restricted bosses’ ability to hand out jobs, and in some cities, unions replaced party bosses as the main support for politicians. Inquiries such as the 1951 Kefauver hearings exposed the links between many urban politicians and organized crime.

Political scientists and journalists have offered varying assessments of political machines. Some praise them for integrating immigrants into American politics. Many of the newcomers had little experience with democracy and little understanding of the Anglo-American tradition. Machine politicians gave them something concrete for their vote, whether that was a small gift, help with the law, or a job. Machines have also been praised for making government function; Richard J. Daley boasted that Chicago was ‘‘the city that works.’’ Others have criticized machines for corrupting government, enriching political hacks, and providing poor public services.

While few machines still operate, American cities still see plenty of graft. Periodic scandals rock urban police departments, most recently in New Orleans and Washington. Frequently, there are revelations about the scandalous relations between construction firms and politicians. In the mid-1980s, a scandal concerning the Parking Violations Bureau ended the careers of many New York City politicians. Marion Barry, the four-term mayor of Washington, made himself a synonym for graft and misgovernment.

There have also been many scandals concerning state government. During the late nineteenth century, businessmen, especially railroad magnates, bribed state legislators en masse. From Arizona to South Carolina, recent sting operations have found state legislators pathetically eager to accept payoffs. The cozy relationships between state officials and the construction industry have had national implications. In 1973, Vice President Spiro Agnew resigned as part of a plea bargain stemming from bribes he accepted as governor of Maryland.

There are large regional differences in attitudes toward corruption. What is considered scandalous in Minnesota may be seen as merely inappropriate in New York and harmless in Louisiana.Daniel Elazar argues for a theory of political culture that explains these differences. Puritan New England developed a ‘‘moralistic’’ conception of governance that emphasized the common good. When New Englanders settled the states of the northern tier, from Michigan to the Pacific Northwest, they brought this culture with them. These states continue to be intolerant of corruption. The Middle Colonies attracted a diverse ethnic mix that made it difficult to agree on a common good. Instead, they developed an ‘‘individualistic’’ political culture that saw politics as a business and tolerated politicians’ pursuit of self-interest. States in a belt running west from New York and New Jersey to Illinois and Missouri continue to accept petty graft as part of the normal way of conducting politics. The South developed politics dominated by elite factions and low public participation. Elazar calls this culture ‘‘traditionalistic.’’ Particular states have developed their own cultures tolerant of or antagonistic to corruption. The Scandinavians who settled the upper Midwest brought their squeakyclean politics with them. Louisiana’s French heritage bestowed upon it the Napoleonic Code, with its emphasis on state power and a certain lassitude about graft.

Coruuption at the Federal Level

While there were scandals during the Republic’s early years, corruption did not become a major problem until the Jacksonian era of the 1820s and 1830s. Mass political parties brought with them the ‘‘spoils system’’ through which the president bestowed government jobs upon his supporters. The ‘‘spoils system’’ came to dominate government to the extent that some presidents spent most of their time fulfilling the demands of state party leaders for rewards for their followers. After a disappointed office seeker assassinated President James Garfield in 1881, demands for reform led Congress to pass the Pendleton Act two years later, which created the modern civil service; but it was not until the early twentieth century that merit came to predominate in government employment.

The Industrial Revolution increased business influence in government. The Civil War saw a series of military procurement scandals, beginning a long tradition in American life. During the years after the war, there were several scandals concerning the relationships between politicians and railroads (many of which received government subsidies). In addition, during this period, many prominent officials were found to have taken bribes, most notably William Belknap, Ulysses Grant’s secretary of war.

While the Progressive era saw a general reform of American politics, the United States experienced several scandals during the 1920s. The sale and production of alcoholic beverages was forbidden during the Prohibition era (1920–1933), but the public’s continuing thirst spawned a vast underground liquor trade that fueled the rise of organized crime and corrupted many public officials.The administration of President Warren Harding (1921–1923) is usually considered the most corrupt in American history. Charles Forbes, head of the Veterans’ Bureau, was convicted of fraud, conspiracy, and bribery. In the ‘‘Teapot Dome’’ scandal, Interior Secretary Albert Fall secretly leased federal oil reserves to two businessmen in return for cash gifts and no-interest loans; Fall was eventually imprisoned for bribery.

The succeeding decades saw few high-level scandals. There were many congressional peccadilloes, but the worst that could be discovered about any high officials was influence peddling by some of Harry Truman’s cronies and acceptance of small gifts by Dwight Eisenhower’s chief of staff. The Watergate scandal (1972–1974) made up for lost time, bringing down President Richard Nixon and sending many of his closest allies to jail. While it is beyond the scope of this article to explain the details of this affair—there are entire books that do that—we should note that little about Watergate concerned financial corruption, primarily Nixon’s tax evasion and massive illegal contributions to his 1972 reelection campaign. Watergate was mostly a matter of abuse of power, especially Nixon’s use of the government to harass his political enemies and his cover-up thereof.

Watergate led to a flood of legislation. The 1971 Federal Election Campaign Act was extensively amended in 1974. The Ethics in Government Act of 1978 created the institution of the independent counsel to investigate official malfeasance. The Foreign Corrupt Practices Act of 1977 forbade American companies to bribe overseas officials. Prosecutors and journalists became more aggressive in their investigations of corruption. Two major scandals rocked Congress: the revelation of corrupt links between a South Korean lobbyist and several congressmen (‘‘Koreagate’’) and the willingness of some senators and representatives to take bribes in a sting investigation (‘‘Abscam’’).

The 1980s saw their share of scandals. The Iran-Contra affair, which involved the covert sale of arms to Iran and the illegal diversion of the profits to Nicaraguan anti-communist rebels (the ‘‘contras’’), tarnished the last years of the Reagan Administration. A long investigation found favoritism and influence peddling to be rife within the Department of Housing and Urban Development (HUD). The collapse of many savings and loans (S&Ls), which cost the government $500 billion to pay back depositors, revealed suspicious relationships between some thrift operators and prominent politicians, most notably House Speaker Jim Wright. The so-called Keating Five senators lobbied for easier treatment for S&L owner Charles Keating; revelations about their activities ended the careers of three of the five.

While Bill Clinton promised to run the ‘‘most ethical administration in history,’’ he has instead presided over an era as sleazy as those of his predecessors. Scandals forced out HUD Secretary Henry Cisneros and Agriculture Secretary Mike Espy. There were charges that foreigners made large illegal donations to the Democratic National Committee during the 1996 election. The most explosive charges surrounded Clinton himself. Allegations of corrupt real estate deals by Clinton when he was governor of Arkansas led to an independent counsel investigation that began in 1993 and continues as of this writing. This investigation eventually produced the charge that Clinton had perjured himself and had obstructed an inquiry into his affair with a White House intern. Clinton was questioned about this affair as part of a sexual harassment lawsuit. Clinton was eventually impeached, but the Senate failed to convict him.

Corruption in Western Europe

Italy is probably considered the most corrupt country in western Europe. Southern Italy has a long history of patron-client relationships that take precedence over written law. In this highly stratified society, landowners and professionals serve as natural patrons to their clientele of laborers and peasants. The Mafia, of course, is part of this system of patronage. Italy’s complex administrative law undermines efficiency, and so requires mediation in order to function. Politicians and local notables help citizens, especially businessmen, navigate the maze of red tape—for a price.

After World War II, Italy developed a strong party system that permeated all of society. While Italy had many small parties, three dominated politics until 1993: the Christian Democrats, the Socialists, and the Communists. In order to keep the Communists out of power, the Christian Democrats dominated every government from 1947 to 1993; after 1962, they usually governed with the support of the Socialists. Both the Christian Democrats and the Socialists were deeply factionalized, with politicians commanding their own followings. As such, the parties could only be held together through bargaining—which often included graft. The Christian Democrats, in particular, were dependent upon the support of local leaders in the South and in Sicily (which were both far behind the rest of country economically), many of them with ties to the Mafia. Southern politicians used the national government’s resources to support their local economies. Often this meant public works boondoggles, which enriched politically connected (and Mafia-owned) construction firms and which only increased the contempt held by northern Italians for their southern countrymen.

Students protesting against corrupted government demanding their educational rights

Figure 2: Students protesting against corrupted government demanding their educational rights

Because many Italians feared that a communist government would bring their country into the Soviet bloc, the Christian Democrats were essentially a perpetual governing party. Proportional representation meant that no party would ever gain a majority, so coalition governed Italy. While squabbling among factions meant that particular governments usually lasted a year or less, the same parties always came out on top. The Christian Democrats and the Socialists used their power to create a vast web of patronage, which enmeshed Italy’s many state-owned firms, the national broadcasting system, executive agencies, and public banks. The lack of turnover loosened what few inhibitions Italian politicians had about exploiting their positions for financial gain. While the Communists remained out of power, they cut backroom deals with the ruling parties to enrich themselves, especially after the 1970s, when they distanced themselves from the Soviet Union and when regional autonomy gave Communists more chances to govern.

These arrangements collapsed in 1992–1993. There were a number of reasons for this change. Under the pressure of global competition, Italian business owners grew weary of the high taxes and inefficient government produced by widespread corruption. The drive for European monetary union required Italy to reduce its huge budget deficit. The end of the Cold War made communist control less unthinkable (especially when the party renounced communism and renamed itself the Democratic Party of the Left).

It was a team of prosecutors investigating corruption in Milan’s construction industry who really rocked Italy’s political world. Led by Antonio Di Pietro (who now sits in Italy’s Senate and may be the next president), the so-called clean hands brigade demolished the Italian establishment during 1992–1994. Prosecutors exposed massive patronage, political awarding of contracts, and bribery. It became clear that organized crime had friends at the highest levels. Former Prime Minister Bettino Craxi, a Socialist, was convicted of corruption after he fled to Tunisia. Giulio Andreotti, a Christian Democrat who had served as prime minister seven times, is, as of this writing, on trial for being a member of the Mafia.

The corruption investigations touched even those who benefited from them. After the Italian party system collapsed in 1993, the media tycoon Silvio Berlusconi led a conservative coalition to victory in the March 1994 elections. Berlusconi’s government collapsed when prosecutors announced that they were investigating him. In 1998, Berlusconi was convicted of bribing tax inspectors (although he was later acquitted of other charges), but he remains leader of his Forza Italia party.

Spain also has a long history of corruption and patronage. Governments have long relied on local notables to administer the law. While Francisco Franco strengthened the state during his long rule (1939–1975), he made appointments more on the basis of loyalty than competence. The return of democracy brought greater professionalism, but local patrons remain important. It was corruption on a national scale that grabbed the headlines in the 1990s. A series of scandals embarrassed the socialist government of Prime Minister Felipe Gonzalez, who led Spain from 1982 to 1996. Many observers attributed the corruption to the socialists’ arrogance after so many years in power. In 1991, Deputy Prime Minister Alfonso Guerra resigned after his brother Juan was accused of using party facilities for private gain. A series of scandals surrounded Socialist party finances. The heads of the Bank of Spain and the Civil Guard were besmirched by corruption. This wave of ‘‘sleaze’’ helped lead to the socialists’ defeat in 1996.

France has had many scandals throughout its history. Some have even threatened the stability of the regime. Conservatives opposed to the Republic used the Panama Canal scandal (1892–1993) and the Stavisky affair (1934) to attack the legitimacy of democratic government. Others have simply been embarrassing, as when it was revealed that President Valéry Giscard d’Estaing had accepted diamonds from the infamous tyrant Jean- Bedel Bokassa, president of the Central African Republic and a longtime French client. Overall, the French tend to have a cynical view of government, accepting corruption and the abuse of power as the way the world works.

The ‘‘long presidency’’ of François Mitterand (1981–1995) included a series of scandals, many of them concerning the finances of Mitterand’s Socialist Party. Rising campaign costs forced socialists, who lacked conservatives’ constituency among business, to raise money in irregular ways. Contractors who sought business with socialist-governed municipalities were told to contribute to party-controlled consultancies, which funneled the money to the national party. The exposure of this practice embarrassed the socialists, but they could plausibly claim that other parties engaged in similar schemes. The businessman Roger-Patrice Pelat, who was indicted for insider trading before his death in 1989, had questionable relationships with many politicians, including his close friend Mitterand and Prime Minister Pierre Bérégovoy, who committed suicide in 1993 after it was revealed that Pelat had given him an interestfree loan.

Two other leading French politicians have come under fire in recent years. Alan Juppé, a conservative former prime minister, has been charged with obtaining fraudulent jobs for Gaullist party activists when he worked for then–Paris Mayor Jacques Chirac, who is now president. Roland Dumas, a former foreign minister and chief of the Constitutional Court, is under investigation for his ties to a defense contractor, which hired his mistress and paid her a $9 million commission.

Greece is another southern European country notorious for corruption and clientelistic politics. The governments of Andreas Papandreou (1981– 1989, 1993–1996), longtime leader of the Pan- Hellenic Socialist Movement (PASOK), were widely perceived as crooked and patronage ridden, but Papandreou himself was acquitted of embezzlement charges in 1992. Tax evasion is common, and the economy remains dependent upon state patronage and contracts.

Many of the countries of northern Europe have become bywords for clean government. The governments of Scandinavia, the Netherlands, and Switzerland, in particular, are known for their honesty. A typical ‘‘scandal’’ in these countries would be a politician using party funds to pay for diapers for her baby. One major exception is Belgium, which is known as the ‘‘Italy of the North’’ for its corruption and cronyism. The government was shaken by a case of the pedophile murderer Marc Dutroux, who had conducted his activities in such a way that it appeared he had official protection. The 1991 murder of a Socialist Party boss remains unsolved, and many suspect the involvement of leading politicians and the Mafia. Willy Claes, former North Atlantic Treaty Organization (NATO) secretary general, was convicted in December 1998 of accepting a bribe from a defense contractor when he was economic affairs minister. Two other prominent Belgian politicians were also convicted.

Corruption was widespread in British politics during the eighteenth and early nineteenth centuries, but the Northcote-Trevelyan reforms of 1854 established the modern British civil service, which is world renowned for its honesty. Indeed, many former British colonies, such as Singapore, have benefited from their reputation for sound administration. The conservative governments of Margaret Thatcher (1979–1990) and John Major (1990– 1997) saw their share of scandals, notably some involving large donations to the Conservative Party by questionable characters. (The United Kingdom does not limit donations to parties, nor does it require them to be disclosed.) Years of one-party rule led to a certain degree of arrogance and selfsatisfaction, but little real corruption. While many observers attributed Major’s defeat in 1997 to ‘‘sleaze,’’ it appears that is just another way of saying, ‘‘The Tories had been in power for too long and it was time to give someone else a chance.’’

Germany is also known as a relatively corruption- free country, although, contrary to popular belief, the Nazi regime was filled with petty graft and party patronage. In the 1980s, it was revealed that the Flick industrial group had made illegal donations to the major political parties, while this embarrassed the government of Chancellor Helmut Kohl (1982–1998), it never threatened its stability. More recently, there have been scandals about bribery in the construction industry and about the involvement of big-city police with the drug trade and prostitution. Probably the most serious threat is the large network of ex-communists in the former East Germany, which has become known for favoritism and intimidation.

The most conspicuous European scandal of the late 1990s has concerned the European Commission, the governing body of the European Union. An internal audit, leaked to members of the European Parliament, revealed waste, corruption, and cronyism in many Euro-programs. It revealed that Edith Cresson, commissioner for research policy and a former French prime minister, had appointed her dentist to coordinate acquired immune deficiency syndrome (AIDS) research and had presided over a fraud-ridden job training program. In order to stem a parliamentary drive to censure or remove the commissioners, commission president Jacques Santer appointed the Committee of Independent Experts to investigate the audit’s charges. The panel produced a report that essentially found the allegations to be true. Faced with a parliamentary revolt, and with Cresson unwilling to quit alone, all twenty European Commissioners resigned in March 1999.

Corruption in East Asia

During the last quarter of the twentieth century, East Asia has had the fastest-growing economy in the world, but the economic crisis of 1997–1998 exposed the vast corruption of some countries. Indonesia was the most conspicuous case. During his 1966–1998 reign, Suharto amassed a fortune that may reach into the tens of billions of dollars. His children enriched themselves by acting as middlemen between state-owned firms and contractors; serving as the Indonesian partners of many foreign investors; and acquiring interests in aviation, broadcasting, automobiles and many other industries. Businessmen close to Suharto, such as industrialist Liem Sioe Liong and timber magnate Mohammed ‘‘Bob’’ Hasan, came to dominate the economy. As long as Indonesia kept growing, most citizens and businessmen accepted Suharto’s banditry. Indonesia’s economic and political collapse in 1998 led to demonstrations against his rule and to bloody riots in Jakarta, the capital. Suharto quit in May 1998; B. J. Habibie, his successor, found his associates implicated in a multimillion- dollar banking scandal. Abdurrahman Wahid, elected president in October 1999, announced that he would pardon Suharto should be ever be convicted of corruption.

The Philippines has a long history of corruption. A small group of families has long dominated Philippine politics, buying off their supporters through graft and patronage. Filipino culture emphasizes personal relationships, rather than formal institutions. As such, written law has little connection with the workings of the Philippine government. The Philippine civil service, police, and congress have particularly corrupt reputations. After independence in 1946, several Philippine presidents were known to be corrupt, especially Elpidio Quirino (1948–1953) and Carlos García (1957–1961). Ferdinand Marcos (1965– 1986) put them all to shame, especially after he declared martial law in 1972. Philippine Airlines became a private commuter line for the Marcos family. Marcos bullied wealthy families into giving up their holdings to his family and friends. The Central Intelligence Agency (CIA) estimated that Marcos himself was worth $10 billion, but after Marcos fell from power, investigators were able to track down only a fraction of that sum. Despite her promises of a new era, the administration of Corazon Aquino (1986–1992) was also wracked with corruption. Fidel Ramos (1992–1996), however, built a reputation for honesty and presided over a period of prosperity.

Thailand is world renowned for its tolerance for drug trafficking and prostitution, and it is widely alleged that these businesses have allies in the government. The country also has a political culture dominated by patronage, bribery, vote buying, and crony capitalism. Prime Minister Banharn Silpa-Archa (1995–1996) was particularly identified with these practices, but the crisis of 1997–1998 disrupted many of Thailand’s arrangements. The country has now adopted a more democratic constitution and has banned vote buying and insider deals.

South Korea has a political system that concentrates power in the presidency. It is not surprising that corruption has been concentrated there, too. Park Chung-hee seized power in 1961, vowing to end the sleaze of South Korea’s early years. Park amassed enormous power over South Korea’s economy and government. While most observers agree that he mostly used that power to his country’s betterment, his dominance convinced many businessmen that they needed to donate to Park’s party if they wanted to win his favor. After Park was assassinated in 1979, Chun Doo Hwan assumed the presidency. There were rumors of corruption surrounding Chun, which were confirmed in 1996 when he and his successor, Roh Tae Woo, were convicted of corruption and sedition. Chun was sentenced to life in prison; Roh received seventeen years. Kim Young Sam, who succeeded Roh in 1993, had a clean image that was soiled when his son Kim Hyun Chul was convicted in 1997 of receiving bribes. The collapse of one of the nation’s leading conglomerates sparked charges that it had corrupt ties with Kim’s government.

The Liberal Democratic Party (LDP) dominated Japanese politics from 1955 to 1993; it still leads most governing coalitions. On the international stage, it projected an image of serene competence. Behind the scenes, Japanese back rooms saw wheeling and dealing that would put any Chicago pol to shame. Kakuei Tanaka, prime minister from 1972 to 1974, ran a pork-barrel-fueled machine that dominated the LDP. Tanaka forced the government to extend the bullet train line into his mountainous home base, nearly bankrupting the national railroad in the process. In 1983, Tanaka was finally convicted of accepting bribes from the American aircraft manufacturer Lockheed, which had spread around $22 million among Japanese politicians in the 1970s. While the LDP’s rule was broken in 1993, it regained control in 1994, and by 1996 an old Tanaka ally, Ryutaro Hashimoto, was serving as prime minister. In recent years, scandals have rocked the Ministry of Finance, which wields great power over the Japanese economy. Finance officials have been accused of covering up banks’ financial troubles and of leaking sensitive information to bank executives.

Corruption in South Asia

Former Pakistani President, who was considered as the most corrupted leader in the history of Pakistan (Musharf is also considered as the reason for the trouble Pakistan is going through currently)

Figure 3: Msharaf - Former Pakistani President, who was considered as the most corrupted leader in the history of Pakistan (Musharf is also considered as the reason for the trouble Pakistan is going through currently).

The nations of South Asia (India, Pakistan, Bangladesh, and Sri Lanka) are all former British colonies that benefited from the United Kingdom’s common law tradition and bureaucratic honesty; but all have sunk into a morass of corruption. Pakistan is now considered one of the most corrupt countries in the world. Tax evasion is ubiquitous: only about half of assessed taxes are actually collected. Businessmen believe that they must pay government officials if they seek a public contract. Civil servants are poorly paid, and believe they must take bribes in order to survive. The two most recent prime ministers, Benazir Bhutto (1988–1990, 1993–1996) and Nawaz Sharif (1990– 1995, 1997–present), have presided over administrations rife with corruption. In April 1999, Bhutto and her husband were convicted of taking kickbacks on government contracts. They were each sentenced to five years in prison.

A recent book on India and Pakistan calls corruption in India ‘‘pervasive, systematic, structured, and graded . . . running from the bottom to the top of the political order.’’ The British gave India an honest civil service, but Indira Gandhi’s state of emergency (1975–1977) destroyed its integrity and morale by forcing bureaucrats to break the law. Now India’s estimated fifteen million civil servants shake down citizens for every service imaginable, from installing phone lines to permitting people to enter the country. Corrupt politicians hold power on a national scale. Jayalitha Jayaram, the notorious boss of Tamil Nadu state, brought down the government of Prime Minister Atal Bihari Vajpayee through her defection in April 1999. A 1996 corruption investigation discovered that Jayaram owned 10,000 saris and 350 pairs of shoes.

Corruption in the Middle East

Leaders in the Middle East

Figure 4: Leaders in the Middle East

The Middle East is a nation bereft of functioning democracies, save Israel and Turkey. The predominance of authoritarian regimes has created a situation ripe for corruption. The Saudi royal family has a reputation for corruption on a massive scale. It treats the national income as royal revenue and distributes it at whim. There are 7,000 royal princes, whom the Economist described as ‘‘lawless and hedonistic.’’ Not content with their generous allowances, they collect huge commissions on foreign contracts and muscle in on private business. Public anger at royal corruption, particularly that of King Saud, fueled an Islamic fundamentalist movement for a time. Crown Prince Abdullah assumed management of the government in January 1996, and his honesty and ruthlessness have defused the threat from the opposition.

Egypt is world renowned for its bureaucratic corruption. Its one million civil servants are notoriously indolent and graft hungry. Bribes are necessary to engage in any government transaction. The government is unable to provide most public services, opening the door for Islamist groups to fill the void. Morocco, Tunisia, and Algeria are also known for their corruption. In Algeria, years of corrupt rule by the military and the National Liberation Front fueled an Islamist revolt that has led to a savage civil war.

Turkey’s fragile democracy has been besieged by corruption. Its parties are far more concerned with seeking patronage and state contracts than with promoting ideological agendas. Former Prime Minister Tansu Ciller (1993–1996) has become vastly wealthy while in politics, and allegations of graft and cronyism have swirled about her. A staunch secularist, she nevertheless formed a coalition government with Islamic leader Necmetin Erbakan in 1996, because he promised to prevent an investigation of Ciller’s finances. She made a similar deal with Erbakan’s successor, Mesult Yilmaz, who had his own skeletons to hide. Yilmaz’s government finally fell in November 1998 because of continuing allegations about corruption. There have also been charges that the police are in league with gangsters, right-wing hit squads, and drug traffickers.

Corruption in Sub-Saharan Africa

With the possible exception of the former Soviet Union, sub-Saharan Africa is the most corrupt region in the world. Colonial rule left weak governments and few educated administrators. Socialist- minded leaders created state-dominated economies that failed disastrously and offered numerous opportunities for graft. With arbitrary boundaries left over from colonial times, few states have developed a sense of ‘‘nationhood,’’ and political actors’ first loyalty is usually to their ethnic group.

‘‘Personal rulership’’ is perhaps the most common political system in Africa. The ruler has almost unlimited legal competence. He is not concerned with building a following among the general public; instead he attends to the needs of his more powerful supporters, usually in the military or in state-owned firms. But state power is too limited to implement any policy except pillage. Personal rulership tends to be corrupt and arbitrary, but also weak and unstable.

The most extreme form of personal rulership is what Max Weber called a ‘‘sultanistic’’ regime. Such a state has no claim to legitimacy, whether based on tradition, ideology, charisma, or social order. The ruler runs the state to benefit him and his allies. He treats the public treasury as an extension of his personal fortune. He sells import and export licenses to the highest bidders, and appoints his cronies to run state-owned firms where they can exploit their nation’s resources. Because the ruler’s whims (and those of his supporters) supersede the written law, there is no predictability to the state’s actions. This discourages private enterprise, since businessmen cannot know whether their property will be confiscated. The only path to success is through winning the ruler’s fickle favors. While sultanistic states rarely function well enough to collect taxes, that did not bother many African leaders, who had their own streams of revenue: exporting natural resources through state-owned firms (especially during the high-commodity-price 1970s) and collecting foreign aid from the Cold War rivals. The French have remained active in their former colonies and have propped up many an unsavory dictator.

Mobutu Sese Seko, who ruled Zaire (now the Democratic Republic of Congo) from 1965 to 1997, was a perfect example of a sultanistic ruler who treated the state as his personal property. The Economist (1997, p.21) described his rule as the ‘‘systematic theft of the state from top to bottom.’’ Mobutu accumulated a fortune that amounted between $4 and $9 billion. Bribes, kickbacks, the public treasury, the returns from Zaire’s mineral wealth, French and American aid—all went into Mobutu’s Swiss bank accounts. By the end of his reign, he owned nine villas in Belgium; a Brazilian coffee plantation; a mansion in Spain; property in several African cities; and estates in Portugal, Switzerland, and the French Riviera. He also owned tens of thousands of bottles of wine bottled in the year of his birth.

Mobutu found Zaire a poor country—and left it destitute. In the name of Zairean nationalism, he seized expatriate-owned businesses in 1973 and gave them to his cronies, who promptly ran them into the ground. (Uganda’s Idi Amin did much the same thing at the same time with Asian-owned businesses, with the same results.) Zaire is worldrenowned for its mineral resources, including cobalt, diamonds and copper. Mobutu nationalized the mining industry—and wrecked it. Rather than paying them, Mobutu let his soldiers work for their money by robbing ordinary citizens. Pity the poor businessman trying to import goods into Zaire, for he had to pass a gauntlet of nine state agencies, all of them demanding bribes. The end of the Cold War meant that Mobutu’s Western allies would no longer subsidize his regime. By the mid-1990s, Mobutu’s government had stopped functioning, and a guerrilla uprising took root. With his army more interested in looting than in fighting, Mobutu fled the country in May 1997 and died soon after. By that point, Zaireans’ purchasing power was only one-fourth what it had been in the 1950s, when they still lived under Belgian rule. The Belgians left behind an excellent system of roads. By the 1990s, it had deteriorated to the point where it was no longer possible to drive across Zaire.

While Mobutu set an impressive standard for banditry, other African rulers did their best to keep up. Mali’s Moussa Traoré, Niger’s Gnassingbe Eyadema, Cameroon’s Paul Biya, and Gabon’s Omar Bongo are some of the more noteworthy kleptocrats who have misgoverned Africa over the past generation. Few have had the panache of Jean-Bedel Bokassa of the Central African Republic (1965–1979). Like Mobutu, Bokassa treated his land as his private domain. Unlike Mobutu, Bokassa went so far as to crown himself emperor in a ceremony modeled after Napoleon’s coronation. Through his control of the diamond trade, Bokassa accumulated a truly imperial fortune. His antics became an embarrassment to his French masters, who overthrew him after he personally led a massacre of children who were protesting the cost of school uniforms. The French spread a rumor that Bokassa ate his political opponents; distraught by this charge, Bokassa revealed that he had given diamonds to leading French politicians, including then–President Valéry Giscard d’Estaing.

Of all African countries, Nigeria is probably the most notorious for corruption. Bribery is universal and scamming seems to be the national pastime. With its vast reserves of petroleum, Nigeria experienced an economic boom during the 1970s oil crisis. The returns from that wealth mostly went to the military and to corrupt politicians. The nation’s schools, hospitals and roads are in dreadful condition. President Shehu Shagari’s administration (1979–1983) was so corrupt that the army overthrew him so they could get in on the action. More recently, Sani Abacha stole billions of dollars from the national treasury during his 1993– 1998 dictatorship. Abacha realized that distributing import licenses for fuel was a good way to reward his cronies. He allowed the nation’s oil refineries to deteriorate, forcing this oil-producing nation to import gasoline, and thereby enriched his pals. Alas, poor Abacha did not get to enjoy his wealth for long: He died suddenly in June 1998, allegedly in the company of prostitutes. (Some have suggested that Abacha’s rivals poisoned his Viagra.)

Corruption in Latin America

While Latin America has not been pillaged as thoroughly as Africa, corruption is a serious problem in most countries in the region. Only Chile, Costa Rica, and Uruguay have reputations for being relatively clean. Latin America’s corruption is rooted in its Spanish and Portuguese colonial past. Far from home, colonial bureaucrats were able to exploit their positions for profit, often treating their offices as their private possessions. Mercantilistic regulation meant that merchants and landowners often had to bribe officials in order to do business. Independence changed little. Hispanic traditions of paternalism meant extensive involvement by the state in the economy, which created great opportunities for bribery and smuggling. A foreign investment boom in the late nineteenth century strengthened local economies, but often primarily enriched a few leaders at the top. Nationalists attacked foreign investment, especially in the oil industry, and replaced it with state-owned firms, which frequently became deeply corrupt. The domestic private sector remained underdeveloped and dependent on the state.

Much of Latin America’s corruption has swirled about the various strongmen who have held power over the years. Alfredo Stroessner, who dominated Paraguay from 1954 to 1989, turned his country into a gangster’s paradise. Nazi war criminals and international drug traffickers flocked to live under Stroessner’s protection. Stroessner treated Paraguay’s government as his personal fiefdom, distributing patronage to his supporters and providing few services to ordinary citizens. Stroessner ensured his longevity by spreading the graft around. High tariffs in neighboring Argentina and Brazil spawned a thriving smuggling trade. Many military officers became millionaires through this trade, buying Rolls-Royces and building mansions. Eventually, the armed forces were wholly funded by the smuggling of cigarettes, whiskey, cocaine, and heroin. The costs of the vast Itaipú hydroelectric project mushroomed from a 1973 estimate of $2 billion to a final figure of $21 billion in 1991. Much of the overrun appears to have gone into officials’ pockets through kickbacks and bribery.

Venezuela saw a series of caudillos who made huge fortunes off the nation’s oil wealth. General Juan Vicente Gomez (1910–1935) accumulated $200 million and became the nation’s largest landowner. Major Marcos Pérez Jiménez did even better during his short reign (1951–1957), building a fortune of more than $250 million. The Somoza clan ruled Nicaragua from 1936 to 1979, dominating the economy and stashing away tens of millions of dollars. Haiti has had scarcely one uncorrupt leader in its entire history, but the Duvaliers (François 1957–1971; Jean-Claude 1971–1986) stand out even in that wretched lot. When Jean- Claude fled Haiti in 1986, he was said to be worth $800 million. Fulgencio Batista, president of Cuba from 1940 to 1944 and from 1952 to 1958, accumulated a fortune of between $100 and $300 million. Rafael Trujillo treated the Dominican Republic as his personal fiefdom during his 1930– 1961 reign. At one point, Trujillo acquired the country’s only shoe factory and then forbade Dominicans to go barefoot. Visitors to Santo Domingo noted that the country’s poverty must be exaggerated: After all, everyone wore shoes! Trujillo’s practice of requiring a 10 percent bribe on every governmental transaction helped him fill his bank accounts with up to $500 million.

While presidential corruption is a long tradition in Latin America, a newer plague is infecting states from the Rio Grande to the Andes: drug trafficking. Norteamericanos’ insatiable appetite for cocaine, marijuana, and heroin (and their government’s insistence on maintaining the ban on such substances) is undermining political stability in several Latin American countries. Cocaine cartels have been a fixture in Colombia since the 1970s. In the 1980s, the Medellín cartel threatened the stability of the Colombian government. More recently, it was revealed that the Calí cartel had partially funded the presidential campaign of Ernesto Samper (1994–1998). The Revolutionary Armed Forces of Colombia (FARC), guerrillas funded by the drug trade, now control much of the country. Many observers fear that Colombia will become the hemisphere’s first ‘‘narco-state.’’

However, Mexico may get there first. Because of the extensive border it shares with the United States, Mexico has long been an ideal location for smugglers. When the Drug Enforcement Administration (DEA) increased surveillance in South Florida and the Caribbean during the late 1980s, the cocaine trade moved into Mexico. Since then the drug trade has boomed in Mexico, corrupting nearly every area of the Mexican government. Even General Jesús Gutierrez Rebollo, who was leading Mexico’s war on drugs, was arrested for accepting bribes from a major drug trafficker. The Mexican police are universally believed to be corrupt. State governors, army officers, party leaders— the drug traffickers have ties to them all.

Several leaders have made their countries havens for the drug trade. The most famous, of course, is Manuel Antonio Noriega, who dominated Panama from 1983 to 1989. An American invasion brought him to the United States, where he now serves a sentence for drug trafficking and racketeering. Vinicio Cerezo, president of Guatemala from 1985 to 1990, was widely suspected of being friendly to the drug trade. For a time during the 1980s, Bolivia was run by a group of military officers known as the ‘‘cocaine colonels.’’

Some of the larger nations in Latin America have developed large, clientelistic political party machines. Probably the most famous is Mexico’s Institutional Revolutionary Party (PRI), which has (under different names) dominated Mexican politics since 1929. Since then, the PRI has won every presidential elections and most state ones, often fraudulently. Since the 1980s, however, the National Action Party (PAN) and the Democratic Revolutionary Party (PRD) have become serious competitors for power. The PRI’s influence permeates Mexican society through corporatist labor and business organizations. PRI patronage dominates many institutions. Mexico’s state-owned oil company, Petroleos Mexicanos, is notoriously corrupt. Mexico has a long history of presidents who retired wealthy. José Lopez Portillo, president from 1976 to 1982, parlayed the oil boom of those years into a fortune of at least $5 billion. Carlos Salinas de Gortari (president, 1988–1994) moved to Ireland under widespread suspicion of massive corruption. His brother, Raul, was later convicted of arranging the murder of a prominent PRI politician. While Salinas privatized many of Mexico’s state-owned firms, thereby opening up its economy, some of these companies went to PRI allies under suspicious circumstances.

From 1958 to 1998, two political parties dominated Venezuela in close cooperation. Vast oil wealth provided the necessary resources for patronage (a country of 22 million has 1.3 million government employees) and subsidies. The state nationalized many industries, providing more opportunities for patronage and graft, but also leaving the private sector weak and dependent. During the boom of the 1970s, politicians could indulge their penchant for cronyism and corruption. The decline in oil prices in the 1980s diminished the parties’ ability to mollify dissent. Jaime Lusinchi, president from 1983 to 1988, had to remain in exile for several years to avoid prosecution for misuse of state property. Carlos Andres Pérez, a fixture in Venezuelan politics since the 1950s and twice president (1974–1979, 1988–1993), was impeached in 1993 for abuse of public funds. Hugo Chavez, who had led an attempted coup d’état against Pérez, was elected president in 1998 without the support of the major parties.

Brazil lacks strong political parties, but it does not lack for patronage. Especially in rural areas, there is a tradition of machine politics dominated by local elites who use public resources to win mass support. President Fernando Collor de Mello (1990–1992) emerged from this background. While other Brazilian presidents had corrupt reputations, such as Juscelino Kubitschek de Oliveira (1956–1962) and José Sarney (1985–1990), Collor became the first president to be impeached by Congress. He resigned before he could be removed from office. Corruption under the Collor regime included overpricing on government contracts, rigging public bidding, insider deals, and illegal fundraising. Collor’s campaign treasurer, Paulo César Farias, collected $2 billion in kickbacks from leading contractors. Collor himself spent $2.5 million on a garden at his home. One corrupt Collor ally in the Brazilian Congress claimed his wealth came from winning the lottery 333 times; he used the lottery as a means of laundering his corrupt wealth. Some observers argued the Collor era’s corruption stemmed from changes in Brazil’s electoral law that made it more difficult for the president to form stable coalitions in Congress. Brazil’s economic crisis reduced the public resources available for bargaining, forcing Collor to turn to private sources.

Corruption in Communist and Post-communist States

Nowhere in the world does corruption pervade society more thoroughly than in communist and post-communist states. The absolute command of resources that characterizes communist states, and many post-communist states, makes them perfect loci for massive corruption. Under Joseph Stalin and Mao Zedong, terror kept corruption from getting out of line. As communist states aged, corruption became more flagrant. In the USSR, the regime of Leonid Brezhnev (1964–1982) became a synonym for graft and inefficiency. Almost all Communist Party officials took bribes; most exploited their offices for all the privileges they were worth. Organized crime, which has a centuries- old history in Russia, established close ties with party leaders. Indeed, the black market often was all that kept the USSR from collapsing. Managers of state factories and farms had to be corrupt to survive. They lacked the material necessary to meet their goals, so they bribed officials to approve their production. Ordinary citizens had to bribe, too, in order to get consumer goods, medical care, and housing.

Other communist countries featured extensive corruption that came to light after the revolution of 1989–1991. Exposure of the lavish lifestyles of the East German elite—who had always preached Marxist simplicity—led to massive demonstrations and helped trigger the end of the communist regime. The leaders of Bulgaria and Romania have also been revealed to be corrupt.

The communist era bequeathed a legacy that made massive corruption inevitable in most postcommunist countries: a contempt for written law, a complete lack of protections for private property, a cynical public, an arrogant officialdom, a state-dominated economy, an absence of any institutions independent of the state. Some post-communist states made the transition relatively easily and with relatively little corruption: Poland, Hungary, the Czech Republic, Slovenia, and the Baltic states. But the states of the former USSR (with the exception of the Baltics) have traveled a rockier path that has mostly led in to a swamp of corruption.

When Russia privatized many of its state firms in 1992, the bulk of them went to former communist apparatchiks, ex-KGB agents, mafiya leaders, and a few well-connected businessmen. These ‘‘oligarchs’’ generally paid bargain-basement prices. They have dominated Russian politics in the post-communist era and have supplied crucial support for President Boris Yeltsin. The crash of the ruble in the summer of 1998 damaged both their political credibility and their economic clout. Former Prime Minister Viktor Chernomyrdin is widely believed to have made a multi-billion-dollar fortune from the privatization of the state natural gas monopoly, Gazprom—one of the few Sovietera companies that makes something that anybody wants. Allegations of massive corruption have swirled about former Finance Minister Anatoly Chubais, once the great hope of reform.

Paid poorly or not at all, military officers have turned to selling their own equipment. During the conflict in Chechnya, some Russian soldiers actually sold weapons to the Chechen separatists. Officers often would rather smuggle than perform their military duties. Some even sell nuclear material or chemical weaponry to rogue states. Customs officials are so corrupt and obstreperous that the U.S. government actually trains Russian businessmen in techniques for avoiding them.

Despite all the talk of Russian capitalism, the state still dominates the economy. Most Russians still work for state firms. Businessmen must obtain licenses for most activities, which creates great opportunity for extortion. More important, Russia has not created the kind of legal system necessary for private enterprise to flourish. With few laws to govern the emerging capitalist economy, bureaucrats can take away a company’s assets at a whim. With their property at the mercy of corrupt officials, even honest businessmen must bribe to stay afloat. There is little tradition of respecting private property in Russia. Even under the czars, all land belonged to the sovereign; even the wealthiest landowner was legally a tenant.

Taking advantage of this time of troubles, organized crime has taken over much of the Russian economy, with the help of their old communist and Komitet Gosudarstvennos Bezopasnoti (Committee for State Security) (KGB) allies. The police and other law enforcement agencies are underpaid, undermanned, and demoralized. With domination of their home territory assured, Russian gangsters are now spreading their activities worldwide.

Other post-communist states have their own patterns of massive corruption. Foreign investors have shied away from Ukraine, despite its rich farmland and modern factories, because its allencompassing graft and labyrinthine bureaucracy makes doing business almost impossible. As in Russia, former communist officials and mafiya gangsters dominate the economy. Ex-communists made Bulgaria and Romania bywords for corruption until the voters booted them out.

China has moved toward a market economy while retaining the Communist Party’s monopoly on political power. This has created many opportunities for corruption. Party leaders have plundered state firms, received state loans, and embezzled state funds. The People’s Liberation Army has entered a variety of businesses, some legal, some not. The children of communist leaders—the socalled ‘‘princelings’’—have used their positions to build fortunes. Some observers have argued that corruption has smoothed the transition to capitalism by circumventing bureaucratic rules. It is true that corruption has been most visible in the fastestgrowing parts of China, especially in the southern province of Guangdong, where it may well have opened doors that strict legality would have kept shut. Corruption may now be harming commerce. Like Russia, China lacks a system of property law, so businessmen remain at the mercy of officialdom and cannot settle their disputes in court. They must instead rely on bribery and guangxi (connections), which often translates into giving local bosses a cut of their profits. Foreign investors are losing patience. There are also signs that corruption is impairing governance. During the Yangtze River floods of the summer of 1998, water washed away many ‘‘bean-curd’’ dams and bridges. Officials had embezzled the money that would have strengthened these structures. Premier Zhu Rongji has used these disasters to justify his current anticorruption campaign.

North Korea has not moved away from communism one bit, so there is no private sector to shake down. Instead, the state itself has become a criminal enterprise. With its economy in ruins, North Korea has become a ‘‘gangster state’’ that sells narcotics and counterfeit money around the world. It can no longer pay its diplomats, so they support themselves by smuggling. North Korea’s fake $100 bills are so convincing that they led the United States to redesign its currency. To fuel its drug trade, the state runs its own methamphetamine factories and opium poppy farms.

The outlook for the Future

The global trend toward democracy and capitalism may decrease corruption in the long term, but in the short term it may increase the perception of corruption. The openness brought by democracy allows for greater disclosures of official malfeasance. Graft that would have remained secret under an authoritarian regime instead comes out, perhaps damaging the public’s opinion of politicians. While capitalism reduces the state’s role in the economy, thereby decreasing the opportunity for officials to enrich themselves, the privatization schemes necessary for the transition to free markets often become a bonanza for those in power.

There are several attempts to fight corruption on an international level. Transparency International, founded in 1993, organizes anticorruption efforts across the world. Its annual survey of perceptions of corruption has embarrassed many graftridden countries. Transparency International now has chapters in seventy countries. In 1997, twentynine members of the Organization for Economic Cooperation and Development (OECD) signed the Convention on Combating Bribery of Foreign Public Officials. This accord, which went into effect in February 1999, forbids the bribery of foreign executive, legislative, and judicial officials. Countries that signed the accord had to agree to punish offenders severely, to help each other prosecute offenders, and to encourage the wider use of sound accounting and auditing practices. The International Monetary Fund (IMF) and the World Bank now often condition their loans on steps to reduce corruption and ‘‘crony capitalism.’’ In 1997, the World Bank established a comprehensive anticorruption program.

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This Aricle was Written by
RICHARD MCGRATH SKINNER

This Article was Published in
ENCYCLOPEDIA OF SOCIOLOGY
Second Edition
A Book by

EDGAR F BORGATTA
Editor-in-Chief
University of Washington, Seattle

AND

RHONDA J. V. MONTGOMERY
Managing Editor
University of Kansas, Lawrence

 

 
 
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