December 7, 2012 6:14 pm

Push back the envelope

The fight against corruption in business and government is never-ending but there are reasons for optimism
 

Waging War On Corruption: Inside The Movement Fighting The Abuse Of Power, by Frank Vogl, Rowman & Littlefield, RRP£24.95/$40, 310 pages

There is a huge gap between political rhetoric at international gatherings on corruption and what governments in the developed world are prepared to do in practice to fight it. So, too, with business, where behaviour in the arms, energy and natural resource industries, among others, is often predicated on the idea that bribery is just part of the marketing toolbox, though nobody nowadays can publicly say so.

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That attitude was summed up by Daniel Haughton, chairman of Lockheed in the mid-1970s, who told a subcommittee of the US Senate led by Senator Frank Church that bribery was part of global business. It was, he added, the way things got done. Lockheed had been responsible for bribing large numbers of politicians including the then prime minister of Japan, Kakuei Tanaka, who was spared jail only thanks to ill health.

This notorious episode was seminal in prompting the introduction in 1977 of the US Foreign Corrupt Practices Act, the first legislation anywhere to make bribery payments by corporations to foreign government officials a criminal offence. Yet as Frank Vogl writes in his wide-ranging Waging War on Corruption, it took a further 20 years before any other country adopted similar legislation.

The cold war undoubtedly played a part in that delay, since western governments were happy to go along with the worst of the developing world’s kleptocrats – Mobutu Sese Seko of Zaire (now the Democratic Republic of Congo) and Sani Abacha of Nigeria spring to mind – provided they were on the right side. Then, with the fall of the Berlin Wall, an opportunity to make inroads into corrupt behaviour opened up. US business wanted a level playing field with competitors and the US lobbied for it at international level as, for different reasons, did Transparency International, of which Vogl was a co-founder and vice-chairman for nine years. The result was that the Organisation for Economic Co-operation and Development produced its Anti-Bribery Convention in the face of considerable resistance in Europe.

Foreign policy imperatives nonetheless continued to dilute international efforts against bribery. In both the US and Europe, concern about security of energy supply ensured that corruption remained rife among oil producers in the Middle East. George W. Bush’s administration showed little inclination to address appalling corruption in Pakistan, Afghanistan, Iraq or Kenya as it pursued its “war” against terrorism. The mercantilist urge to promote arms exports helps explain why foreign bribes were tax deductible until the late 1990s in Germany – and why the government of Tony Blair, citing national security considerations, notoriously stopped a Serious Fraud Office investigation into allegations that BAE Systems had bribed officials in Saudi Arabia.

As befits a co-founder of Transparency International, Vogl writes with passion about the humanitarian issues to which corruption gives rise. Among the biggest victims are the hundreds of millions of poor people around the world who suffer extortion at the hands of mid- and low-level police and who cannot have access to healthcare without paying bribes.

On the wider case against corruption, he quotes former UN secretary-general Kofi Annan, who said: “Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish.” Particularly disturbing is the role of bribery in persuading Pakistani officials to divulge nuclear secrets to North Korea and Iran.

Can the problem of corruption be mastered? Vogl, while acknowledging the obvious difficulties, is optimistic. He points to the Arab Spring as giving this battle enormous momentum, arguing that corrupt leaders have been warned as never before and that a new age of transparency is empowering civil society activism. Much of the book is an account of courageous campaigning by activists, journalists, public prosecutors and, of course, Transparency International.

For good measure, the globalisation of capital flows has enhanced the extraterritorial reach of the Foreign Corrupt Practices Act. Non-US companies that are listed in New York have to comply with the toughest legislation in the world. Non-compliance can be costly, as Germany’s Siemens found in 2008, when it agreed to pay $1.6bn in fines for bribing Argentine government officials.

There remains considerable complacency in the developed world about the damage wrought by corruption. There are also huge institutional obstacles to progress. Multilateral organisations such as the World Bank can only lend or make grants to governments, with which they may become too close. Their employees are rewarded and promoted according to the volume of projects approved, not for saying no. Officials in countries such as India can be so poorly paid that they need income from bribes to support their families.

This is a partisan book, but none the worse for that. It leaves the impression that the fight against corruption may no longer be a lost cause.

John Plender is an FT columnist

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