Good Governance as a Tool to Halt Corruption

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Disclaimer: This blog post solely reflects the opinion of the authors and should not be taken to represent the general views of IPPR’s management team or those of fellow authors.

In 2018, it is estimated that the world lost 2% of its global income to corruption. This amounts to a staggering loss of 2 trillion US Dollars. To put this into perspective, the World Economic Forum has calculated that with this money one could: eradicate world hunger and malaria, bridge the global infrastructure gap and provide basic education to all children around the world. And, what is more, there would still be money left to combat other global problems.

Now that the world is wealthier than ever, it simply seems silly to not tackle the problem of corruption. So too thinks Daniel Kaufmann. Over the course of his career, Mr Kaufmann has advised governments and international organisations worldwide on policies to combat corruption more efficiently. On the 5th of March Mr Kaufmann spoke at the event “Governance, Capture and Corruption: Evidence and Solutions for a Changed World” hosted by UCL’s Global Governance Institute. Packed into a crowded lecture theatre, the speaker was able to methodologically describe how good governance is the most effective tool to fight corruption.

The research that Daniel Kaufmann, Aart Kraay and Pablo Zoido conducted describes three dimensions that influence the effectiveness of public governance. In turn, each dimension has its own distinct sub-categories. Data has shown that high scores on each of these dimensions will lead to less corruption, an increased level of human development, and an increase in economic wealth. The scheme below shows a brief overview of these dimensions.

  1. The Political dimension, which is measured through the following sub-categories:
    1. Voice and (democratic) accountability, measured by the freedom of press, freedom of expression and the extent to which elections are free and fair;
    2. Political stability and the absence of violence: increased instability in a system is likely to result in increased levels of public unrest and corruption.
  1. The Economic dimension, which is again measured by compounding the scores in the sub-categories, namely:
    1. The capacity of a government to implement effective policies. This can be quantified by measuring the effectiveness of a state’s bureaucracy;
    2. The quality of governance, this can be assessed by analysing a regulatory agency’s ability to regulate a given sector.
  1. The Institutional Respect dimension, this dimension accounts for the respect that a government has for its citizens and their rights, this can be measured by assessing:
    1. The primacy of the rule of law in practice;
    2. A government’s ability to control levels of corruption.

By compiling data from think-tanks, governments, research institutes and civil society organisations, the aggregate data can be use to provide clear insights to compare the effectiveness of governance with levels of corruption in a country. And the results are shocking.

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Source: Worldwide Governance Indicators

Comparing the mapped data of government effectiveness with that of control over corruption, it becomes apparent that the levels of corruption are not merely confined to some global regions. Instead, corruption can differentiate significantly from neighbouring country to another, based on the governance that a state is able to establish. The research clearly shows a massive correlation between a states control over governance and the effectiveness thereof on the ‘development dividend’. Mapping the global levels good governance among state along a normal distribution shows that a shift of one standard deviation results in a tripled rise in income. A rise in income is not the only positive result that flows from increasingly good governance, a shift of one standard deviation is also associated with decreasing child mortality, an increase in the global competitiveness of businesses and with reduced interest rates on lending. In all, good governance accounts for many positive societal developments.

Why does not every state seek to combat corruption one might ask? The answer seems cliché. Its difficult and, perhaps unsurprisingly, it might not be in the best interest of the ruling elite. Other than traditional corrupt transactions, where wealth is traded for certain privileges, the form of corruption that is harder to combat is that of state and administrative corruption. These sorts of corruption are set apart by the fact that oftentimes, these transactions are masked as either legal transactions or merely result from state capture. Mr Kaufmann stresses that the elites ability to shape the regulatory rules of the game greatly accounts for legal forms of corruption, which are harder to tackle. Although data shows that transitioning economies are especially prone to the legalised corruption, the corruption that results from state capture affects all states alike.

With a rise in income inequality and the accumulation of vast amounts of wealth, wealthy individuals can gain access to legislative processes through private access to the legislature. There seems to be a real danger of rising levels of undetected (or even sanctioned) corruption. During the event, Mr Kaufmann stressed that the definition of corruption ought to be extended to include the privatisation of public policy making. Think, for instance, of the influence that the American Legislative Exchange Council (ALEC) wields on American state legislatures. Through ALEC, private interest groups are able to penetrate the US’ state legislatures by drafting model legislation for state representatives. With Trump in the White House, most eyes are generally turned to the political games that are being played out in Washington D.C., yet important and impactful decisions are made in the US’ state legislatures on a daily basis. By providing state representatives with so-called ‘model-bills’, the ALEC is able to push consequential bills without much opposition. Those of us who have never heard of ALEC, including me, should truly delve into the workings information. Researchers at the Brookings Institution show that 90% of Republican lawmakers sponsor bills that were proposed by the ALEC. By accessing legislatures who are already under pressure to bring forward bills, corporations can alter the rules of the game to their favour. And don’t think that these rules are bend to put additional restrictions on these corporations. Through political favours or excessive wealth, oligarchs or monopolistic economical entities may gain access to the policy-making process. Thereby possibly altering laws in their favour. Next to the more obvious example of Russian oligarchs that might spring to mind, Western countries are no less subject to these forms of corruption. In short, and perhaps unsurprising, legal and illegal corruption remains a challenge to our society.

Luckily, Mr Kaufmann left the audience with a brighter outlook. Corruption can be tackled, even by ordinary citizens. For example by demanding increased transparency from their representatives, citizens may be able to force higher reporting standards and demand political action against illicit cash flows to tax havens. The speaker urged the audience to become part of ‘the millions of auditors’ that constantly measure the effectiveness and transparency of those in governing positions. Mr Kaufmann remarked, “corruption is not fought by fighting corruption” instead, better governance fights it.

I think that the research conducted by Mr Kaufmann clearly shows the positive relationship between government accountability that the liberal world order seems to offer, and the state of economic development, corruption and global competitiveness. In this time of where there seems to be a decreased popularity of liberal values, it might be of extreme interest to study and learn from the benefits that the liberal order might have for societal development and the quality of life.

This talk was hosted by UCL’s Global Governance Institute, the GGI regularly organises events on a wide range of interesting topics. Would you like to visit one of their talks and perhaps write an article for the IPPR blog about the event? Find events that might interest you via this link: https://www.ucl.ac.uk/global-governance/events.

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