Factors promoting corruption

Introduction

Corruption is a worldwide phenomenon not limited to any one region. Corruption is not a new phenomenon. Two thousand years ago, Kautilya, the prime minister of an Indian king, had already written a book, Arthashastra, discussing it. Seven centuries ago, Dante placed bribers in the deepest parts of Hell, reflecting the medieval distaste for corrupt behavior. Shakespeare gave corruption a prominent role in some of his plays; and the American Constitution made bribery one of two explicitly-mentioned crimes which could lead to the impeachment of a U.S. president.

 

No country is immune from the consequences of corruption. It occurs in all countries, regardless of whether they are rich or poor, dictatorships or democracies, socialist or capitalists. Governments have fallen because of accusations of corruption. Prominent politicians have lost their official positions due to corruption. Experts say that corruption breeds corruption and the longer it persists the more endemic it becomes.

Corruption in cross-cultural perspective is a complex area of study which challenges our basic notions of what is right and wrong. In many countries, bribery is a way of life. There are many places where open corruption has taken hold and is endemic (widespread) among the population; e.g., Mexico with its mordida; Russia with its mafia; Africa with its swindles; Asia with its gift-giving; and America with its padding (doctoring the books). Whole countries can be said to have become kleptocracies, such as Zaire, Paraguay, and Haiti to name a few. Politicians often demand "kickbacks" from employees and contractors; tax and border officials overlook violations for cash; police and judges overlook crime if the price is right; and citizens regularly pay teachers and doctors extra to get decent educational and medical services. All such practices are far too common in many nations of the world. Bribery is particularly shameless where it occurs endemically. Economically, it functions as an extra tax on citizens as well as foreign investors. It impedes development and growth. It has a documented "corrosive effect" on public trust, the rule of law, and societal mores as a whole. The existence of widespread bribery plays a significant role in the operations of organized crime and terrorism – terrorists pay bribes, money-launderers pay bribes, and anyone who traffics in people, narcotics, weapons, or drugs pay bribes. Bribery is so embedded in some places that it is charitably referred to as "facilitating payments" or "grease." It is what it takes to get anything done in some places.

Definition of corruption

Defining corruption itself is problematic. It has been defined in many different ways, each lacking in some aspect. It can be simply defined as behavior that corrupts.

Some experts defined corruption as an all-inclusive variable comprising of bribes, bureaucratic inefficiency, extortion, and embezzlement. The most well known is “the abuse of public roles or resources for private benefit” This is the definition used by the World Bank. (Robins on, 1998). Similarly, Transparency International has defined corruption as the misuse of entrusted power for private gain (Transparency International, 2005). From these definitions it should not be concluded that corruption cannot exist within private sector activities. Especially in large private enterprises, this phenomenon clearly exists, as for example in procurement or even in hiring. It also exists in private activities regulated by the government. In several cases of corruption, the abuse of public power is not necessarily for one’s private benefit but it can be for the benefit of one’s party, class, tribe, friends, family, and so on. In fact, in many countries some of the proceeds of corruption go to finance the political parties.

Not all acts of corruption result in the payments of bribes. For example, a public employee who claims to be sick but goes on vocation is abusing his public position for personal use. Thus, he is engaging in the act of corruption even though no bribe is paid. Or a president of a country who has an airport built in his small hometown is also engaging in the act of corruption that does not involve the payment of a bribe.

It is important to distinguish bribes from gifts. In many instances, bribes can be disguised as gifts. A bribe implies reciprocity while a gift should not. However, even though the distinction is fundamental, it is at all times difficult to make. At what point does a gift become a bribe? Does the distinction depend on the sizes of gifts? What about cultural differences that can explain different sizes of gifts? What if a large gift is not given to the person who provides the favour but to a relative to that person? In any case this indicates that identification of a bribe may not always be simple.

Measurement of corruption

No one has ever tried to measure the exact amount of corruption worldwide. The extent of corruption in all parts of the world is anyone's guess. Some research suggests that corruption is more endemic in communist and socialist societies, but other research suggests that constitutional republics with strong federalism (strong state or provincial governments) have more endemic corruption. As will be shown in a moment, a veritable industry has evolved among business leaders to try and estimate the levels of "perceived corruption" in the form of indexes.

If corruption could be measured, it could probably be eliminated. In fact, conceptually it is not even clear what one would want to measure. Simply measuring bribes paid would ignore many corrupt acts that are not accompanied by the payment of bribes. An attempt to measure acts of corruption rather than the amounts of bribes paid would require counting many relatively unimportant actions and identifying each act information that is simply not available. While there are no direct ways of measuring corruption, there are several indirect ways of getting information about its prevalence in a country or in an institution.

The way the IMF and other international organizations look into the question of where corruption occurs is quite subjective, relying upon self-reported surveys. Survey data being what it is, this public-perception approach is the best the world has at the moment. Where corruption is worst, survey findings show that "commission" payments in foreign aid are usually laundered through intermediaries who divert the money from essential services like education and health (where bribery potential is low) to grandiose projects like transportation and defense (where bribery potential is high). The World Bank also conducts annual surveys which produce a Corruption Perceptions Index (CPI) published by Transparency International showing which countries are highly corrupt (0 = corrupt; 10 = clean). This index is remarkably consistent from year to year, and a sampling of countries and their rank scores is as follows:

Corrupt and Clean Countries
Corrupt	Clean
Myanmar Somalia Uzbekistan Sudan Laos Guinea Congo Venezuela Bangladesh Turkmenistan Zimbabwe Kazakhstan Russia Syria	1.4 1.4 1.7 1.8 1.9 1.9 2.0 2.0 2.0 2.2 2.4 2.4 2.5 2.9	Denmark Finland Singapore Sweden Netherlands Switzerland Canada Australia United Kingdom Austria Ireland Japan France United States	9.4 9.4 9.3 9.2 9.0 9.0 8.7 8.6 8.4 8.1 7.5 7.5 7.3 7.2

 

(For more information see https://www.transparency.org/cpi2014/results).

Forms of corruption

The exact form corruption will take depends upon context. What is corrupt in one country may not be in another. Communist and Islamic countries consider various aspects of capitalism to be corrupt. All countries pay lip service to the evils of bribery, fraud, extortion, embezzlement, and kickbacks. There is a wide range of opinion about what qualifies as corrupt, but less difference of opinion about "grand," "syndicated" or "systemic" corruption (these terms again, like the term "endemic" referring to an unspecified, but presumably large number of people regularly engaging in corruption). Grand corruption presumably involves the top levels of government, but determining the extent of corruption throughout a whole government is an inexact science. Some of the most common forms of "syndicated" corruption are as follows:

• bribes to reduce the taxes paid to a government
• payoffs to police in order to look the other way
• bribes to customs agents to overlook an illegal import
• collusion among contractors to obtain high procurement prices
• selling international food relief supplies for profit.

Bellow is the list of the forms of"systemic" corruption:

• bribery and graft (extortion and kickbacks)
• kleptocracy (stealing and privatizing public funds)
• misappropriation (forgery, embezzlement, misuse of public funds)
• nonperformance of duties (cronyism)
• influence peddling (favor brokering and conflict of interest)
• acceptance of improper gifts ("speed" money)
• protecting maladministration (cover-ups and perjury)
• abuse of power (intimidation and torture)
• manipulation of regulations (bias and favoritism)
• electoral malpractice (vote buying and election rigging)
• rent seeking (charging after creating artificial shortages)
• clientelism and patronage (favors in exchange for support)
• illegal campaign contributions (gifts to influence policy)

Although corruption comes in many shapes and sizes, it has one thing in common -- the inappropriate mix of public and private. Corruption almost always occurs for personal reasons when someone does something different than what their public duty requires of them. It violates one of the primary rules of public administration -- that public officials are not supposed to profit personally from public office. Bribery (a root form of systemic corruption) has been defined as "the use of reward to pervert the judgment of a person in a position of trust" (Nye 1967). Public office should not be an opportunity for plunder. Legislative decisions are also not supposed to be for sale to the highest bidder. All states should draw a sharp line between market and nonmarket mechanisms for allocating resources. Clearly, however, there is no such thing as a country totally free from corruption; and no such thing as "absolute integrity".

Corruption across cultures

Corruption can be defined simply as behavior that corrupts. It tends to subvert the

cultural system in which it occurs. This means that one cannot recognize corruption in a particular society without knowing something about how that society works.

The West tends to be universalist in its outlook: every society works, or should work,

essentially the same way. Its business practices, for example, should be based on a

market system that is characterized by transparency and regulated by laws that apply

equally to all players. A country that fails to conform to this model is viewed as

underdeveloped or dysfunctional. It follows that corruption is basically the same,

whether one does business in Sweden or Sudan.

The reality, however, is that different cultures use radically different systems to get things done. Whereas Western cultures are primarily rule-based, most of the world’s cultures are relationship-based. Western business people trust the system, while people elsewhere trust their friends and family. Westerners organize their business around discrete deals that are drawn up as written contracts and enforced by a legal system. Others organize their business around personal relationships that are cemented by personal honor, friendship, or long-term mutual obligation. Loyalty to cronies is suspect behavior in Western business but represents high moral character in much of the world.

The distinction of rule-based and relationship-based systems is only one of many cultural differences, but it already creates different ethical norms.

 

Since cultural systems operate differently, business practices that are corrupting in the

West may be acceptable elsewhere, even obligatory. Practices that are acceptable to

Westerners may be corrupting elsewhere. And finally, practices that are corrupting both

in the West and elsewhere may be corrupting for very different reasons. Each of these

three possibilities may be illustrated as follows.

What is corrupt in the West may be acceptable elsewhere. The classic example of the

purchasing agent illustrates this point. The Western purchasing agent is expected to

award contracts based on the quality of bids and transparently available financial

information about the bidders. An agent who favors personal friends is viewed as

corrupt, because cronyism subverts this transparency-based system. It creates a conflict

of interest: a choice that is good for the agent and his or her cronies may not be good for

the company.

In much of the world, however, cronyism is a foundation for trust. A purchasing agent

does business with friends because friends can be trusted. He or she may not even ask to

see the company financials, since this could insult the other’s honor. It is assumed that

cronies will follow through on the deal, not because they fear a lawsuit, but because they do not wish to sacrifice a valuable relationship in an economy where relationships are the key to business. In such a system it is in the company’s interest for the agent to do business with friends, and cronyism therefore presents no conflict of interest.

What is acceptable in the West may be corrupt elsewhere. Lawsuits provide an example

of this. In the West, which relies on rules and individual responsibility, lawsuits are

routine and necessary. In Japan, however, they are corrupting. Japan is a strongly

relationship-based culture in which interpersonal relations are based on maintaining

harmony. Harmony is preserved by elaborate courtesies, humility, deference to

superiors, and avoidance of confrontation. Lawsuits have no place in this system because they promote confrontation. Thus if a plane crashes, the victims’ families normally do not file suit; rather, the airline’s CEO personally apologizes to them. The apology does not indicate personal guilt as in the West but is intended to restore harmony. A dramatic illustration of this principle is provided by Shohei Nozawa’s tearful apology to employees and stockholders shortly after Yamaichi Securities declared bankruptcy.

Nozawa was not admitting guilt and in fact had just assumed his position as CEO in order to clean up a mess left by others. His aim was to restore harmony among the

stakeholders.

What is corrupt both in the West and elsewhere may be corrupt for different reasons.

Bribery, for example, is corrupting in the West because it induces people to depart from

established rules and procedures. Furthermore, if bribes become common enough, people in general may lose faith in the system and flout the rules routinely.

Bribery is also corrupting in most Confucian cultures, but for a different reason: it shortcircuits the building of relationships. China and Taiwan, for example, rely on the stability provided by long-term relationships of mutual obligation (gu ā nxì). A bribe

“buys” a relationship that lasts only until the next bribe is required.

Since there is a fine line between legitimate gu ā nxì relationships and quid-pro-quo

bribery, bribery tends to be more common in Confucian countries than in some Western

countries. An Western analogue would be litigiousness, or overuse of the legal system,

since there is an equally fine line between legitimate lawsuits and nuisance lawsuits.

Litigiousness is a form of corruption that is particularly prevalent in the United States.

Bribery can also flourish in Western countries, of course, particularly when political

upheaval or oppression break down the traditional rule-based mechanisms.

Bribery Around the World

While on the subject of bribery, it is useful to survey briefly the state of affairs in several countries. The brief summaries given here do not reflect the subtlety and complexity of local situations, which should be researched thoroughly before doing business there.

China and Taiwan. As already mentioned, bribery is common in these countries and is

corrupting because it undermines more stable forms of relationship. In China particularly, the central government strongly discourages bribery, which erodes its power.

The penalty for some types of bribery can be severe (e.g., death).

Japan. Bribery scandals periodically come to light in Japan and may result in a flurry of

prosecution and punishment. Bribery is corrupting primarily because it undermines

group solidarity, the primary mechanism for social cohesion. Group solidarity is

maintained by a careful process of cultivating loyalty and maintaining harmony, not by

side payments.

Singapore. Bribery is strictly forbidden in Singapore and is not practiced.

India. Bribery and skimming are common in India, and facilitating payments are

ubiquitous. The latter are small, routine payments made to obtain services to which one

is already entitled. They are arguably functional in that they supplement the inadequate

salaries of bureaucrats. On the other hand, bribery in the sense of influence peddling is

both unnecessary and dysfunctional. It is unnecessary because Indian business and

politics are based primarily on skilled networking and family connections, not bribes. It

is dysfunctional because it corrupts India’s quasi-Western public administration.

Although bribery is common, the system operates despite it, not because of it. It is

therefore corrupting and should be avoided.

Russia and Eastern Europe. Bribery is a way of life in many of these countries and is an

unmitigated evil. It is a symptom of system breakdown, due to a recent history of

political oppression or instability. It is best to rely on corporate clout, connections, and

pro bono activities, and to maintain a clean reputation.

Arab countries. These present a complex picture, due to regional variations and mixing

of cultures. Kickbacks are other relationship-based practices are common, but their

tendency to corrupt depends on the local situation.

Turkey. Bribes and facilitating payments are very common in both business and public

administration, and Turks find them quite irritating. Bribes that circumvent the law

undermine the country’s quasi-Western administration and should be avoided. Some

small payments may be unavoidable, as when settling a traffic ticket, getting children intoschool, or clearing customs.

Sub-Saharan Africa. Bribery in much of central and southern Africa is out of control,

and it cripples the economy. It represents the total corruption of an ancient patronage

system that once held rulers accountable. It is a symptom of social breakdown that stems from Africa’s encounter with Western powers and a radically different economic system.

Companies should use any means available to avoid paying bribes. They can often exert

the necessary influence through the potential economic benefits of their operations and

their willingness to fund infrastructure.

Latin America. Bribery is common in Latin America but not ubiquitous. It is widely

regarded as immoral, in many cases even by those who demand bribes. Bribery seems to be a holdover from a turbulent past and is arguably inessential for a system that can rely on other kinds of relationships. It in fact seems to be on the wane in some countries, such as Mexico. Business people should cultivate personal connections and avoid paying bribes. They should make it known that they work only with locals who play it clean.

Ethics and Human Nature

The ethical norms discussed here ultimately reflect different interpretations of human

nature. In the West, for example, human beings are viewed as autonomous rational

individuals, whence the central role of equality and emphasis on individual responsibility.

In a Confucian system, human beings surrender much of their autonomy to parents,

ancestors, or rulers. Personhood is defined primarily by relationships with others rather

than existence as an individual. This gives rise to the central role of authority and saving

face, and it places responsibility on the ruler rather than the individual.

A prevalent African view, which is shared by many other traditional cultures, is that the

basic unit of human existence is the community. People do not distinguish their

individual welfare from the collective welfare, and the economy is based on sharing of

resources.

The Hindu/Buddhist world view likewise declines to see human beings as separate

entities but interprets them as manifestations of a single consciousness (atman). This

highlights the connectedness of all life but assigns no role to egalitarianism.

Each of these viewpoints supports a sophisticated ethical philosophy. Those of us who

operate across cultures owe them respect not only for their own sake, but because they

teach crucial insights that may be absent from our own traditions.

teach crucial insights that may be absent from our own traditions.

Language of corruption

What do "beans for the kids" in Kinshasa, "a glass of wine" in Paris, and "little carps" in Prague have in common? The phrases tell you something about local cuisine - but they are also euphemisms for bribes.

The language of corruption differs from one country to the next, but there are also striking similarities, as David Henig (University of Kent) and Nicolette Makovicky (University of Oxford) illustrate in the following examples.

Cash for soup (Turkish)

If you are stopped by traffic police in North Africa the officer may well ask you to sponsor his next cup of "kahwe", or coffee. In Kenya you might be stopped by traffic policemen and asked to contribute to "tea for the elders" ("chai ya wazee" in Swahili). But in Turkey, the police would rather you give them "cash for soup", or "chorba parasi" - soup is traditionally eaten at the end of a night of heavy drinking.

Respect (Azeri)

Whether it happens on the street, or in the boardroom, corruption rests on the abuse of power and privilege. But popular euphemisms often deny this reality and present corrupt behaviour as altruistic "favours" for friends. In Azeri, the word commonly used for bribe - "hurmat" - is interchangeable with the word for respect. An official requesting a bribe will therefore ask you to "do him a favour" - "hurmatimi ela".

Something small (Swahili)

Many euphemisms of corruption and bribery work to deflect attention from the action or minimise its importance. The Swahili expression "kitu kidogo" (something small) is a good example of this. In Ivory Coast the police used to ask for a "pourboire" (the cost of a drink), comparing the size of the bribe to that of a small tip. The Brazilian term for a bribe - "um cafezinho" (a little coffee) - also doubles as the term for a tip in the conventional sense.

Nokia box (Hungarian)

In Hungary, the term "Nokia box" became a symbol of corruption in 2010 after the head of the Budapest Public Transport Company, Zsolt Balogh, was caught handing over cash to the deputy mayor of Budapest, Miklos Hagyo, in a Nokia box. Since then, "Nokia box" has also became a sort of unit of measurement - meaning 15m forints ($65,000) - the size of Balogh's original bribe.

Little carp (Czech)

In the Czech Republic, the terms "little carp" (kaprzhici), or "fish" (ryby), were used as a coded language during a large corruption scandal in Czech football. In the communication between the managers, referees and players, a "little carp" also operated as a unit of measurement, meaning 1,000 Czech koruna ($50) a "fish". The euphemism "little carp" has become a Czech synonym for corruption.

 

Introduction

Corruption is a worldwide phenomenon not limited to any one region. Corruption is not a new phenomenon. Two thousand years ago, Kautilya, the prime minister of an Indian king, had already written a book, Arthashastra, discussing it. Seven centuries ago, Dante placed bribers in the deepest parts of Hell, reflecting the medieval distaste for corrupt behavior. Shakespeare gave corruption a prominent role in some of his plays; and the American Constitution made bribery one of two explicitly-mentioned crimes which could lead to the impeachment of a U.S. president.

 

No country is immune from the consequences of corruption. It occurs in all countries, regardless of whether they are rich or poor, dictatorships or democracies, socialist or capitalists. Governments have fallen because of accusations of corruption. Prominent politicians have lost their official positions due to corruption. Experts say that corruption breeds corruption and the longer it persists the more endemic it becomes.

Corruption in cross-cultural perspective is a complex area of study which challenges our basic notions of what is right and wrong. In many countries, bribery is a way of life. There are many places where open corruption has taken hold and is endemic (widespread) among the population; e.g., Mexico with its mordida; Russia with its mafia; Africa with its swindles; Asia with its gift-giving; and America with its padding (doctoring the books). Whole countries can be said to have become kleptocracies, such as Zaire, Paraguay, and Haiti to name a few. Politicians often demand "kickbacks" from employees and contractors; tax and border officials overlook violations for cash; police and judges overlook crime if the price is right; and citizens regularly pay teachers and doctors extra to get decent educational and medical services. All such practices are far too common in many nations of the world. Bribery is particularly shameless where it occurs endemically. Economically, it functions as an extra tax on citizens as well as foreign investors. It impedes development and growth. It has a documented "corrosive effect" on public trust, the rule of law, and societal mores as a whole. The existence of widespread bribery plays a significant role in the operations of organized crime and terrorism – terrorists pay bribes, money-launderers pay bribes, and anyone who traffics in people, narcotics, weapons, or drugs pay bribes. Bribery is so embedded in some places that it is charitably referred to as "facilitating payments" or "grease." It is what it takes to get anything done in some places.

Definition of corruption

Defining corruption itself is problematic. It has been defined in many different ways, each lacking in some aspect. It can be simply defined as behavior that corrupts.

Some experts defined corruption as an all-inclusive variable comprising of bribes, bureaucratic inefficiency, extortion, and embezzlement. The most well known is “the abuse of public roles or resources for private benefit” This is the definition used by the World Bank. (Robins on, 1998). Similarly, Transparency International has defined corruption as the misuse of entrusted power for private gain (Transparency International, 2005). From these definitions it should not be concluded that corruption cannot exist within private sector activities. Especially in large private enterprises, this phenomenon clearly exists, as for example in procurement or even in hiring. It also exists in private activities regulated by the government. In several cases of corruption, the abuse of public power is not necessarily for one’s private benefit but it can be for the benefit of one’s party, class, tribe, friends, family, and so on. In fact, in many countries some of the proceeds of corruption go to finance the political parties.

Not all acts of corruption result in the payments of bribes. For example, a public employee who claims to be sick but goes on vocation is abusing his public position for personal use. Thus, he is engaging in the act of corruption even though no bribe is paid. Or a president of a country who has an airport built in his small hometown is also engaging in the act of corruption that does not involve the payment of a bribe.

It is important to distinguish bribes from gifts. In many instances, bribes can be disguised as gifts. A bribe implies reciprocity while a gift should not. However, even though the distinction is fundamental, it is at all times difficult to make. At what point does a gift become a bribe? Does the distinction depend on the sizes of gifts? What about cultural differences that can explain different sizes of gifts? What if a large gift is not given to the person who provides the favour but to a relative to that person? In any case this indicates that identification of a bribe may not always be simple.

Factors promoting corruption

The causes or factors that promote corruption are those that affect the demand (by the public) for corrupt acts and those that affect the supply (by public officials) of acts of corruption. Among the factors affecting the demand, the most important are (1) regulations and authorizations; (2) certain characteristics of tax systems (3) certain spending decisions; and (4) provision of goods and services at below-market prices. Among the factors affecting the supply of acts of corruption are (1) the bureaucratic tradition; (2) the level of public sector wages; (3) the penalty systems; (4) institutional controls; (5) the transparency of rules, laws, and processes; and (6) the examples set by the leadership. (for more information see http://www.imf.org/external/Pubs/FT/staffp/1998/12-98/pdf/tanzi.pdf)

Measurement of corruption

No one has ever tried to measure the exact amount of corruption worldwide. The extent of corruption in all parts of the world is anyone's guess. Some research suggests that corruption is more endemic in communist and socialist societies, but other research suggests that constitutional republics with strong federalism (strong state or provincial governments) have more endemic corruption. As will be shown in a moment, a veritable industry has evolved among business leaders to try and estimate the levels of "perceived corruption" in the form of indexes.

If corruption could be measured, it could probably be eliminated. In fact, conceptually it is not even clear what one would want to measure. Simply measuring bribes paid would ignore many corrupt acts that are not accompanied by the payment of bribes. An attempt to measure acts of corruption rather than the amounts of bribes paid would require counting many relatively unimportant actions and identifying each act information that is simply not available. While there are no direct ways of measuring corruption, there are several indirect ways of getting information about its prevalence in a country or in an institution.

The way the IMF and other international organizations look into the question of where corruption occurs is quite subjective, relying upon self-reported surveys. Survey data being what it is, this public-perception approach is the best the world has at the moment. Where corruption is worst, survey findings show that "commission" payments in foreign aid are usually laundered through intermediaries who divert the money from essential services like education and health (where bribery potential is low) to grandiose projects like transportation and defense (where bribery potential is high). The World Bank also conducts annual surveys which produce a Corruption Perceptions Index (CPI) published by Transparency International showing which countries are highly corrupt (0 = corrupt; 10 = clean). This index is remarkably consistent from year to year, and a sampling of countries and their rank scores is as follows:

Corrupt and Clean Countries
Corrupt	Clean
Myanmar Somalia Uzbekistan Sudan Laos Guinea Congo Venezuela Bangladesh Turkmenistan Zimbabwe Kazakhstan Russia Syria	1.4 1.4 1.7 1.8 1.9 1.9 2.0 2.0 2.0 2.2 2.4 2.4 2.5 2.9	Denmark Finland Singapore Sweden Netherlands Switzerland Canada Australia United Kingdom Austria Ireland Japan France United States	9.4 9.4 9.3 9.2 9.0 9.0 8.7 8.6 8.4 8.1 7.5 7.5 7.3 7.2

 

(For more information see https://www.transparency.org/cpi2014/results).

Forms of corruption

The exact form corruption will take depends upon context. What is corrupt in one country may not be in another. Communist and Islamic countries consider various aspects of capitalism to be corrupt. All countries pay lip service to the evils of bribery, fraud, extortion, embezzlement, and kickbacks. There is a wide range of opinion about what qualifies as corrupt, but less difference of opinion about "grand," "syndicated" or "systemic" corruption (these terms again, like the term "endemic" referring to an unspecified, but presumably large number of people regularly engaging in corruption). Grand corruption presumably involves the top levels of government, but determining the extent of corruption throughout a whole government is an inexact science. Some of the most common forms of "syndicated" corruption are as follows:

• bribes to reduce the taxes paid to a government
• payoffs to police in order to look the other way
• bribes to customs agents to overlook an illegal import
• collusion among contractors to obtain high procurement prices
• selling international food relief supplies for profit.

Bellow is the list of the forms of"systemic" corruption:

• bribery and graft (extortion and kickbacks)
• kleptocracy (stealing and privatizing public funds)
• misappropriation (forgery, embezzlement, misuse of public funds)
• nonperformance of duties (cronyism)
• influence peddling (favor brokering and conflict of interest)
• acceptance of improper gifts ("speed" money)
• protecting maladministration (cover-ups and perjury)
• abuse of power (intimidation and torture)
• manipulation of regulations (bias and favoritism)
• electoral malpractice (vote buying and election rigging)
• rent seeking (charging after creating artificial shortages)
• clientelism and patronage (favors in exchange for support)
• illegal campaign contributions (gifts to influence policy)

Although corruption comes in many shapes and sizes, it has one thing in common -- the inappropriate mix of public and private. Corruption almost always occurs for personal reasons when someone does something different than what their public duty requires of them. It violates one of the primary rules of public administration -- that public officials are not supposed to profit personally from public office. Bribery (a root form of systemic corruption) has been defined as "the use of reward to pervert the judgment of a person in a position of trust" (Nye 1967). Public office should not be an opportunity for plunder. Legislative decisions are also not supposed to be for sale to the highest bidder. All states should draw a sharp line between market and nonmarket mechanisms for allocating resources. Clearly, however, there is no such thing as a country totally free from corruption; and no such thing as "absolute integrity".

Corruption across cultures

Corruption can be defined simply as behavior that corrupts. It tends to subvert the

cultural system in which it occurs. This means that one cannot recognize corruption in a particular society without knowing something about how that society works.

The West tends to be universalist in its outlook: every society works, or should work,

essentially the same way. Its business practices, for example, should be based on a

market system that is characterized by transparency and regulated by laws that apply

equally to all players. A country that fails to conform to this model is viewed as

underdeveloped or dysfunctional. It follows that corruption is basically the same,

whether one does business in Sweden or Sudan.

The reality, however, is that different cultures use radically different systems to get things done. Whereas Western cultures are primarily rule-based, most of the world’s cultures are relationship-based. Western business people trust the system, while people elsewhere trust their friends and family. Westerners organize their business around discrete deals that are drawn up as written contracts and enforced by a legal system. Others organize their business around personal relationships that are cemented by personal honor, friendship, or long-term mutual obligation. Loyalty to cronies is suspect behavior in Western business but represents high moral character in much of the world.

The distinction of rule-based and relationship-based systems is only one of many cultural differences, but it already creates different ethical norms.

 

Since cultural systems operate differently, business practices that are corrupting in the

West may be acceptable elsewhere, even obligatory. Practices that are acceptable to

Westerners may be corrupting elsewhere. And finally, practices that are corrupting both

in the West and elsewhere may be corrupting for very different reasons. Each of these

three possibilities may be illustrated as follows.

What is corrupt in the West may be acceptable elsewhere. The classic example of the

purchasing agent illustrates this point. The Western purchasing agent is expected to

award contracts based on the quality of bids and transparently available financial

information about the bidders. An agent who favors personal friends is viewed as

corrupt, because cronyism subverts this transparency-based system. It creates a conflict

of interest: a choice that is good for the agent and his or her cronies may not be good for

the company.

In much of the world, however, cronyism is a foundation for trust. A purchasing agent

does business with friends because friends can be trusted. He or she may not even ask to

see the company financials, since this could insult the other’s honor. It is assumed that

cronies will follow through on the deal, not because they fear a lawsuit, but because they do not wish to sacrifice a valuable relationship in an economy where relationships are the key to business. In such a system it is in the company’s interest for the agent to do business with friends, and cronyism therefore presents no conflict of interest.

What is acceptable in the West may be corrupt elsewhere. Lawsuits provide an example

of this. In the West, which relies on rules and individual responsibility, lawsuits are

routine and necessary. In Japan, however, they are corrupting. Japan is a strongly

relationship-based culture in which interpersonal relations are based on maintaining

harmony. Harmony is preserved by elaborate courtesies, humility, deference to

superiors, and avoidance of confrontation. Lawsuits have no place in this system because they promote confrontation. Thus if a plane crashes, the victims’ families normally do not file suit; rather, the airline’s CEO personally apologizes to them. The apology does not indicate personal guilt as in the West but is intended to restore harmony. A dramatic illustration of this principle is provided by Shohei Nozawa’s tearful apology to employees and stockholders shortly after Yamaichi Securities declared bankruptcy.

Nozawa was not admitting guilt and in fact had just assumed his position as CEO in order to clean up a mess left by others. His aim was to restore harmony among the

stakeholders.

What is corrupt both in the West and elsewhere may be corrupt for different reasons.

Bribery, for example, is corrupting in the West because it induces people to depart from

established rules and procedures. Furthermore, if bribes become common enough, people in general may lose faith in the system and flout the rules routinely.

Bribery is also corrupting in most Confucian cultures, but for a different reason: it shortcircuits the building of relationships. China and Taiwan, for example, rely on the stability provided by long-term relationships of mutual obligation (gu ā nxì). A bribe

“buys” a relationship that lasts only until the next bribe is required.

Since there is a fine line between legitimate gu ā nxì relationships and quid-pro-quo

bribery, bribery tends to be more common in Confucian countries than in some Western

countries. An Western analogue would be litigiousness, or overuse of the legal system,

since there is an equally fine line between legitimate lawsuits and nuisance lawsuits.

Litigiousness is a form of corruption that is particularly prevalent in the United States.

Bribery can also flourish in Western countries, of course, particularly when political

upheaval or oppression break down the traditional rule-based mechanisms.

Bribery Around the World

While on the subject of bribery, it is useful to survey briefly the state of affairs in several countries. The brief summaries given here do not reflect the subtlety and complexity of local situations, which should be researched thoroughly before doing business there.

China and Taiwan. As already mentioned, bribery is common in these countries and is

corrupting because it undermines more stable forms of relationship. In China particularly, the central government strongly discourages bribery, which erodes its power.

The penalty for some types of bribery can be severe (e.g., death).

Japan. Bribery scandals periodically come to light in Japan and may result in a flurry of

prosecution and punishment. Bribery is corrupting primarily because it undermines

group solidarity, the primary mechanism for social cohesion. Group solidarity is

maintained by a careful process of cultivating loyalty and maintaining harmony, not by

side payments.

Singapore. Bribery is strictly forbidden in Singapore and is not practiced.

India. Bribery and skimming are common in India, and facilitating payments are

ubiquitous. The latter are small, routine payments made to obtain services to which one

is already entitled. They are arguably functional in that they supplement the inadequate

salaries of bureaucrats. On the other hand, bribery in the sense of influence peddling is

both unnecessary and dysfunctional. It is unnecessary because Indian business and

politics are based primarily on skilled networking and family connections, not bribes. It

is dysfunctional because it corrupts India’s quasi-Western public administration.

Although bribery is common, the system operates despite it, not because of it. It is

therefore corrupting and should be avoided.

Russia and Eastern Europe. Bribery is a way of life in many of these countries and is an

unmitigated evil. It is a symptom of system breakdown, due to a recent history of

political oppression or instability. It is best to rely on corporate clout, connections, and

pro bono activities, and to maintain a clean reputation.

Arab countries. These present a complex picture, due to regional variations and mixing

of cultures. Kickbacks are other relationship-based practices are common, but their

tendency to corrupt depends on the local situation.

Turkey. Bribes and facilitating payments are very common in both business and public

administration, and Turks find them quite irritating. Bribes that circumvent the law

undermine the country’s quasi-Western administration and should be avoided. Some

small payments may be unavoidable, as when settling a traffic ticket, getting children intoschool, or clearing customs.

Sub-Saharan Africa. Bribery in much of central and southern Africa is out of control,

and it cripples the economy. It represents the total corruption of an ancient patronage

system that once held rulers accountable. It is a symptom of social breakdown that stems from Africa’s encounter with Western powers and a radically different economic system.

Companies should use any means available to avoid paying bribes. They can often exert

the necessary influence through the potential economic benefits of their operations and

their willingness to fund infrastructure.

Latin America. Bribery is common in Latin America but not ubiquitous. It is widely

regarded as immoral, in many cases even by those who demand bribes. Bribery seems to be a holdover from a turbulent past and is arguably inessential for a system that can rely on other kinds of relationships. It in fact seems to be on the wane in some countries, such as Mexico. Business people should cultivate personal connections and avoid paying bribes. They should make it known that they work only with locals who play it clean.

Ethics and Human Nature

The ethical norms discussed here ultimately reflect different interpretations of human

nature. In the West, for example, human beings are viewed as autonomous rational

individuals, whence the central role of equality and emphasis on individual responsibility.

In a Confucian system, human beings surrender much of their autonomy to parents,

ancestors, or rulers. Personhood is defined primarily by relationships with others rather

than existence as an individual. This gives rise to the central role of authority and saving

face, and it places responsibility on the ruler rather than the individual.

A prevalent African view, which is shared by many other traditional cultures, is that the

basic unit of human existence is the community. People do not distinguish their

individual welfare from the collective welfare, and the economy is based on sharing of

resources.

The Hindu/Buddhist world view likewise declines to see human beings as separate

entities but interprets them as manifestations of a single consciousness (atman). This

highlights the connectedness of all life but assigns no role to egalitarianism.

Each of these viewpoints supports a sophisticated ethical philosophy. Those of us who

operate across cultures owe them respect not only for their own sake, but because they

teach crucial insights that may be absent from our own traditions.

teach crucial insights that may be absent from our own traditions.

Language of corruption

What do "beans for the kids" in Kinshasa, "a glass of wine" in Paris, and "little carps" in Prague have in common? The phrases tell you something about local cuisine - but they are also euphemisms for bribes.

The language of corruption differs from one country to the next, but there are also striking similarities, as David Henig (University of Kent) and Nicolette Makovicky (University of Oxford) illustrate in the following examples.

Cash for soup (Turkish)

If you are stopped by traffic police in North Africa the officer may well ask you to sponsor his next cup of "kahwe", or coffee. In Kenya you might be stopped by traffic policemen and asked to contribute to "tea for the elders" ("chai ya wazee" in Swahili). But in Turkey, the police would rather you give them "cash for soup", or "chorba parasi" - soup is traditionally eaten at the end of a night of heavy drinking.

Respect (Azeri)

Whether it happens on the street, or in the boardroom, corruption rests on the abuse of power and privilege. But popular euphemisms often deny this reality and present corrupt behaviour as altruistic "favours" for friends. In Azeri, the word commonly used for bribe - "hurmat" - is interchangeable with the word for respect. An official requesting a bribe will therefore ask you to "do him a favour" - "hurmatimi ela".