Combating corruption.

Corruption is hardly a problem that is exclusive to the third world. True, in Venezuela a local dictionary of corruption has been published in two volumes. But it is also true that a French author, apparently independently, had the same idea for France. Probably every country could publish a similar volume. The fact that much third world corruption has important first world participation is also now a commonplace. The international nongovernmental organization Transparency International focuses on corruption in "international business transactions" and points out that there are first world givers of many third world bribes. In coming years, the World Trade Organization will find this issue a central one. The reminder that corruption exists everywhere, in private as well as public sectors, in rich countries and poor, is salutary, because it helps us avoid unhelpful and untrue stereotypes. But to contextualize the discussion in this way is not to end it.

In fact, noting that corruption is widespread may convey its own unhelpful subliminal messages. It may suggest, for example, that all forms and instances of corruption are equally harmful. Even more perniciously, it may lead lazy listeners to the conclusion that because corruption exists in every country, nothing can be done about it here. Saying "it's not only our problem and it's not all our fault" may sidetrack more useful discussions on how to do better. Consider the analogy of pollution or disease. Both exist everywhere on the planet. But the extent and patterns of the problems differ radically. Questions of how much and what kind are crucial, and so they are with regard to corruption. No one would conclude, for example, that because water pollution and AIDS exist in every country that nothing can or should be done to reduce them.

Corruption is a term of many meanings and, indeed, the beginning of wisdom on the issue is to subdivide and unpack the vast concept. At the broadest level, corruption is the misuse of office for unofficial ends. The catalogue of corrupt acts includes bribery, extortion, influence-peddling, nepotism, fraud, speed money, embezzlement and more. Although we tend to think of corruption as a sin of government, of course, it also exists in the private sector. Indeed, the private sector is involved in most government corruption.

Different varieties of corruption are not equally harmful. Corruption that undercuts the rules of the game - for example, the justice system or property rights or banking and credit - devastates economic and political development. Corruption that lets polluters foul rivers or hospitals extort patients can be environmentally and socially corrosive. In comparison, some speed money for public services and mild corruption in campaign financing are less damaging.

Of course the extent of corruption matters, too. Most systems can stand some corruption, and it's possible that some truly awful systems can be improved by it. But when corruption becomes the norm, its effects are crippling.

So although every country has corruption, the varieties and extent differ. The killer is systematic corruption that destroys the rules of the game. It is one of the principal reasons why the most underdeveloped parts of our planet stay that way.

Can anything be done to reduce corruption? It is surprising how cynical many of us have become. We tend to short-circuit policy analysis with fatalistic refrains. And yet experience teaches us that broad social changes, as well as specific anti-corruption efforts, can make a big difference.

In the long run, more democracy and freer markets will help. The benefits of privatization in this domain are less clear. In general it may help to reduce state monopolies, but it is hardly an improvement to reinstall another monopoly that's private. Metaphorically, corruption follows a formula: C = M + D - A. Corruption equals monopoly plus discretion minus accountability. Whether the activity is public, private or non-profit, whether you are in New York or Nairobi, you will tend to find corruption when someone has monopoly power over a good or service, has the discretion to decide whether or not you receive it and how much you get, and is not accountable.

Corruption is a crime of calculation, not passion. When the size of the bribe is large, the chance of being caught small, and the penalty if caught meager, many officials will succumb.

Combating corruption, therefore, begins with better systems. Monopolies must be reduced or carefully regulated. Official discretion must be clarified. Transparency must be enhanced. The probability of being caught must increase, and the penalties for corruption (for both givers and takers) must rise.

Each of these headings introduces a vast topic. But notice that none immediately refers to what most of us think of first when corruption is mentioned - new laws, more controls, a change in mentality, an ethical revolution. Laws and controls prove insufficient when systems are not there to implement them.

Despite the obvious sensitivity of devising and implementing strategies against systematic corruption, the United Nations can help - and indeed already does help - through aid for democratic reforms, more competitive economies, and the improvement of governance. But a more focused effort is needed: a systematic attack on systematic corruption. In coming years, donor nations will face ever greater pressures from their citizens not to aid countries perceived as corrupt. At the same time, the new wave of democratically-elected Governments in the developing world will be looking to the international community for help in controlling bribery, extortion, kickbacks, fraud and other forms of illicit behaviour. They are recognizing that neither free markets nor multi-party democracies will succeed if the institutions of the private and public sectors are riddled with systematic corruption. As few countries make progress in fighting corruption, others will follow. A campaign against systematic corruption needs more than better economic policies and better laws and more training, helpful though these may be. It requires a shock to a corrupt equilibrium.

However, experience in many countries shows that efforts to improve public servants' ethics through codes of conduct and exhortation alone are non-starters. There are numerous examples of the most scandalous regimes making the loudest noises about public ethics. It is true that if we could transform ourselves into more ethical beings, corruption would be reduced. It is also true that Governments lack ready tools for accomplishing such transformations.

Therefore, combating corruption should focus on the reform of systems, combined with great political sensitivity and strategy. The design and implementation of the measures we have been discussing must obviously be closely tailored to each country's special conditions. And yet, as we have seen, international cooperation can make a big difference. Sometimes providing specialized skills can help, such as organizing high-level seminars or the hiring of international investigators to track down ill-gotten deposits overseas. International cooperation can help develop or stiffen political resolve. International action usefully conveys the recognition that we are all involved in the problem of corruption and together we must find ways out.

Four Components of an Anti-Corruption Strategy

1 They begin "frying big fish". In situations where corruption has grown extensive, people no longer believe even the finest promises from politicians and chief executives. When a culture of impunity exists, the only way to break it is for a number of major corrupt figures to be convicted and punished. Often there are many cases "pending" which have been set aside for reasons ranging from political sensitivity to corrupted justice officials. These cases should be pushed forward, or the Government should quickly attempt to identify a few big tax evaders, a few big bribe givers and a few high-level government bribe takers. Since a campaign against corruption can too often become a campaign against the opposition, the fist big fish that are fried should be from the party in power.

2 Successful campaigns involve the people. If only they are consulted, citizens are fertile sources of information about where corruption occurs. The mechanisms for consulting them include systematic client surveys, hot lines, call-in shows, educational programmes, and so forth. Business people and groups should participate in the protection of anonymity in diagnostic studies of how corrupt systems of procurement, contracting and the like actually work, where the emphasis is on systems and not on individuals. Self-policing by the private sector, especially when supported with international investigative capabilities (and credibility), can help businesses say "no" to requests for bribes.

3 Successful anti-corruption efforts fix corrupt systems. They use a formula such as C = M + D - A to carry out "vulnerability assessments" of public and private institutions. Like the best public health campaigns, they emphasize prevention.

Of course, reducing corruption is not all that we care about. We might spend so much money attacking corruption, or generate so much red tape and bureaucracy, that the costs and losses in efficiency would outweigh the benefits of lower corruption. This sort of economic perspective on corruption, combined with case studies of successful anti-corruption efforts, can stimulate tremendous creativity on the part of political leaders and top public managers. The method is often a workshop running 10 to 16 hours over one and a half to five days.

4 Finally, Governments wishing to stop corruption must improve incentives. In many countries, public sector wages have fallen so low that a family cannot survive on a typical official's salary. Moreover, measures of success are often lacking in the public sector, so what officials earn is not linked with what they produce. It should be no surprise that under such conditions corruption flourishes.

Fortunately, around the world, experiments in both public and private sectors are emphasizing performance measurement and the overhauling of pay schemes. Fighting corruption is only one part of a broader effort that I call institutional adjustment, the systematic recasting of information and incentives in public and private institutions. Institutional adjustment is the next big item on the development agenda.

The worry is that corrupt officials on top are monopolists unwilling to sacrifice their rents, and international and local business people are locked in an "n"-person prisoners' dilemma where the dominant strategy is to bribe. A corrupt equilibrium results, where rulers and top civil servants and some private companies gain, but society loses.

In both theory and practice, when a situation grows systematically corrupt, it is difficult even for leaders with political will to make their reforms believable. Citizens may have grown cynical; a culture of impunity may exist, and actors, both national and international, will not believe an announcement that the rules of the corrupt game have changed.

Robert Klitgaard is Ford Distinguished Professor of International Development and Security, and Dean of the RAND Graduate School of Policy Studies, Santa Monica, California. He served as professor of economics at the University of Natal, Durban; Lester Crown visiting professor of economics at Yale University's School of Management; and associate professor of public policy at Harvard University's John F. Kennedy School of Government, where he also served half-time as Special Assistant to Harvard President Derek Bok.

Professor Klitgaard has been a consultant to the White House, the World Bank, the IMF, OECD, USAID, the United Nations, the Organization of American States, the Development Bank of Southern Africa, and the Rockefeller and Ford Foundations. He has been an advisor to many Governments on economic strategy and institutional reform, and his consulting work and research have taken him to 27 countries in Latin America, Asia and Africa. In addition to many articles, he has written six books.

This article is an excerpt of a paper presented in Thessaloniki, Greece in November 1997, at the regional conference on "Public Service in Transition: Enhancing its Role, Professionalism, Ethical Standards and Values". This event was organized by the Division of Governance, Public Administration and Finance of the UN/DESA and hosted by the Government of Greece. The views expressed are those of the author.