2022 24th
2020 28th
2017 16th
Corruption is notoriously difficult to track and measure: hidden from the public for obvious reasons, slippery to define, perhaps meaning one thing in government and other things in businesses, unions, media, nonprofits, etc. Those hoping to put numbers on it find it still harder to get anything very reliable. Even the White House’s June 2021 Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest wound up passing on a long-debunked data point. (“It has been estimated that acts of corruption sap between 2% and 5% of global gross domestic product.” See below for a look at the origins of this statistic.) But though particular numbers and definitions may dissolve under examination, broad definitions, general observations, and case studies alike suggest that the White House’s view of corruption as a security threat is well-founded. Three useful approaches:
(1) Definitions – Corruption beyond bribery and crimes: William Riordan’s Plunkitt of Tammany Hall (1905), an admiring/appalled biography-in-interviews of an early 20th century NYC political boss, explains why actual bribery (and by extension other crimes) aren’t always the right things to look for. “With the grand opportunities all around for a man of political pull,” says Plunkitt, “there’s no excuse for stealin’ a cent.” He viewed taking a bribe as the high-risk, low-reward act of a fool, because the big money was in low-risk, high-reward insider deals. Plunkitt made himself rich through perfectly legal purchases of land he knew NYC would later designate for city parks, which he then sold to the city at much higher prices a few months later. As a more sinister and security-linked modern counterpart, look perhaps to the high-pay, low-work sinecures and Board consultancies Russia’s state energy and mining firms were giving out to retiring Western politicians during the 2010s.
(2) A general approach – Corruption shifts wealth and reduces long-term growth: The IMF’s Paolo Mauro (2021) looks at ways in which corruption can shift taxation and spending, and (over time) eat away at long-term growth and development. He reports that governments in low-corruption countries collect about 4% of GDP more in tax revenue than governments in high-corruption countries, and that in practical terms this suggests that if high-corruption governments reduced corruption rates to those of their low-corruption counterparts, they would gain perhaps $1.25 trillion in revenue. This wouldn’t be “lost,” or “sapped” from global GDP, but would presumably move away from mansion-building and tax-haven accounts to public investment. Moreover, Mauro observes, lower-corruption governments use revenue differently (spending somewhat less of their money on defense and public works and somewhat more on education and public health), and get more growth for the money:
“Grand corruption is usually associated with complex and costly projects such as construction and defense equipment. By comparison, it is harder to collect bribes on teachers’ and health care workers’ wages. As a result, spending on education and health is likely to be lower where corruption is high, making it less likely that worker productivity and living standards will improve.”
(3) A case study – Corruption and the erosion of state legitimacy: In Thieves of State (2015), Sarah Chayes draws on ground-level experience to explain how province- and federal-level corruption hollowed out attempts to build a representative government in Afghanistan, prefiguring the fall of the state:
“Officeholders who had to recoup the money they’d spent buying their jobs would request assignments in zones where cash flowed. Senior officials, anticipating the sums to be collected, would not try too hard to fill billets in impoverished rural districts. … An absence of integrity in the system meant that this late in the game [2009] constructive men and women had been stripped out – and by now might want to stay clear. ‘No one would dirty his hands getting near this government,’ a Kandahar-area farmer exclaimed to me once.’”
In conclusion: The White House might have been a bit quick to pass on an interesting data point. But it’s probably right to view corruption as a national security threat, and to think about ways to do better.
Policy:
The White House’s June 2021 Memorandum designating corruption as a national security threat.
… six months later, the formal “Anti-Corruption Strategy” launch.
… and from this past March, Treasury Secretary Yellen updates.
Analyses and examples:
IMF analyst Paolo Mauro estimates that governments lose about $1 trillion in tax revenue to corruption.
Sarah Chayes’s prescient Thieves of State: Why Corruption Threatens Global Security analyzes the fall of democratic Afghanistan six years before it actually happened.
And William Riordan’s admiring/appalled look at turn-of-the-20th-century American city politics in Plunkitt of Tammany Hall: A Series of Very Plain Talks on Very Practical Politics.
A cautionary statistical tale:
Where did the White House figure come from? To refresh, the June 2021 Memorandum asserted that: “it has been estimated that acts of corruption sap between 2 and 5 percent of global gross domestic product.” Others — the U.N. Secretary General, academic analysts, etc. — had used variants of this before, often adding a figure of “$2.6 trillion” to the percentage. A January 2021 note by the World Bank’s Anti-Corruption Resource Center tracked this back through a quarter-century of quotations and extrapolations, to a 1998 speech on money laundering (a different though related topic) by then-International Monetary Fund Managing Director Michel Camdessus. Camdessus had cautiously suggested that the ratio of annual laundering flows to global GDP might be 2% to 5%. A separate organization appears to have inappropriately converted this in 2008 from a “flow” to a “net cost to global GDP” and derived the $2.6 trillion in losses from it. (World GDP in 2007 was $58 trillion.) The WB group’s plea: “No organisation or advocate should cite this statistic under any circumstances.”
The WB fact-checks 10 frequently cited corruption stats, and finds not even one of them usable.
… a similar error from the UN Secretary-General (2018).
… and a depressing coda, in which the WB press office encourages lazy tweeters to forward a short sentence that seems more likely to aggravate the problem than to warn over-eager analysts away. (“A popular estimate is that more than $2.6 trillion, or 5% of global GDP, is lost to corruption annually around the world.”)
Another approach:
What then might be a useful measurement? One very well-known approach is that of Transparency International, a 30-year-old NGO which else publishes an annual Corruption Perceptions Index. This is a kind of global opinion poll asking how corrupt the respondents think various governments and institutions might be. Their most recent edition, released in January 2023 and covering perceptions as of late 2022, ranks 180 countries. It places Denmark, Finland, and New Zealand at the very top; North Korea, South Sudan, and Somalia at the bottom; and India exactly in the middle. The U.S. is in 24th place. This is an improvement from the 28th-place ranking of 2020, enough to America’s anti-corruption image above those of Taiwan, Bhutan, Chile, and the United Arab Emirates, but still well below the 16th-place ranking in the 2017 Index (and only sixth among the G-7 countries). TI’s summary suggests that the U.S.’ not-entirely-savory reputation reflects perceptions less of corruption in state/federal bureaucracies or of private-sector businesses than of a deteriorating political system:
“The [U.S.’] lack of progress on the CPI [Corruption Perceptions Index] can be explained by the persistent attacks on free and fair elections, culminating in a violent assault on the U.S. Capitol, and an increasingly opaque campaign finance system.”
Transparency International’s 2022 Corruption Perceptions Index, with links to earlier Indexes back to 1995.
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
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