Time to clear the underbrush of bribery

Stories telling how employees of the just shuttered “The News of the World” newspaper in Britain had possibly colluded with Scotland Yard in inappropriate ways, including payments to police, are just one recent troubling example of corruption in business and government. One need only Google “bribery” for plenty of other fresh examples around the world.

Ironically, Britain just put into effect July 1 a new Bribery Act that aims to clean up its ways of operating. It’s the latest follow up to the US Foreign Corrupt Practices Act of 1977, which has had a worldwide effect by demanding that US businesses not pay bribes overseas.

The extent of global corruption is undoubtedly massive, though hard to quantify. How much more does a project cost because of invisible bribes? What worthless “white elephant” projects are approved?

Such corruption can scare away foreign investment and reduce economic growth. A corrupt country’s economic growth rate can be .5 to 1 percentage points lower than that of a similar country with low corruption, according to the World Bank.

Exact figures on losses from corruption can be elusive, but from time to time some numbers have been put forward. For example, China’s central bank recently estimated that more than $120 billion had been stolen by employees of government enterprises since the mid-1990s.

Now for the good news: Governments and civic activists are recognizing the need to combat bribery – and vigorously.

Governments have only to look to the streets of the Arab world where outrage over government corruption has inspired angry protests and even toppled rulers.

In the world’s two most populous countries, China and India, hundreds of millions of people expect to be lifted out of their poverty through economic growth. Officials in both countries are recognizing that corruption will hold them back.

“We must create the conditions in which the people can supervise and criticize the government ... so as to prevent corruption from developing,” Chinese Premier Wen Jiabao said in June. “Corruption will cost the party the support and trust of the people,” chimed in China’s President Hu Jintao July 1, adding “We must not turn our power into an instrument for making personal gain for a handful of individuals. It is more urgent than ever for the party to impose discipline on its members.”

While crackdowns in China on corruption at the local level have been tolerated – and even encouraged – in the past, what remains to be seen is whether a housecleaning can take place at the higher levels of Chinese government.

In India, Prime Minister Manmohan Singh has attacked business leaders for their “ethical deficit” that could harm the nation’s drive to become an economic superpower. “Our corporate culture must be attuned to the universally accepted values of good governance,” he said.

No doubt this was a “pot calling the kettle black” moment, since the Indian government itself remains torn by various scandals. Still it represented an effort to recognize the destructive influence of corruption. India’s Chamber of Commerce didn’t disagree, itself saying that “brand India” could be damaged in the world’s eyes if “brazen acts of corruption” were not addressed.

In India last year, a private group set up the website “I Paid a Bribe” in order to shed light on incidences of bribery throughout Indian society. This effort at harnessing social media has been an early success, with more than 12,000 incidents of bribery already reported on the site along with some evidence that officials are responding.

The site confirms what has long been known: At the individual level, generally it’s the poor who are forced to pay bribes to those who are wealthier and more powerful.
Helped by the Internet, citizens are becoming better watchdogs. Combined with the efforts of governments, the picture is slowly brightening.

“It is heartening that so many people are ready to take a stand against corruption,” Huguette Labelle, the chairwoman of Transparency International, said late last year. “This willingness must be mobilized.”

At its heart, the issue is honesty. Honesty is not only the basis of good business, it’s the basis of good politics, including the maintenance of harmonious relations between countries.

The path out of the world’s current economic doldrums will become clearer as governments, businesses, and individuals clear away the underbrush of bribery and corruption.