Confronting Corruption in the Developing World

The Politic goes into the corporate boardroom and government bureau to sniff out the sources, contaminants, and discontents of corruption. Shifty businessmen and bodyguards with large silver briefcases swarm the BRIC nations, but anti–corruption campaigns are gaining momentum. Governments are clamping down. Citizens are mobilizing. Bloggers are taking to cyberspace. The four articles in this feature examine the cultural roots, political struggles, and economic damage of corruption. The Politic interviews activists, professors, and NGO directors in order to help us weigh the respective anti-corruption measures of the BRIC nations, how far they have come, and how far they need to go.

Many Brazilian children grow up reading the tales of Pedro Malasartes, a prototypical trickster. With deft rhetorical turns, he manipulates foolhardy characters, usually of a higher social status, into doing what he wants. The idea is that shrewd maneuvering can turn a disadvantage into an advantage.

To be sure, the “hero without any character,” as author Roberto DeMatta describes Malasartes in Carnivals, Rogues and Heroes, is rather innocuous in children’s stories. But his incorporation into the political sphere carries a more menacing implication. When Brazilian politicians begin to take after Malasartes, it is the Brazilian people who end up getting swindled.

President Lula speaking at the World Economic Forum on Latin America

Professor emeritus of the University of Brasilia, David Fleischer suggests two forms of corruption that are typical in Brazil. First, there is the embezzlement of funds for direct financial gain. Then there is the illegal appropriation of public funds by politicians and institutions for political purposes. This may include pork barrel projects, cash to finance campaigns, and kickback for political allies. Detouring public funds in such a way might not produce a profit for the politicians but earns them political capital come election season.

To explain the prevalence of corruption in Brazilian politics, scholars go back to the days of Portuguese-colonized Brazil. “The unavoidable truth,” analyst Carlos Eduardo Lins da Silva writes, “is that corruption has been a trademark in the Brazilian political system since its earliest origins.” Portuguese officials knew that an assignment to Brazil meant the opportunity of a lifetime, the chance to amass wealth. The Portuguese crown was willing to overlook the misdeeds of its officials so long as the stream of revenue across the Atlantic remained uninterrupted. Powerful donatários were able to manage their captaincies in Brazil with virtual independence. The result, as Georgetown Professor Joseph Page writes, was that “the administration of the colony became a paradigm…of graft and corruption, as local officials siphoned off public funds and otherwise took financial advantage of their position.”

Despite the establishment of a constitutional democracy after decolonization, corruption continued to permeate Brazilian politics. President Jânio Quadros came into office in 1961, brandishing broom in hand, promising to sweep the streets clean of corruption. He lasted seven months. The military coup of 1964 promised to eliminate not just communism but corruption too. Twenty years later, military rule had little to show for itself. In response to a floundering economy suffering under the weight of rampant corruption and hyperinflation, protesters took to the street demanding a return to civilian rule. One demonstration in Sao Paulo drew a crowd of 1.5 million.

In 1989, after five arduous years of regime change, with a newly drafted democratic charter, the Brazilian people elected President Fernando Collor de Mello. Halfway through his five-year term, a congressional inquiry exposed the first democratically elected president in nearly 30 years as another executive trickster. Once again thousands of frustrated protestors organized to express their indignation. Collor resigned from office in December 1992 before the Senate could vote for his impeachment.

Since the 1992 resignation, Brazil has enjoyed tremendous growth and a consolidation of the democratic process. In what has come to be called the Mensalão (“Big monthly payment”) scandal, Brazilian newspapers revealed in 2005 that key advisors to President Luiz Inácio Lula da Silva had accepted bribes from state – owned companies. Despite his implication in the Mensalão, Lula won a second term in the 2006 presidential race. Dr. Matthew Taylor, who has written extensively on Latin American policy, says there is a “tradition of ‘rouba mas faz’ (he steals but gets things done), starting with São Paulo governor Adhemar de Barros in the 1950s and continuing through the present day, under politicians like Paulo Maluf.” Lula survived the scandal because he achieves results.

Yet, “here we are more than five years later,” says Taylor. “Lula got reelected, sat through his second term, elected his successor, and still there has been no decision by [Brazil’s Supreme Federal Court] either to convict or to absolve the alleged participants” of the Mensalão.

On the whole, however, there is much cause for celebration. A movement emerged in 2008 to put an end to political impunity that culminated in the introduction of the Ficha Limpa (‘Clean Record’) bill, a proposal to bar any politician who has been found guilty of abusing administrative power or any other criminal offense from continued government participation.

Because so few congressmen offered to sponsor the bill, advocates of Ficha Limpa resorted to the little known and rarely implemented ‘popular initiative clause’ of the constitution. The clause demands congress to vote upon a bill that has received signatures from 1% of the Brazilian population. The Movimento de Combate á Corrupçåo Eleitoral (MCCE), an umbrella group comprised of over 40 NGOs and other organizations that helped design the legislation, gathered more than 1.9 million signatures in favor of Ficha Limpa. Another 3 million more registered in support online. The petition was sent to the National Congress and in June 2010, President Lula signed the bill into law.

Luciano Santos, a lawyer at the helm of the Ficha Limpa campaign, said that when politicians saw the massive popular support behind the bill, lawmakers felt pressure to approve the law. Taylor is heartened by the public’s push to clean up politics. “The fact that civil society is leading the drive for change suggests an important source of reform that can drive continuous improvements in coming years, whether or not the ‘political class’ is on board.”

Alongside increased civil activity, Taylor points to the resilience of the 1988 constitution and the success of President Fernando Henrique Cardoso, Lulu’s immediate predecessor, and the Real Plan, a set of measures taken to stabilize the Brazilian economy that included the privatization of public sectors, in shoring up once rickety political and economic structures. Stabilization will continue to make the fight against corruption easier. “There is of course much that remains to be done, especially to accelerate the inefficient prosecution of corruption cases in the courts. But the fact of the matter is that it is a lot easier to be transparent and fight corruption when inflation is running at 6% a year than when it is 3,000% a year.”

As problems of hyperinflation, poverty, and education are addressed, Taylor predicts “moral questions such as corruption will rise to the forefront. The evidence seems fairly strong that Brazil is moving in this direction.” The fight against dirty politics is self-perpetuating – every success against corruption moves corrupt officials out of the government, thereby making anti-corruption reform easier to pass. Cleaning up politics “is not something that happens overnight, and it will be highly dependent on the future path of Brazil’s economy and democracy,” Taylor says. But the recent triumph of the Ficha Limpa movement suggests that Brazilians who are fed up with corruption may have a real opportunity to make changes in the coming years.

Yelena Panfilova, director of the Moscow office of Transparency International, didn’t react well to her country’s ranking in the 2010 Transparency International Report. “How can a country claiming to be a world leader be in such a position? It’s a situation of national shame.”

The stench of corruption is everywhere and everyone has a story to tell. Young men avoid conscription with cash. Students buy admissions into the top universities. Officers in the army hire troops out as day laborers. Developers and contractors require licenses to build, and every license needs a bribe. In 2005, the latest year for estimations, bribery and fraud amounted to over $316 billion, more than the entire country’s federal budget.

The list goes on. Dozens of coal miners have died where pit owners neglected safety rules to maximize profits. Bombers have bribed their way through the gate and crashed airplanes to the ground. Since 2000, 17 journalists have been killed. More than three quarters of Russians say corruption is a major problem and is worse than it was 10 years ago. Corruption has meant international shame and death for too many. It spells future instability and poor economic prospects. The country has sailed along with relatively high GDP growth over the past decade, thanks in large part to its exportation of natural gas and oil. The country’s Central Bank holds over $500 billion in reserves. There is a growing consensus among economists, however, that corruption is becoming increasingly cumbersome to growth and development. Malfeasance has scared away potential foreign investors and their checkbooks. Studies have shown that if Russia were to reduce corruption to the levels of its neighboring countries like Poland, Hungary and the Czech Republic, annual growth would rise by percentages point.

Any attempts to curb corruption have failed to liftoff. Current Prime Minister and former President Vladimir Putin, mockingly hailed by The Economist as Russia’s “Humiliator-in-Chief,” had promised to tame the Russian bear and establish a “dictatorship of law.” His successor, current President Dmitry Medvedev, established the Anti-Corruption Council. Early into his presidency, Medvedev penned an open letter to the Russian people under the headline “Forward Russia!” begging the question: “Should we continue to drag into the future our primitive raw-materials economy, endemic corruption, and inveterate habit of relying on the state, foreign countries or some all-powerful doctrine to solve our problems — on anyone except ourselves?” He has called on Russians to e-mail the Kremlin with suggestions on how to purge the country’s Augean stables. The public, however, unimpressed by his gestures and absence of any real improvement, is growing more impatient. A recent poll showed that 71 percent of respondents feel government efforts to fight corruption will amount to little.

Aleksei Navalny is on a crusade to expose the extortion of big state-owned energy companies

Whence will reform and purification come if not from the Kremlin? One blogger, a 34-year-old real estate lawyer by training, has taken it upon himself to do what Putin and Medvedev will not. Aleksei Navalny is on a crusade to expose the extortion of big state owned energy companies. His website, Navalny.ru, posts scoops on the misconduct of companies such Transneft and Gazprom and has attracted millions of visitors.

As The New York Times reported in March 2011: “Mr. Navalny, whose fame and unabashed political ambitions are surely helped by his blue-eyed good looks and acidic sense of humor, has clearly touched a nerve in Russian society. His blog appeals to Russians who wonder: if the country’s vast oil wealth is not trickling down to the public, where is it going?” According to Nikolai Petrov, a fellow at the Carnegie Moscow Center, Navalny’s celebrity “is growing almost as quickly as that of Wiki Leaks founder Julian Assange.”

Navalny got his start in 2007. Exercising his rights as a minority stockholder, he sued Russian companies to disclose their accounting documents. He then published the disclosures on a LiveJournal blog. Within months he had gained a following and launched Navalny.ru in 2010, relying upon the undercover and discrete help of bankers and financial analysts to examine company accounting documents.

The recent stir over Transneft’s pipeline construction that Navalny uncovered has generated interest not just from the public and a few brave bankers, but even from the Prime Minister. Putin has taken Navalny’s postings on Transneft seriously enough to call for an investigation, which is still ongoing. This step has done little to appease Navalny and contain his righteous fury. The blogger has expanded his operations to exposing government impropriety. His new website RosPil.info sheds light on government procurement process and even asks for input from his online audience.

Navalny has sworn to continue to fight despite threats and possibility of arrest. He wouldn’t be the first to find himself behind bars for activism. Attorney Sergei Magnitsky was arrested in 2008 after accusing officials in the Interior Ministry of falsifying tax documents to steal $230 million from the state. He died in custody in November 2009. William Browder, an American investor who ran Hermitage Capital Management, the investment fund Magnitsky had worked at before his arrest, conducted a private investigation into the death of the Russian lawyer. The report found that he had been denied medical attention in prison and gruesomely beaten. “The Russian government knows exactly who tortured and killed Sergei Magnitsky, as well as who stole $230 million, but has refused to investigate and prosecute them,” the investigation concluded.

Daring individuals like Navalny and Magnitsky are not alone among anti–corruption activists. Moscow based think–tank Indem Foundation has been monitoring and publishing reports on corruption since 1996. The non–governmental organization, the Center for Anti-corruption Research and Initiative Transparency International Russia, has been working for over a decade toward greater transparency. Yelena Panfilova, the NGOs founder and director, even finds reason to hope, pointing to Moscow’s decision to join the OECD’s Anti-Bribery Convention, action Panfilova personally pushed for.

Some businesses, like the joint venture of TNK-BP, Russia’s third largest oil producer, have taken it upon themselves to purge their accounting books of craft and chicanery. The company recently confirmed 365 cases of alleged corruption and violations identified by a security staff. This may be a move in part to repair the damaged public image caused by the Deepwater Horizon accident. The company also sees the economic sense in going after ‘Dirty Harry.’ BP recently lost a bid worth billions on a project in the Russian Artic to its rival ExxonMobil. Financial Mismanagement and shady handling hamstring the company’s ability to lure both potential investors and win big contracts.

The anti-corruption campaign is gathering pace. Navalny’s website increases its membership by over 10% every month. NGOs, like Panfilova Transparency International Russia, have succeeded in pushing the Kremlin to take stronger action. Companies, like TNK-BP, are self-regulating in order to compete better globally. Bankers and financial analysts, like those supporting Navalny and investing the death of Magnitsky, are doing their part to fight corruption. And yet, Russia still has still so far to go, many more miles to run in the marathon. Putin and Medvedev have gone after the small fishes, but people involved in the biggest bribery scandals are also the ones who seem best at avoiding prosecution. To be truly effective, anti-corruption efforts must start at the top. Such will be the task facing Putin next year when he returns to the presidency.

Don’t hold your breath.

Shobila Kali, the director of anti-corruption organization 5th Pillar, traces back the corruption in India today to independence from the British Empire in 1947. Following decolonization, government officials retained extensive rights but saw their salaries cut. Many turned to illegal and often coercive means to protect their income.

The LokPal Bill establishes an independent ombudsman body called the LokPal (Sanskrit for "protector of the people")

Monika Halan, editor of Mint Money and a Yale World Fellow, believes the structure of India’s former socialist based economy explains the ubiquity of fraud and extortion. Only a few individuals in the government had control over production and distribution. These officials exercised much power within their districts to take advantage of the lack of oversight for profit. These practices survived India’s transition from socialism to capitalism in the last decades of the 20th century.

Navneet Jawanda, biologist and researcher at the Yale School of Medicine and a member of the citizen’s movement India Against Corruption, considers corruption so embedded in society that it has made young generation of Indians numb, even indifferent. Arvind Panagariya, professor of Indian Political Economy at Columbia University and former Chief Economist at the Asian Development Bank, meanwhile, sees buds of progress and reason to hope. He points to the Right to Information Act of 2005. Under this act, any citizen may request information from a public authority that is required to reply within thirty days. The law, says Panagariya, has galvanized the anti – corruption movement in the country.

One of the most visible leaders of the campaign against corruption is Anne Hazare. He is pressing for the passage of the LokPal Bill to establish an independent ombudsman body called the Lokpal (Sanskrit for “protector of the people”). It would be empowered to register and investigate complaints of corruption against politicians and bureaucrats without prior government approval.

Hazare and his hunger strikes have effectively captured the attention of millions of citizens and generated interest from the global community. Sara Shneiderman, an Assistant Professor of Anthropology at Yale who teaches “Contemporary South Asia,” accredits the effectiveness of Hazare’s message to the adoption of Mahatma Gandhi’s own method. Hunger strikes focus international attention upon the individual as the symbol of the common man’s grievances against the system, creating an embarrassing situation for the central government. Indian Prime Minister Manmohan Singh has stated that the bill will be re – introduced in the 2011 monsoon session of Parliament.

While legislative steps are necessary, lasting reform lies in changing the attitudes of everyday people. According to the director of 5th Pillar, “We see awareness campaigns as a way to reduce citizen apathy to corruption and hence educate the public with ways to combat corruption.” The organization conducts educational campaigns in more than nine hundred schools and colleges across the country. One particularly creative tactic of the 5th Pillar operation is the “zero-rupee note (ZRN),” a currency – like slip printed with the words “I will neither accept nor bribe.” Citizens are encouraged to hand public official the ZRN as a political statement. So far, over 1.5 million of these notes have been distributed. Kali says that rather than resort to bribery, many citizens have presented the notes to officials and “have found to their pleasant surprise that the erstwhile corrupt official yields instantaneously to their request without the bribe.”

Alongside the efforts of NGOs, new technologies, such as online social media and mobile phones, are helping to alter cultural perceptions towards corruption. They allow the involvement of individuals who may otherwise not feel comfortable participating in social movements, says Shneiderman. One example is the website ipaidabribe.com, where individuals can report acts of bribery and corruption anonymously, and “tell their story” to the masses. There have been over 14,000 posts so far.

Professor Panagariya of Columbia University argues that economic reform, not political restructuring or social awareness, is the most important component in fighting corruption. He is not very confident that the movement of Anna Hazare to establish the ombudsman, the “super cop” in his words, would be an effective or long-lasting solution. “What if the super cop is corrupt?” Panagariya asks. Corruption of authority has happened before in the judiciary and the police. India needs economic regulatory overhaul to restrict the scope of corruption. Still other experts, like Navneet Jawanda of India Against Corruption, propose campaign finance reform to limit a politician’s incentive to accept bribes during elections.

India’s greatest strength moving forward is its democratic institutions that provide the framework and legal means to address grievances and pass necessary reform. The world’s largest democracy allows for NGOs and free press. Contrast this with the repressed political environment of China, where the options and opportunities are severely limited.

In the world’s most populous country, problems of corruption are rooted in the culture of guanxi that nurtures networks of relationships, deep state involvement in the economy, the control of the Chinese Communist Party. Though Beijing recognizes the importance of cleaning up corruption under the scrutiny of the international community and domestic pressures at home, the situation does not seem to be improving in the near term.

Chinese government officials "often heavily influence and interfere with the decisions over who receives bank loans"

In Chinese society, there exists a blurry line between the traditional notion of guanxi and corruption. According to Professor Thomas Gold, former Director of the Berkeley China Initiative and Chair of the Center for Chinese Studies, the first problem lies in determining what actions are considered corruption. “What is defined as corruption in the West may not be considered corruption in China,” he explains. China has such a large population and very limited resources, that sometimes, for one to get a resume in the door, or a doctor’s appointment, or an article published in a journal, one must establish connections with key individuals. Guanxi involves doing favors and giving money and gifts to create and cultivate these relationships. Gold states that for many officials, the line between guanxi and corruption is whether one gets caught. China’s highly personalized system of rule of law enables many powerful actors to dodge legal ramifications.

According to Time Magazine, 99% of corrupt officials escape punishment, and those individuals who are charged with a crime are simply considered the unlucky ones.

Other causes of the endemic corruption in Chinese society are heavily related to state involvement in the economy. Though China has liberalized its economy since the reforms of Deng Xiaoping, many sectors of the economy, such as energy, transportation, natural resources, finance, and telecommunications remain in state control. Easy access provides opportunities too tempting to ignore. Mayling Birney, an Assistant Professor at the London School of Economics and Political Science, offers one example.

In the financial sector, where all four of the biggest banks are state-owned, government officials “often heavily influence and interfere with the decisions over who receives bank loans.” Lynn T. White, professor of Politics and International Affairs at Princeton, provides another typical form of corruption involving local officials who sell off farmland for factory development, infrastructure projects, and real estate. While some of the profits from the sales may go into local development, much of the money is embezzled. The farmers, who lose their land at below market rates, are the ultimate losers.

The central government has recognized that it must address the growing issue of corruption. Its 2010 white paper on anti-corruption “China’s Efforts to Combat Corruption and Build a Clean Government” states: “It is the firm stance of the Communist Party of China and the Chinese government to combat corruption and build a clean government.” Empty words. Professor Anthony Saich, the Director of the Ash Center for Democratic Governance and Innovation at Harvard, does not see the lack of government oversight or poor implementation of corruption laws changing anytime soon.

High profile trials and executions for the few corrupt officials caught are only superficial gestures. China may be the world leader in capital punishment for corruption, with 90% of the all world cases reports Time Magazine. There even appears to be popular demand for these trials. Executions, however, remain a cosmetic approach without the necessary structural fixes.

Any centralized attempts of structural fixes have been stifled at the local level. Provincial officials have too much flexibility and discretion. Birney believes that Beijing will continue to struggle to disincentive corruption without changing the political system itself.

The central government is betting on continued economic prosperity to distract people and buy time. The protests continue to amass. Millions of citizens, undeterred by the lack of legal options, are taking to the streets. A recent citizen protest in Dalian, a northeastern city, was described as “one of the largest demonstrations since Tiananmen Square.” As growth slows and awareness grows, the central government has a potential powder keg on its hands.

Josef Goodman is a sophomore in Morse College. Molly Ma is a junior in Timothy Dwight College. Jay Pabarue is a sophomore in Silliman College.