Corruption

• 1. Introduction

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  Corruption is a form of dishonesty or criminal conduct undertaken by people or organizations entrusted with power, turned to personal gain. In 2009, the municipality of Kaunas, Lithuania ordered a shipping container converted into an outdoor toilet at a cost of 500,000 litai, roughly 150,000 euros. A very similar facility existed in the nearby town of Kedainiai for 4,500 euros. By the time lawyers, courts, and compensation were tallied, the total bill had climbed to 352,000 euros. Nobody was ultimately convicted of corruption. The public servants involved were cleared of those charges, received compensation, and the renamed "Golden Toilet" sat closed for years. What this Lithuanian scandal illuminates is something far larger: the gap between what we call corruption and what actually damages societies. What are the many forms corruption takes? How do nations try to measure and fight it? And why do some of the world's wealthiest democracies remain deeply enmeshed in practices that fit every definition of corrupt conduct, even as they sit near the top of global anti-corruption rankings?

• 2. Unbundling the Forms

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  Political economist Yuen Yuen Ang distinguishes four types of corruption: petty theft, grand theft, speed money, and access money. Speed money refers to petty bribes paid to bureaucrats to clear hurdles or accelerate routine processes. Economists once theorized that this kind of bribery might function as an efficient lubricant in economies where red tape was thick, though research found it burdensome in practice. Access money is different in character. Ang defines it as high-stakes rewards extended by business actors to powerful officials to secure exclusive, valuable privileges. From a business perspective, she argues, access money functions less like a tax and more like an investment, and is better described as sludge than grease. Petty theft and grand theft drain public and private wealth while delivering no benefits in return; speed money may relieve a headache but does not improve underlying conditions. Access money, by contrast, Ang compares to steroids: it can spur growth and enable extraordinary performance, but it carries serious side effects, including the possibility of complete collapse. The Unbundled Corruption Index uses what it calls stylized vignettes rather than broadly worded survey questions to measure which of these four forms prevails in a given country. Grand corruption operates at the highest levels of government, requiring significant subversion of political, legal, and economic systems, and is common in countries without adequate oversight mechanisms. Systemic corruption, by contrast, is rooted in organizational weaknesses: conflicting incentives, monopolistic powers, low pay, lack of transparency, and a culture of impunity.

• 3. Measuring the Invisible

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  Transparency International has published the Corruption Perceptions Index annually since 1995, ranking countries by their perceived levels of public sector corruption based on expert assessments and opinion surveys. Journalist and author George Monbiot has criticized the index for its narrow definition, arguing it surveys mostly Western executives about bribery and excludes the kinds of corruption prevalent in rich countries. In his book How Corrupt is Britain, David Whyte reveals that corruption exists across a wide range of venerated institutions in the UK, which sits near the top of the CPI rankings. The problem, several researchers argue, is that global metrics systematically under-measure corruption of the rich, which tends to be legalized, institutionalized, and ambiguously unethical, as opposed to the more visible corruption of the poor. World Bank economist Daniel Kaufmann extended the standard concept of corruption to include what he calls legal corruption, in which power is abused within the confines of the law. A 1994 comparative study presented by the German Parliamentary Financial Commission found that in most industrialized OECD countries, foreign corrupt practices were legal, and that Germany actively fostered foreign corruption while prosecuting domestic corruption. It was not until 1999, after the OECD Anti-Bribery Convention came into force, that Germany withdrew the legalization of foreign bribery. One study proposed an unusual proxy measure for situations where formal instruments are impractical: researchers found that the obesity of cabinet ministers in post-Soviet states was highly correlated with more accurate measures of corruption.

• 4. Corruption and the Law

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  The Siemens case illustrates how legal frameworks shape what can be prosecuted. In 2007, Siemens was convicted in the District Court of Darmstadt for paying nearly 3.5 million euros in bribes to secure a 200 million euro contract from the Italian company Enel Power SpA, a firm partially owned by the Italian government. The payments were routed through black money accounts in Switzerland and Liechtenstein established specifically for such transactions. Because the crime occurred in 1999, after the OECD convention had entered into force, it could be prosecuted. It was the first time a German court treated foreign corrupt practices on the same legal footing as domestic corruption. The concept of state capture, first used by the World Bank in 2000, describes a situation where small corrupt groups use their influence over government officials to shape the very laws that would otherwise constrain them. Unlike most corruption, which exploits existing laws, state capture seeks to influence the formation of laws from the outset. It is not necessarily illegal, depending on the determination of the very state being captured. Judicial corruption poses particular challenges: governmental control over court budgets in transitional and developing countries critically undermines the separation of powers, fostering financial dependence of courts on the executive branch. In the United States, the Foreign Corrupt Practices Act of 1977 was an early model for directly targeting the active party in a corrupt transaction rather than only the victim or the passive recipient.

• 5. Corruption Across Sectors

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  Corruption takes distinct shapes depending on the sector it inhabits. In police forces, one well-documented form involves white supremacist groups recruiting law enforcement members to repress minorities and covertly advance ideological agendas. Whistleblowers in law enforcement face retaliation including demotion, forced transfer, professional threats, and physical danger to themselves and their families. In healthcare, Transparency International described in 2019 the six most common forms of service corruption as absenteeism, informal payments from patients, embezzlement, inflating costs, favoritism, and manipulation of billing records. As of 2019, no evidence existed for interventions that reliably reduce corruption in the health sector. In education, doctoral degrees and dissertations have been documented for sale, including to politicians. Russia's parliament has been noted for its concentration of members with advanced degrees obtained through corrupt processes. In natural resources, the presence of fuel extraction is described as unambiguously associated with corruption, while the relationship with mineral exports depends on a country's wealth level. Wealthier countries exporting gold and diamonds are actually associated with reduced corruption. In Kenya, farmers blamed poor agricultural productivity on corruption and as a result were less willing to undertake soil conservation measures. In Benin, mistrust of government led small farmers to reject climate change adaptation measures.

• 6. Causes and Consequences

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  Economist R. Klitgaard proposed that corruption will occur when the corrupt gain exceeds the punitive damages multiplied by the likelihood of being caught and prosecuted. Others added a fourth variable: morality, with both an intrinsic dimension tied to personal ethics and an extrinsic dimension tied to circumstances like poverty, inadequate pay, and dysfunctional procedures. A comparison of the most corrupt with the least corrupt countries shows that the most corrupt tend to have large socio-economic inequalities, while the least corrupt tend to have higher degrees of social and economic justice. Contemporary corruption in Africa has been linked to the historical use of material incentives by colonizers to secure the collaboration of local rulers, and for all developing countries, the degree of European settlement in the colonial era correlates with present-day corruption levels. Corruption reduces the returns on productive activities. When production returns fall faster than returns on rent-seeking, resources shift from productive work toward corrupt activities over time, lowering the stock of human capital in affected countries. Simon Weschle at Syracuse University examines the consequences of campaign finance for democracy. Kristin Surak at the London School of Economics studies the practice of wealthy individuals buying so-called golden passports with no intention of migrating, which she describes as a full-blown citizenship industry that thrives on global inequalities. USAID Administrator Samantha Power stated in a 2022 speech that corruption now involves sophisticated transnational networks, including financial institutions hidden in secrecy, well beyond the older image of individual autocrats plundering national wealth.

• 7. Philosophical and Religious Responses

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  Plato, writing in The Republic, acknowledged the corrupt nature of political institutions and counseled philosophers to shelter behind a wall rather than martyr themselves against an entrenched and wicked order. He compared the lone honest person in a corrupt state to someone who has fallen among wild beasts, unable to join in their wickedness but also unable to resist it, and therefore useless to the state and dangerous to themselves. The 19th-century German philosopher Arthur Schopenhauer drew a line between corrupt university philosophers, whose real concern was earning a comfortable living and enjoying public prestige, and genuine philosophers, whose sole motive was discovering and bearing witness to the truth. The Jewish prophets Isaiah and Amos, according to the source text, berated the rabbinical establishment of ancient Judea for failing to live up to the ideals of the Torah. In the New Testament, Jesus accused that same establishment of following only the ceremonial portions of religious law while neglecting justice, mercy, and faithfulness. Corruption within religious institutions helped trigger the Investiture Controversy, and in 1517 Martin Luther accused the Catholic Church of widespread corruption, including the selling of indulgences. In 2015, Princeton University professor Kevin M. Kruse advanced a thesis that business leaders in the 1930s and 1940s collaborated with certain clergy to promote a reading of Scripture that de-emphasized the social gospel and emphasized individual salvation, themes more hospitable to free enterprise. The Tax Justice Network, a more recent initiative, has shifted public attention beyond bribery and theft toward the structural mechanisms of tax abuse that allow corruption to persist in legal form.