Exporting corruption: privatisation, multinationals and bribery

Exporting corruption: privatisation, multinationals and bribery

Transparency, participation and decentralisation are required to resist the globalisation of corruption

Deals with the globalisation of corruption. The article suggests that if corruption is growing throughout the world, it is largely a result of the rapid privatisation (and associated practices of contracting-out and concessions) of public enterprises worldwide. This process has been pushed by Western creditors and governments and carried out in such a way as to allow multinational companies to operate with increased impunity.

Thus multinationals, supported by Western governments and their agencies, are engaging in corruption on a vast scale in North and South alike. Donor governments and multilateral agencies such as the World Bank and International Monetary Fund frequently put forward anti-poverty and “good governance” agendas, but their other actions send a different signal about where their priorities lie.

Corruption poses a serious problem for public authorities and the public because it makes services more costly, undermines development, and distorts democratic processes and rational decision-making. The amount of money lost to corruption which could, and should, be directed towards public services and to the development of democratic institutions is significant. Transparency International estimates that, on average, five per cent of public budgets go astray.

Huge international capital flows have meant an absolute boom in the amount of money entering emerging countries. There is no question that this phenomenon has fuelled grand corruption in a major way.

Structural adjustment policies leading to privatisation have had the following effects:

  • Governments are often unable to arrange transparent and open bidding processes or promulgate needed regulatory laws
  • Managers and employees, fearful for their future and confident of their ability to escape punishment, commonly strip the assets of the entities undergoing privatisation
  • Many interested parties are able to engage in insider dealing and political manipulation of the process for their own profit
  • Many state enterprises do not have the time to become economically viable before being sold off, leading to frequent sales of industries at below market value despite heavy government spending on recapitalisation

In theory, decentralisation – regarded by the World Bank as essential for combating corruption – is about bringing decision-making closer to local people and improving services. Over 56 developing and transition countries have now embarked on decentralisation programmes, many of them with World Bank advice and supported with World Bank loans. In practice, however, the type of decentralisation urged by multilateral development agencies has often gone forward without local bureaucracies being adequately prepared and without the necessary transfer of financial resources. One result has been increased corruption

Recommendations:

  • Economic sanctions acts as a deterrent to corruption
  • Opening development projects to more scrutiny
  • Decentralisation and develotion of power
  • Mobilise ordinary people. Civil society groups will need to be prepared to take on governments in innovative and sometimes confrontational ways. They will also need to be committed to being transparent and accountable themselves
  • Push for freedom of information and enable ordinary people to use that information. Only if they have the relevant knowledge can citizens hold their governments accountable and ensure that resources that belong to them are used in the right way
  • Help increase citizen participation in decision-making

  1. How good is this research?

    Assessing the quality of research can be a tricky business. This blog from our editor offers some tools and tips.