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to Global Governance
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Global Governance 7 (2001), 25-49
Transparency International
and Corruption as an Issue of
Global Governance
_ /2E\ _
25
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26 Corruption as an Issue of Global Governance
Table 1 Average Annual Entries on Corruption in the New York Times Index
for Recent Six-Year Periods
1969-1974 357
1975-1980 245
1981-1986 302
1987-1992 402
1993-1998 578
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Hongying Wang et) James N. Rosenau 27
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28 Corruption as an Issue of Global Governance
Structural Changes
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Hongying Wang &) James N. Rosenau 29
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30 Corruption as an Issue of Global Governance
Transparency International
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Hongying Wang et) James N. Rosenau 31
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32 Corruption as an Issue of Global Governance
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Hongying Wang et) James N. Rosenau 33
Strategies
Thus far, TI appears to have been very successful. Jeremy Pope, TI's ex
ecutive director, recalls that "in the early 1990s, the topic of corruption
was simply not addressed in polite company."37 In 1998, TI president
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34 Corruption as an Issue of Global Governance
Peter Eigen took note of the worldwide momentum toward greater sen
sitivity to corruption issues by stressing TPs growth: "If today our
movement seems at times to be just a trifle breathless, it is because we
have traveled such a long distance in such a short space of time. . . .
Quite suddenly, from being a very small office we have acquired a crit
ical mass."38 TPs budgetary income increased from $582,441.39 in
1995 to $1,114,834.26 in 1997.39 TPs effectiveness owes much to its
strategies.
Framing the issue. TI has been careful in its framing of the corruption
issue. First, it relates the fight against corruption to a number of issues
already well established on the global agenda. TPs official mission state
ment portrays the movement against corruption as humanitarian, demo
cratic, ethical, and practical.40 In the words of a member of TI-USA,
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Hongying Wang et) James N. Rosenau 35
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36 Corruption as an Issue of Global Governance
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Hongying Wang e? James N. Rosenau 37
in the interest of many of the companies from the North not to have to
pay bribes, they are afraid that if they refuse to pay bribes, they will
lose contracts and jobs to their competitors.64 This is a typical case of
Prisoner's Dilemma. TI's "islands of integrity" model offers a useful
solution to this dilemma.
This model is designed to curb corruption in a single market with
a limited number of competitors. It is most applicable to large, gov
ernment-funded infrastructure projects, where corruption has been the
most serious.65 Since its inception in 1993, the model has been used in
a few projects in Latin America. Recently, it has been endorsed by a
number of national and local governments in Africa as well. The model
also has the support of the World Bank and a number of large compa
nies from developed countries.
The islands of integrity model is designed to help governments and
companies refrain from corruption. It requires that all applicants for a
public tender and the government that issues it sign a pact that obliges
all competitors to refrain from corrupt practices. If the agreement is vi
olated, the violators are subject to sanctions, such as loss of contract,
liability for damages (to the government and the competing bidders),
and forfeiture of the bid security. Companies engaging in corruption
can also be barred from future government business.66 A related
method with which the national chapters hope to influence government
and business behaviors is to accredit government agencies and compa
nies that refrain from corrupt practices.
Comparisons
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38 Corruption as an Issue of Global Governance
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Hongying Wang et) James N. Rosenau 39
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40 Corruption as an Issue of Global Governance
Conclusion
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Hongying Wang et) James N. Rosenau 41
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42 Corruption as an Issue of Global Governance
Notes
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Hongying Wang et) fames N. Rosenau 43
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44 Corruption as an Issue of Global Governance
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Hongying Wang et) James N. Rosenau 45
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46 Corruption as an Issue of Global Governance
Economie Research Working Paper No. W6030, May 1997. Controlling for
other factors, Wei finds that corruption tends to discourage foreign direct in
vestment (FDI), in effect by acting as a tax on foreign business. From Singa
pore to Mexico, the marginal tax rate on foreign investment is raised by 20 per
cent. According to Peter Eigen, there is a tendency for countries with rampant
corruption to face difficulties in sustaining economic development "because
very often the wrong projects are chosen, not the ones which give the best price
and best product. Very often funds are not made available to schools, hospitals
and other services which are important to create a healthy and prosperous
society." Kang Siew Li, "KL's Anti-Graft Laws Lauded," Business Times
(Malaysia), 17 September 1998.
46. For a review and critique of the functionalist literature on corruption,
see Shahid M. Alam, "Anatomy of Corruption: An Approach to the Political
Economy of Development," American Journal of Economics and Sociology 48
(October 1989): 441-456.
47. Tyler Cowen, Amihai Glazer, and Henry McMillan, "Rent Seeking
Can Promote the Provision of Public Goods," Economics and Politics 6 (July
1994): 131-145.
48. Cheung, "A Simplistic General Equilibrium Theory of Corruption,"
pp. 1-5. Also see Gordon Tullock, "Corruption Theory and Practice," in Con
temporary Economic Policy 14 (July 1996): 6-13.
49. Basu and Li, "Corruption and Reform."
50. Francis T. Liu, "Three Aspects of Corruption," Contemporary Eco
nomic Policy 14 (July 1996): 26-29.
51. Trond E. Olsen and Gaute Trosvik, "Collusion and Renegotiation in
Hierarchies: A Case of Beneficial Corruption," International Economic Review
39 (May 1998): 413-438.
52. In addition to the study by Shang-jin Wei (note 46), see Oluwole
Owoye and Ibrahim Bendardaf, "The Macroeconomic Analysis of the Effects
of Corruption on Economic Growth of Developing Economies," Rivista Inter
nazionale de Scienze Economiche e Commerciali 43 (January-March 1996):
191-211; Paolo Mauro, "Corruption and Growth," Quarterly Journal of Eco
nomics 110, no. 3 (August 1995): 681-712; and M. Shahid Alam, "Anatomy of
Corruption: An Approach to the Political Economy of Underdevelopment,"
American Journal of Economics and Sociology 48 (October 1989): 441-456.
53. "Corruption in Brazil Raises Costs by Up to 40%," Gazeta Mercantil
Online, 18 September 1996.
54. Michael Hamlyn, "Opposition Urges Mandela to Act Against Corrup
tion," New Straits Times (Malaysia), 15 August 1997, p. 12.
55. "Corruption Related to Economic Crisis," Korean Herald, 9 February
1998.
56. "The Cameroon government condemns strongly the arrogance of certain
bodies that are in the pay of neo-colonial clusters of people at work to impede
the progress of our countries instead of supporting efforts and sacrifices made by
our people." Quoted in Barbara Crossette, "Europe Dominates Survey's Top 10
Least-Corrupt-Countries List," New York Times, 4 October 1998, p. 5.
57. "This is a subjective and partial study which is aimed at feeding the
political opposition's campaign against the government and renew their attacks
on the integrity and credibility of the country." Quoted in Beth Rubenstein,
"Corruption Taint Hurts Argentina's Trade Goals," Journal of Commerce, 9
October 1998, p. 4A.
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Hongying Wang ?) James N. Rosenau 4-7
58. For instance, after TI issued the CPI for the first time in 1995, Singa
pore's prime minister, Goh Chok Tong, noted that "there is no reason why, in
terms of the honesty and integrity of our system, Singapore should be second
to any other country." See Susan Sim, "Corruption Index Based on 7 Polls of
Businessmen, Newsmen," Straits Times (Singapore), 26 August 1995, p. 2. In
the aftermath of the issuance of the 1997 CPI, opposition leader Lim Kit Siang
told the Malaysian government that by aggressively fighting corruption,
Malaysia's ranking in the CPI will improve. See "DAP: Give ACA Chief Back
His Old Powers," New Straits Times (Malaysia), 10 April 1997, p. 4.
59. Quoted in Sharon Nelson, "Towards More Open Dealings," New
Straits Times (Malaysia), 1 May 1997, p. 9.
60. Personal correspondence with TI official, April 1999.
61. Quoted in Trevor Royle, "Corruption Pays Its Way Throughout the
World," Scotland on Sunday (London), 4 May 1997, p. 21.
62. Quoted in Roger Boyes, "Britain Moves Higher in Bribery League,"
The Times (London), 1 August 1997.
63. Janet Guttsman, "Canada Among the Least Corrupt Countries,"
Toronto Star, 23 September 1998, p. D7. Indeed, in the fall of 1997, it was re
ported that TI issued a report stating that Belgium, Luxembourg, France, Italy,
the Netherlands, and South Korea are the most corrupting countries in the
world. This is analyzing corruption from the point of view of the corrupting
countries offering bribes to countries bidding for contracts. The least corrupt
ing countries are Australia, Malaysia, and Sweden. Gazeta Mercantil Online, 2
September 1997. TI executive director Jeremy Pope cautions that this report
was done by a TI researcher and the methodology was inherently flawed. Per
sonal correspondence, April 1999.
64. "Eigen Fights the Corruption Monster," New Straits Times (Malaysia),
9 September 1997, p. 1.
65. The level of corruption differs among different economic sectors.
George Moody-Stuart, chairman of TI-UK, ranks industries by the extent to
which he estimates they are prone to bribery?aircraft and defense, major in
dustrial goods, major civil works, supplies, and consultancy. See Michael
Prest, "$40bn Business Beset by Bribes and Kickbacks," The Observer, 22 Oc
tober 1995, p. 1. Defense sales are ideal for grand corruption because of their
size and secrecy. George Moody-Stuart, "Scope for Corruption in Arms
Trade," The Times (London), 26 February 1996. In many countries, construc
tion projects tend to be where corruption concentrates. For instance, according
to official reports, 63 percent of the more than 100,000 cases of corruption in
recent years have taken place in the construction sector (see China News Ser
vice, 6 March 1999).
66. For more details on this model, see Transparency International, The
Fight Against Corruption, chap. 4.
67. Keck and Sikkink, Activists Beyond Borders.
68. Ibid., p. 2.
69. Ibid., p. 8.
70. Ibid., p. 17.
71. Ibid., p. 19.
72. Enrique Larafia, Hank Johnston, and Joseph R. Gusfield, eds., New
Social Movements: From Ideology to Identity (Philadelphia: Temple University
Press, 1994); Keck and Sikkink, Activists Beyond Borders; Jackie Smith,
Charles Chatfield, and Ron Pagnucco, eds., Transnational Social Movements
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48 Corruption as an Issue of Global Governance
and Global Politics: Solidarity Beyond the State (Syracuse: Syracuse Univer
sity Press, 1997); and David S. Meyer and Signey Tarrow, eds., The Social
Movement Society: Contentious Politics for a New Century (Lanham, Md.:
Rowman & Littlefield Publishers, 1998).
73. Social movements are not the same as transnational activist or advo
cacy networks. As Tarrow points out, "There is an important substantive dif
ference: activist networks are horizontal elite linkages in transnational space
with occasional organizational connections to grassroots social actors, while
transnational social movements are built on these social networks themselves."
Sidney Tarrow, "Does Internationalization Make Agents Freer?or Weaker?"
paper prepared for a workshop on European institutions and transnational con
tention, Cornell University, 5-6 February 1999, p. 7. Also see Tarrow, "Fish
nets, Internets, and Catnets: Globalization and Transnational Collective Ac
tion," in M. Hangan, L. Page Moch, and Wayne de Brake, eds., Challenging
Authority (Minneapolis: University of Minnesota Press, 1998), p. 237. The
phrase transnational advocacy network is used in Keck and Sikkink, Activists
Beyond Borders.
14. Keck and Sikkink, Activists Beyond Borders, pp. 27, 204-205.
75. See Paulo Mauro, "The Effects of Corruption on Growth, Investment,
and Government Expenditure: A Cross-Country Analysis," in K. A. Elliott
(ed.), Corruption and the Global Economy, p. 83.
76. Elliott, "Corruption as an International Policy Problem," p. 190.
77. Keck and Sikkink, Activists Beyond Borders, p. 35.
78. Raymond Bonner, "The World Business of Bribes: Quiet Battle Is
Joined," New York Times, 8 July 1996, p. A3.
79. Kerene Witcher, "A Bribe or Tip? A Dilemma," Asian Wall Street
Journal, 15 September 1997, p. AL
80. Shang-Jin Wei, "How Taxing Is Corruption on International In
vestors?" National Bureau of Economic Research Working Paper No. W6030,
May 1997.
81. Stephanie Flanders, "Clear Thinking on Corruption," Financial Times,
23 June 1997, p. 10.
82. Nancy Dunne, "U.S. Presses Drive Against Business Bribery," Finan
cial Times, 24 February 1999, p. 7.
83. Mason and de Jonqui?res, "Goodbye Mr. 10%," p. 15.
84. A review of TI's financial supporters reveals the importance of cor
porate donors, especially U.S. multinational corporations. Twenty-nine of the
seventy-three corporate donors are U.S. companies. See TI's home page at
www.transparency.de. Other sources of funding include multilateral groups,
such as the World Bank, the Asian Development Bank, the European Union,
the Inter-American Development Bank, and the UN Development Programme;
national development agencies such as the U.S. Information Agency, the U.S.
Agency for International Development, the French Ministry of Cooperation,
and the Swedish International Development Authority; and private foundations
such as the Asia Foundation, the Ford Foundation, the MacArthur Foundation,
the Rowntree Foundation, the Open Society Institute, and the Konrad-Ade
nauer Stiftung.
85. Russell Mokhiber, editor of Corporate Crime Reporter, letter to the
editor of the New York Times, 19 August 1995, section 1, p. 18.
86. Michael Hershman, "A Blow Against Bribery," Financial Times, 23
February 1998, p. 14.
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