Has globalization made corruption worse?

Leaders today, regardless of whether they work in the public or private sector, face no shortage of challenges. We are told often, and with great certainty, that the consequences for ignoring any one challenge are dire. Among the issues to deal with are wobbling economies, growing terrorism, spreading pandemics, a warming planet and online attacks against confidential information. We can’t possibly devote equal attention to all of these, but we can figure out how they are connected. Understanding how and why problems are related helps us devise solutions that will have the greatest impact.

One place to start is to take a closer look at corruption. The damage it wreaks on our economy and institutions is well documented. It distorts markets by removing any notion of a level playing field, it undermines the rule of law, and it allows crony capitalists and the otherwise undeserving to hoard economic and political power.

The fraud and corruption schemes uncovered by investigators at the World Bank are linked to many other global challenges. Last year, more than 60% of the complaints we received relating to projects in fragile and conflict-affected situations involved corruption and embezzlement. When the collapse of a bridge or building leads to preventable deaths, it’s worth digging around to see if bribes were paid. We see a consistent pattern, of companies cutting corners on safety and quality in order to recoup the cost of the bribes they pay government officials to win contracts. Even something as mundane as waste removal, which does indeed have an impact on the environment, can be distorted by corruption. The problem with fraud and corruption is that they prevent good solutions and sound policies from reaching their full potential.

This summer I contacted 25 anti-corruption leaders and asked them what had been the biggest change in the anti-corruption movement in the past 15 years. Most of them pointed to the shift in thinking that placed fighting corruption on the global agenda, along with the work of international bodies and NGOs to raise awareness about corruption. Indeed, the past few decades have seen a rise in international anti-corruption legislation, such as the United Nations Convention Against Corruption (UNCAC), the OECD’s Anti-Bribery Convention, as well as regional and national laws. International civil society – such as Transparency International, Global Witness, Global Financial Integrity and more recently the Volcker Alliance – have all had a great influence. However, many also cautioned that while increased international attention has helped move the anti-corruption agenda forward, globalization is responsible for an increasingly sophisticated form of corruption. We have to ask whether corruption-fighting solutions have kept pace with the integration of financial systems, global supply chains and multi-jurisdictional entities.

The World Economic Forum’s Global Agenda Council on Transparency and Anti-Corruption tries to get to the heart of these issues, to identify and advance the core levers of change. Nineteen of us believe that we can design corruption out of the system at the industry, regional and global levels. By focusing on the nexus between the private the public sector – both the problems and the solutions – we are far more likely to be effective.

Council members have identified a number of entry points to build upon. Isabel Saint Malo de Alvarado, the vice-president of Panama, pointed out that contracting and public works is where the real corruption occurs, which Mark Pieth, professor and former chairmanof the OECD Working Group on Bribery, believes can be addressed through expanded use of high-level reporting mechanisms. Cobus de Swardt from Transparency International is mindful of the need to keep the anti-corruption agenda front and centre, advocating a strong push to make fighting corruption a part of the post-2015 development goals. Bringing a private-sector perspective, Lee Tashjian from Fluor Corporation rightly reminded us to be more involved in reviewing and monitoring the implementation of the B20 recommendations.

Above all, this Global Agenda Council’s work is about restoring faith in leaders and institutions. Watch this space for ideas and change.

More on corruption
Bill Gates on fighting corruption
Shame, people power and corruption
How technology is beating corruption
Can we design corruption out of the system?

Author: Leonard Frank McCarthy is the Integrity Vice-President of the World Bank Group, Washington DC, and the chair of the Global Agenda Council on Transparency and Anti-Corruption (2014-16).

Image: Shadows are cast on the wall of a stadium in Senegal’s capital Dakar, May 10, 2009. REUTERS/Finbarr O’Reilly