Transparency International’s new Corruption Perceptions Index – getting it wrong again

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Transparency International have published their new Corruption Perceptions Index today. I remain worried by this index. It covers 179 countries. Look at the top decile of clean countries:

1. Denmark
2. Finland
3. New Zealand **
4. Singapore **
5. Sweden
6. Iceland **
7. Netherlands **
8. Switzerland **
9. Canada
10. Norway
11. Australia
12. Luxembourg **
13. United Kingdom **
14. Hong Kong **
15. Austria
16. Germany
17. Ireland **
18. Japan

Notice the double asterisks? They're the tax havens. That's 50% of the top 10% of the cleanest countries in the world are tax havens. I'm sorry. That's not true. Who is kidding who when they say Switzerland is clean, for example? Or London?

Then add in the next decile:

19. France
20. USA **
21. Belgium **
22. Chile
23. Barbados **
24. Saint Lucia **
25. Spain
26. Uruguay **
27. Slovenia
28. Estonia
29. Portugal
30. Israel **
31. Saint Vincent and the Grenadines **
32. Qatar
33. Malta **
34. Macao **
35. Taiwan
36. United Arab Emirates **

Just over 50% of them are tax havens. Some are serious offshore players providing conduit facilities that without doubt help the flow of funds out of the developing countries of the world.

There's good reason for this mistaken list. It's that TI insists that corruption is (as is noted on page 4 here):

the misuse of public power for private benefit, for example bribing of public officials, kickbacks in public procurement, or embezzlement of public funds. Each of the sources also assesses the "extent" of corruption among public officials and politicians in the countries in question.

And therein lies the weakness. This index measures the corruption of politicians and public officials. I roundly condemn that corruption. But we all know that this means that some countries are virtually bound to come near the top of this list (and they're conveniently in the North, by and large, and do not have majority black populations (sorry to state the obvious - but it's true - look at the list above)) whilst others which are the inverse of this will come at the bottom, mainly as a result of the the accident of geography, or being-post colonial and being subject to the resource curse.

So the TI index measures only one form of corruption. It ignores that of the private sector.

Worse, it ignores the role of the private sector in facilitating the corruption to which it refers. That private sector activity is largely in the tax havens - who TI score well.

So the CPI has a use. But do not for one minute think it is the beginning and the end of the story on corruption. It is not.