This week the UK host an international Corruption Summit. But there is a problem. It will, based on all the evidence seen and heard so far, focus on the wrong type of corruption.
One type of corruption is the type identified by Transparency International: it involves a the exploitation of government for private gain. This may be bribe taking by an official. It could include tax evasion.
I am not for a moment suggesting that these issues are not serious, but we know how to tackle them. Full automatic information exchange from tax havens (and countries like the USA), full accounts on public record everywhere and full registers of beneficial ownership will, we know, go a very long way to beat this abuse. David Cameron knows what he has to deliver. Whether he will is another matter.
Then there is the second type of corruption. As the Tax Justice Network said recently:
In the UK over the past few years, reports of major corruption scandals of various kinds in the public and private sectors have become daily fodder. We are overwhelmed by the scale, frequency and variety of corruption cases in Britain, from police manipulation of evidence, to over-charging in out-sourced public contracts, bv way of cash-for-access scandals involving prominent politicians and price fixing, market manipulation and fraud in key sectors of the economy.
And yet, in January 2016 it was reported that the UK was now the 10th least corrupt country in the world. This result, reported by Transparency International’s benchmark Corruption Perceptions Index (CPI), represented a remarkable rise up the charts. In 2010, David Cameron’s first year of office, Britain was in 20th place. Robert Barrington, the head of Transparency International qualified the result by pointing out that there are “good reasons why people are skeptical about whether Britain really merits a top 10 ranking”.
There are two major reasons to conclude that Britain’s chart position is creating a false impression. The first is that the “corruption” that the CPI is concerned with is of a very particular kind. Economists sometimes distinguish between collusive corruption (where two parties collude for their common benefit) and extortive corruption (where one party is compelled to make a bribe payment to another). It is less common, for example, to have to bribe a public official in the UK than some other countries. Extortive corruption is not a major problem in this country, though it is probably more widespread than we tend to think it is. It is extortive corruption that surveys like the CPI are primarily concerned with.
But the British style of corruption that we are increasingly exposed to is collusive. And collusive corruption is not done merely for personal gain, but is largely done for the benefit of the organization or the institution. Police rigging of evidence for example is typically done to avoid criticism of the police (as in the Hillsborough case). The rigging of LIBOR doubtless benefited the traders that colluded, but benefitted the banks and their shareholders much more.
The second reason that we should be skeptical about Britain’s rise up the charts is that the received wisdom projected by surveys like the CPI is exactly that: received wisdom rather than concrete evidence. The CPI merely measures the impressions of a large group of observers and experts around the world who are selected for the survey. In the sense that it is based on perceptions of groups of people who are perceived to be experts, the Index can actually be said to be doubly subjective. But what would a different survey look like, one that asked not a bunch of handpicked experts, but a representative sample of the population?
As TJN then showed, if the public are asked their perception of corruption is much wider than the narrow, TI and official, view.
We need to move this debate on. Corruption now is about the destruction of fair competition, the capture of the state itself and the need to create level playing fields if democracy is to survive.
Country-by-country reporting is part of tackling this bigger issue.
But if it isn't even talked about this type of deep corruption will continue. And my fear is that is the plan.