Paul Collier on corruption: Regulatory processes and ethical values

The people-led movement that resulted in the Arab spring represents a watershed moment in the recent history of the Arab region. The former regimes in Egypt and Tunisia were synonymous with corruption on a grand scale and patently unfair income allocation. Systemic corruption on this scale tends to transpose  norms and values throughout society, from the top down. The theme of ERF’s 18th Annual Conference, Corruption and Economic Development, currently underway in Cairo, is particularly appropriate at this juncture.

Defining what constitutes corruption and how we measure it are critical factors in shedding light on how it can be fought. Paul Collier (University of Oxford) argued at the opening plenary, that the cost of corruption is much greater than we generally think. However, he recognises that it is incredibly difficult to measure, and as a result “what you measure needs to come from a diagnosis of what can be done about it.” For Collier, this means placing an emphasis on the state to set-up regulatory processes and to focus on changing the values of people and their organisations.

Highlighting incentive structures

Drawing on the commercial public sector, Collier spoke about the associated ‘costs’ of two corruption cases, and the factors that supported such corrupt practices. The first came from an unnamed West African country where the Minister for Mining rewarded prospecting rights to a resource extraction company. It was a deal that brought financial gain to the minister in question, but none to the government he was serving. The deal, worth a potential $10 billion, represented over treble the annual GDP of the country.

In this example, the temptation for the minister was enormous, while the resource extraction company could afford to pay astronomical bribes, and still make significant gains. Collier argued “that unless these people are saints they are going to succumb to this kind of temptation,” especially in a system that contains no offsetting penalties for this type of behaviour.

Mabey and Johnson, a UK-based bridge-building company provide the second example. This company was found guilty by the Serious Fraud Office of paying a Jamaican public official for bridge-building contracts (along with a series of other corruption offences in Iraq and Ghana). These bribes went on for five to seven years, giving the accused, Joseph Hibbert, the financial means to enter politics and eventually become Minister of Transport. One oblique, but key, associated ‘costs’ relating to this case was that there is every chance that this corrupt minister prevented someone who had integrity and a real desire to serve the public well from ever holding this post.

This, Collier posed, can create a ‘selection effect’ which brings people with different kinds of incentives into public office. This means the ‘powerful,’ rather than those content on serving the public, can come to dominate the political system, leaving the public a “difficult choice between crook A and crook B.”

Removing incentives through regulatory processes

Dealing with corruption on this scale is not easy, and ‘fighting fire with fire’ has not always brought success when dealing with this issue. Collier suggested that regulatory processes provide a crucial means of removing some of the incentives that support corruption, especially on a grand scale. Competitive public auctions and tenders are one way the public sector can achieve this, but these must be backed up by sound implementation monitoring. Without this ongoing process of monitoring, the public purse can continue to be hit hard by corrupt practices.

Angola, for example, has a process of competitive tendering in place for road building, as a means to keep costs low. Often, these roads are useless after only a few years because they are not built on stable foundations. A process of ongoing monitoring of the construction work could wipe out this kind of practice, but such monitoring can prove highly resource dependent.

Petty corruption and value-centred incentives

Petty corruption offers another example that can, over the long term, be very damaging to national development. Collier linked this type of corruption closely with the values that exist within organisations, such as schools and hospitals. Transforming these values can bring about changes that are potentially “astronomical” in scale.

Collier gives the example of a study into education in Nigeria, which found that a high proportion of 10 year olds could not read. One of the explanations for this was that many of the teachers could not read either, and so were ill equipped to teach basic literacy skills at all. Interestingly, these teachers had teaching certificates, which suggests some teachers had gained their certificates through unethical means.

Collier believes that if organisations like the retailer Walmart can internalise their value systems, and incentivise workers to perform well, then governments should be able to create incentive structures in the service sector to cover health and education. The benefit of this would be to create a positive system of values that help bring petty corruption into focus.

Of course, it isn’t necessarily the case that some of the world’s poorest countries would have access to the same resources as a retailing giant like Walmart. However, the social and economic benefits of focusing on these value systems could be enormous.

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