Addressing Corruption In The Global Economy: An Essay.

1. You will need to produce a report with the following title: ‘How can we address the problem of corruption in the global economy?’

How you divide up the task is entirely up to you, but it is strongly suggested that you use the following guidelines when approaching the task: 

• Introduce the topic
• Decide which are the important aspects of the issue which need covering
• Please note that there is no obligation to cover every possible point you could make. In fact you are advised not to. It is better to choose a few aspects of the issue and explore them thoroughly than to try and cover too much ground.

Collaborating with other students to produce work presents a range of challenges above and beyond those involved with simply producing your own work. I suggest that in the first instance you read through the section in the Module Handbook entitled ‘Coursework’ which gives some very good advice on navigating the potential difficulties.

2. After having completed your report (see the Second Assignment brief which provides details of the contents, title and recommended reading) you will need to produce a short poster abstract which should do the following;

Provide an outline of the overall findings of your report

Detail the main points covered

Summarise the overall significance of your findings

Sources of Corruption

1. How can we address the problems of corruption in global economy?

A world without corruption is considered one of the most critical objective for several governments and international organizations. It is rightly justified as humans are dealing with utmost unescapable crime that wears down the basis of fair trade, good governance and sustainable development. The effects of corruptions goes further than the particular misbehaviour of the factors involved. Its consequences effects the whole populations (Rose-Ackerman and Palifka 2016). A bribe of one million euro can quickly turn into a loss of one hundred million euro in a poor nation through de-railed plans of development and incoherent decisions of investment. Incomplete roads, disintegrating schools and degrading system of health are some of the serious examples of corruptions.

Addressing the problems of corruptions is the heart of this report. According to Campbell (2016, pp. 20-34), corruption is defined as the abuse of public office for private gain. Arguably, the definition clearly omitted the similar behaviour, which takes place entirely in the private sector. Insider dealings and offering bribes to secure private contracts that are considered as corrupt are ignored in this analysis. Not because the economic effect of corruption is small but because of the complexity of the topic.

The intention to indulge in unethical behaviour might originate when a public officer has an authority over something that is valued by the private sector along with the willingness to determine its allocation (Whyte 2015). As every government in the world spends money and taxes to control its citizens to a certain degree, whatever the size and type of state a nations selects there always remains a threat. Considering the evidences for sources of corruption, it is hard to measure the administrative discretion across several countries. Nonetheless, quantitative indicators of probable monopoly, size of government, the significance of industrial policies, trade limitations and other types of state interventions in the economy is available for several nations. Responsibility of public officers that determines the probability that corruption will be punished is more problematic to measure accurately. However, responsibilities are derived in part from the political structure under which official functions and qualitative reflectors of political honesty is available for several nations.

An argument put forward by Mensah (2013), that larger the size of government, measured in terms of their GDP share, the higher would be degree of anticipated corruption. A large of number of government share of GDP might reflect a large bureaucracy with large amount of regulations and red tape. It may possibly indicate that the greater the share of national income passes through the hands of government, the higher is the chance of malfeasance. More notably that the size of the government is the sort of activities in which it indulges. Arguably, a government that limits economic competition by maintaining business restrictions with monopolistic state owned companies will create economic rents and higher opportunities for rent seeking corruptions. According to Heywood and Rose (2014, pp. 507-529), that an economy that is less competitive is greatly exposed to openings of corruption provide further evidence.

Economic Consequences of Corruption

Several scholars have agreed with Dunst, Diamant and Kung(2013), that extensive corruption is detrimental for both economic and political development. It is noteworthy to denote that higher degree of corruption might lower down the total amount of investment and economic growth. It slopes down the allocation of government spending and tends to shift away from public education. Even in circumstances when it is relatively contained, corruption can lead to inefficient allocation of resources, higher inequalities in distribution of income, loss of savings and investment because of the transferring abroad of proceeds derived from bribes (Warf 2016, pp.657-669). In common, the economic consequences of corruptions depends upon the extent of economic incentives that are distorted by the government policies (Merry, Davis and Kingsbury 2015). It represents the degree to which the monetary enticements are distorted or social purposes are destabilised by the corruption.  

Corruption is considered as the chief danger to good governance, sustainable economic development, democratic procedure and fair business practices (Whyte 2015). In the present interconnected world, the corrosive impact of corruption is not only experienced where corruption is originated but also it spread throughout the global economy and society. Countries ability to address corruption, both at domestic level and international level is reduced by poor transparency, responsibility and integrity in public and private sectors (Warf 2016, pp.657-669). Feeble criminal legislation and anti-corruption mechanisms with insufficient international co-operations prevent fight against corruption. Numerous development represents particular challenges globally to fight against corruption. Increased level of international economic activity together with the systematic weakness at the national level has paved way for corruption (Keig, Brouthers and Marshall 2015, pp. 89-116). Factors such as insufficient payment to government sector officers, poor transparency, ineffective enforcement of law and complex financial and organization regulations has enlarged the motivations for corrupt practices.

Undertaking a multidisciplinary approach to fight corruption encourages working in the areas of fiscal policy, fighting bribery of overseas public officials, governance of public sector and private sector integrity (Eggers 2016, pp. 441-472). The multidisciplinary approach necessitates the implementation of comprehensive set of legal, regulatory and policy measures that helps in preventing, detecting, prosecuting and sanctioning of bribery of overseas officials. Furthermore, establishing criminal sanctions and corrupt liability for foreign bribery the convention would require the parties to seize bribes and any kind of profits derived from bribery (Hardoon and Heinrich 2013). Setting up an anti-bribery convention would help the government to work together in order to ensure its effective application such as gathering and exchange evidence through extradition.

Initiatives to Combat Corruption

To support the objectives of anti-bribery conventions, the government must closely monitor the functions of the export credit agencies. These agencies are institutions that act on behalf of the government that assist international business by providing insurance, loans and loan guarantees to support export sales (Spahn 2013). Under the anti-bribery conventions along with its associated instruments the governments would be obliged to undertake actions to discourage the bribery of foreign public officials in international business transactions. The convention should include the officials that are supported by the export credits. Efforts in this area should be concluded in the action statement on Bribery and officially supported export credit. The action statement must contain the measures of deterring bribery in export sales, which is financed with the help of officially assisted export credits. Countries should monitor the action statement with the help of continuous review procedure.

Denying the tax deductibility of bribes will seek to put an end to the claiming of bribes to overseas public officials in the form tax-deductible expenditure. Such measures could act as a success for majority of the countries on anti-bribery convention as this measure prohibits tax deductibility of bribes to overseas public officials (Kolstad and Wiig 2016, pp. 1198-1215). In several cases, countries can move a step forward in prohibiting the deductibility of all bribes. Implementing such kind of measures will send a clear message that briber would not anymore be treated as ordinary or necessary business expenditure and bribery of overseas public officers would be viewed as criminal offence subjected to serious penalties. To assure actual detection the government must issue Bribery Awareness Handbook for Tax Inspectors. The handbook would help the tax inspectors to recognise the doubtful payments that are most likely to be bribes. This will help in imposing the denial of deductibility so that the bribes can be reported to law administration authorities.

An emphasis should be paid on promoting good governance in government sector so that it can prevent the incidence of corruption by addressing the serious demand side elements of corruption. The government of each nations must lay down a forum to recognise the good practices and effectively work out the standards of developing a sound ethical infrastructure (Heywood and Rose 2014, pp. 507-529). A combination of laws, institution and management mechanism will help in preventing corruption and will promote integrity in public service. OECD countries should remain committed in reviewing regularly and modernise the integrity policies and practices by adopting the integrity instruments. On the other hand, the risk of conflict of interest to integrity prevails in the public sector.

Multidisciplinary Approach

Guidelines must be issued by OECD countries to make sure that the public officers for their private interest do not bargain integrity of public decision. They must set up a comprehensive benchmark in order to modernize the governance structures so that it can recognize and manage the situations involving conflict of interest (Cuervo-Cazurra 2016, pp. 35-49). To assist government in implementing such guidelines a practical toolkit must be developed to put the policy in practice. Adopting the guidelines of good governance would help in enhancing the standards in their laws and code of conduct as this will strengthen the measures of preventing the conflict of interest.

Preventing corruption demands more than designing and implementation of core integration and anti-corruption standards. Success also remains dependent on the creation of a supportive environment in the public administration where transparency and responsibility plays an important role (Cockcroft 2013). Administrative simplification, regulatory improvement and control of public finance forms the vital components of long-term policy for addressing corruption by promoting a values of integrity and increasing the resistance to corruption.

A code of conduct must be developed for international business as it forms the part of wide range of instruments on international corruption. Guidelines for multinational corporations should consider all the areas of business ethics that includes disclosure of information, transparency and combat against corruption (Rose and Palifka2016). The government must adhere to such guidelines for multinational corporations and must represents nations that are home to large number of multinational investment having source of most trade and investment. Business conduct guidelines should consists of mediation facility in order to discuss the concrete problems including the areas of political involvement, transparency and bribery. Having a broad coverage and flexible implementation process forms the essential element of fighting against corruptions.

Corruption directly obstructs the progress towards reduction of common poverty objectives for the donor agencies and recipient countries. Fighting corruption by promoting transparency and enhancing the integrity are important for the development of co-operation policies (Spahn2013). The donors must be first introduced to the anti-corruption provisions at their work in obtaining agreements obtained with the help of bilateral development after the recommendations on anti-corruption proposal. The donors must be set out to work in order to make sure that they should collectively support the nationwide anti-corruption strategies and must ascertain that aid programmes does not substitute corruption.

Under such principles, the donors must resolve to harmonise their efforts in supporting the developing countries anti-corruption work and should address the supply side of the corruption. Goals that are set out in the principles must include strengthening of society to assist the recipient countries along with their capacity to demand reformation and transparency in fight against corruption (Lord 2013). Progress should be monitored in donor countries on issues such as money laundering and recovering assets that are lost due to corruption. Donors must work to examine corruption jointly to help the recipient countries by formulating code of conduct for donor agencies in order to prevent, locate and respond to corruption.

Fighting Bribery through Export Credits

Implementing the framework of assistance would make the donors remain committed, as this will help in providing greater support to developing countries towards anti-corruption (Yeoh 2013). This will help in aligning the country led initiatives and promoting local ownership of anti-corruption reformation. Specific areas of focus are the programs of developing countries to strengthen the systems of procurement and financial management systems. An outsmarting theme in the work of donors to fight against corruption is policy coherence, which makes sure that policies achieve the objective of recovering of assets that are diverted from the goals of development. The adaptation and application of global agreements such as United Nations Convention against Corruption should be the part of intelligible donor approaches (Whyte 2015). There is now a better understanding of how the donor countries forms the part of problems of corruption and OECD are assigned with distinct responsibility of preventing and addressing corruption.

Having relations with non-OECD economies around the world, the OECD has offered assistance over a wide a range of anti-bribery and public integrity associated issues that are significant for twin goals of improvement of public governance and supporting the growth of anti-corruption system in non-OECD nations. Such measures not only require the involvement of government but also require the involvement of civil society and private sector. Reaching out internationally forms a blueprint for future course of action to make strong the anti-corruption movement and system of public governance in the economies and regions concerned (Luz and Spagnolo 2016). Co-operating with the other international and intergovernmental partners also consists of the required input for Joint Project Group with financial action.

To explore the multifaceted links between the corruption and money laundering a task force should be launched on prevention of money laundering and the Asia-Pacific Group on Money Laundering. The International organizations and communities to reinforce the OECD anti-corruption movements by promoting a combination of rules and prevention mechanism to address the corruption should launch efforts (Ivlevs and Hinks 2015, p. 425). The OECD is committed to promoting the implementation of UNCAC and helping the governments in reaching the goals and standards with special focus should be paid on the Anti-Bribery Convention. Civil society and private sector perspective must also contribute to the OECD’s approach of promoting integrity and fighting corruption (Le et al. 2014). Establishing relations and productive exchange with the trade union, business communities and non-government organization forms the important part of broad policy dialogue, which underlies the anti-corruption work of OECD.

The World Bank, International Monetary Fund, regional development banks and bilateral assistance from agencies can offer valuable support in fighting anti-corruption efforts in wide array of ways (Hessami 2014, pp. 372-389). In the past, the World Bank and the IMF felt constrained in addressing the problems of corruption and other sensitive issues due to the requirement that they did not want to interfere in the political affairs of the political affairs. On the request of member government, these agencies offer advice, technical assistance and financial assistance for institutional and policy reformation that helps to reduce the corruption either directly or through indirectly.

The contribution of the IMF originates generally from the conditions it generally attaches to the loans that encourages economic liberalization and reduces the opportunities for corruption (Johnston 2014). The World Bank offers financial and technical assistance, which contribute more directly to the institutional and technical support, which can contribute to the institutional reformation and development in countries that requires assistance.

Conclusion:

Some of the observers have suggested that the World Bank and the regional development banks can help in reducing corruption as an explicit part concerning their conditionality. Certainly, the World Bank and the international monetary fund should be less tolerant towards the corrupt government. It is recommended that building foreign alliances and network help in encompassing transition in economies among the developing countries and emerging markets across the world.

The findings from the report lay down the evidences that less competitive economies are greatly exposed to corruption. The report has significantly concluded that there is a significant negative correlation amid the corruption and the share of imports in GDP. It is found that higher instances of corruption are associated with the qualitative measures of market dominance by the new firms with negligent enforcement of anti-trust enforcement in numerous countries. In the subsequent work Whyte(2015), have found the evidence that numerous measures of government industrial substitute is correlated with the relatively more corruption. Even though all the level of probable rents established by the role of government in the economy might be considered as an incentive for indulging in corrupt activities and holding the public officials responsible for those kinds of activities will help in offsetting the temptation.

Other factors might create an impact on the opportunities for corruption including the stage of economic and political development. It also considers how the process of development interacts with the cultural tradition. This is not to be suggested that as at times it is argued that there are certain cultures that are inherently corrupt. The argument is based on that wide range of environmental factors, historical and cultural influences the evolution of the political and economic institutions. It the legitimacy in the eyes of governed and the capacity of the government to render the service that is demanded of it. Moreover, during the times of transition when values, standard and institutions are undergoing change several countries might become prone to certain kinds of corruption. The findings from the report suggest the differences in the relative levels of corruption between the developed nations and the developing countries are to some extent overstated because of way through which corruption is measured and defined. However, there are numerous reasons where developing countries may be more vulnerable to corruption than the developed countries.

The report covers the main sources of corruption and lays down the quantitative indicators of probable monopoly for several nations. The economic consequences of corruption have been considered where it lowers down the total amount of investment and economic growth. To combat corruption multidisciplinary approach has been covered and setting up an anti-bribery convention would help the government in effective application. Areas of export credits have been covered to discourage the bribery of foreign public officials in international business transactions.  

The overall significance of the findings provides thathigher instances of corruption are associated with the qualitative measures of market dominance by the new firms with negligent enforcement of anti-trust enforcement in numerous countries.The argument of the overall findings is based on that wide range of environmental factors, historical and cultural influences evolving around the political and economic institutions.         

Reference List:

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Cockcroft, L., 2013. Global corruption: money, power and ethics in the modern world. IB Tauris.

Compact, U.G., 2014. Overview of the UN Global Compact. Recuperado de https://www. unglobalcompact. org/ParticipantsAndStakeholders/business _associations. html.

Cuervo-Cazurra, A., 2016. Corruption in international business. Journal of World Business, 51(1), pp.35-49.

Eggers, A.C., 2014. Partisanship and electoral accountability: Evidence from the UK expenses scandal. Quarterly Journal of Political Science, 9(4), pp.441-472.

Hardoon, D. and Heinrich, F., 2013. Global corruption barometer 2013. Transparency International.

Hessami, Z., 2014. Political corruption, public procurement, and budget composition: Theory and evidence from OECD countries. European Journal of political economy, 34, pp.372-389.

Heywood, P.M. and Rose, J., 2014. “Close but no Cigar”: the measurement of corruption. Journal of Public Policy, 34(3), pp.507-529.

Ivlevs, A. and Hinks, T., 2015. Global economic crisis and corruption. Public Choice, 162(3-4), p.425.

Johnston, M., 2014. Corruption, contention and reform: the power of deep democratization. Cambridge University Press.

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Kolstad, I. and Wiig, A., 2016. Does democracy reduce corruption?.Democratization, 23(7), pp.1198-1215.

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Luz, R. and Spagnolo, G., 2016. Leniency, Collusion, Corruption, and Whistleblowing.

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Mensah, Y.M., 2013. An analysis of the effect of culture and religion on perceived corruption in a global context.

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Rose-Ackerman, S. and Palifka, B.J., 2016. Corruption and government: Causes, consequences, and reform. Cambridge university press.

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