Mon | Oct 23, 2017

Light on corruption | The norm of the beat the system culture - Wrongdoers are too often praised, promoted and admired

Published:Friday | July 21, 2017 | 12:00 AM
US money
Jamaica money
Corruption
1
2
3
4

Sometimes, what appears to be known and to the naked eye may appear to be an above board transaction is actually the Government transferring large financial benefits to private firms through procurement contracts and the award of concessions.

In a country where a minister can ignore the advice of its statutory bodies and award a contract or licence to an entity, a door is opened for questions of pay for play. A corrupt business person who wants to ensure that their business is the sole distributor of a good or service is likely to engage in activities such as bribing corrupt officials.

Business of corruption

Acts of bribery sometimes manifest themselves in various forms, whether it is large capital-intensive projects or poorly managed government subsidy programmes. The corrupt public official benefits upfront, in that at least some of the bribes are paid up front before a project commences.

Major construction projects are one of the easier ways to facilitate bribes. In addition, with the increasing use of shell companies, it makes it harder for law-enforcement officials to follow the money when the principals of shell companies are not known.

Politics can be an unforgiving sport, and corrupt politicians are often insecure and subject to loss of power and prestige. This insecurity may induce them to steal more, which in turn makes them more insecure. Individuals in this position will have a relatively high discount rate for government projects and will support projects with quick short-term pay-offs, and costs spread far into the future.

Gov't concessions

Corrupt gains can also be extracted from government concessions. A smart way that corrupt officials could do this is to create fiscal crises, not only by supporting too many capital projects, but also by failing to obtain adequate returns from government concessions.

Corrupt officials and private contractors instead earn these returns that should enter the government budget. Individuals involved in corruption often see it as a business, and the return on their investment is significantly higher than the market rate. Corrupt incentives exist because state officials have the power to allocate scarce benefits and impose onerous costs. Because scarcity lies at the heart of corrupt deals, basic insights derived from microeconomics can help structure efforts to reduce corruption.

The most straightforward way to limit corruption is to eliminate corrupt-loaded programmes. In that, if the State has no authority to restrict exports or license businesses, this eliminates a source of bribes.

Furthermore, if a subsidy programme is eliminated, the bribes that accompanied it will disappear as well. Reforms that increase the competitiveness of the economy will help reduce corrupt incentives. But as corruption scholar Susan Rose-Ackerman noted, although eliminating corruption-prone programmes can limit the incentives for pay-offs, a general programme to shrink the size of government will not necessarily reduce corruption.

 

CORRUPT INCENTIVES

 

In that, scarcity produces corrupt incentives, and notice that reduction in government spending can produce scarcity when spending programmes are cut or when regulatory budgets fall with no change in the underlying statutes. Even worse, if a government is under fiscal pressure and cuts back spending, it may at the same time seek to maintain its influence by increasing regulations and mandates.

Some public programmes work so poorly that they seemingly function principally as bribe-generating machines for officials. The structures that allow officials unfettered discretion are particularly likely sources of pay-offs, especially if citizens and firms have no recourse. More often than not, most well-thinking citizens wonder why are there so many seemingly failing crash programmes still in existence rather than simply eliminating them.

In addition, subsidy programmes can also become permeated with corruption. If both the person offering the bribe and the one receiving the bribe are better off with a dishonest system, detection will be difficult, and programme elimination may be the only feasible option.

It is perhaps prudent to admit that there is no system that is corruption-proof. Sometimes removing one set of corrupt incentives may create new opportunities elsewhere. Often, we bemoan how bureaucratic it is to deal with government sectors.

In trying to make doing business more efficient, we should be mindful of not creating grand-corruption schemes, in that in eliminating seven of eight licenses needed to open a business, the remaining official may have access to higher bribes. Deregulating in one area may increase corruption elsewhere.

Privatisation

Privatisation can reduce corruption by ultimately removing certain assets from state control and converting discretionary official actions into private, market-driven choices. But the process of transferring state-owned assets to private ownership is often fraught with corrupt opportunities.

Many corrupt incentives are comparable to those that arise in the award of contracts and concessions. Even though corruption occurs during the privatisation process, the end result can still be a competitive private firm subject to market discipline. With that said, an entity transitioning from being state-owned to privatised does not automatically translate into it becoming a competitive private firm.

Corruption that involves top-level officials can produce serious distortions in the way government and society operates. To some extent, the State often pays too much for large-scale procurements and receives too little from privatisations and the award of concessions. Corrupt officials distort public-sector choices to generate large rents for themselves and to produce inefficient and inequitable public policies.

Government produces too many of the wrong kind of projects and overspends even on projects that are fundamentally sound. Thus, the business of corruption remains ongoing.

It's the greasing of the wheel which, even if it periodically slows down, continues without seemingly much consequence.

The business of corruption will continue as long as individuals act with impunity and are rarely, if ever, sanctioned or punished. But, arresting, charging and prosecuting individuals will not end corruption, and a cynic would say we do not have enough space in our prisons.

 

ACCOUNTABILITY

 

The people of Jamaica are yearning for accountability and desire to see the arrest, charge, and prosecution of senior officials who misuse their public offices. But this alone will not stop or solve the corruption issues.

The inequality in wages - lack of liveable and decent wages for civil servants - fosters the hustle culture. If you enter an organisation and you see your senior colleagues living exorbitantly above their salaries, with no checks and balances, no punishment for corrupt individuals; what do you do? It is almost as if it is a beat-the-system culture where wrongdoers are praised, promoted and admired.

- Omar E. Hawthorne, PhD, is a lecturer in the Department of Government at the University of the West Indies, Mona. Send feedback to: omar.hawthorne@uwimona.edu.jm or editorial@gleanerjm.com