The frequency of exposures and the political impact of corruption scandals appear to be increasing all over the world, says Gideon Rachman in the Financial Times.
Despite their holier-than-thou aura, he notes that bankers, lawyers, real estate agents and PR firms in the US, UK and EU often share in the proceeds of corruption.
As former US vice-president Joe Biden was reported to have said, at a Defend Democracy conference in Copenhagen, globalisation has deepened rifts, divorced productivity from labour and created less demand for low-skilled labour:
“When people see a system dominated by elites and rigged in favour of the powerful they are much less likely to trust democracy can deliver”.
The most recent example of corruption highlighted on this website follows:
After an initial denial (left, Financial Times), Economia confirmed that in an official response to the French government dated 30 March 2017, a HMRC official noted that Lycamobile is “a large multinational company” with “vast assets at their disposal” and would be “extremely unlikely to agree to having their premises searched”, said the report.
The letter from HMRC to the French government added, “It is of note that they are the biggest corporate donor to the Conservative party led by Prime Minister Theresa May and donated 1.25m Euros to the Prince Charles Trust in 2012”.
This is an ongoing saga: in 2016 Economia noted: “The Tories have come under fire for continuing to accept donations of more than £870,000 from Lycamobile since December, while it was being investigated for tax fraud and money laundering”.
Many senior British politicians have taken bribes and many ministers and civil servants move to lucrative positions with companies who have benefitted from legislation supported by these new colleagues – through the revolving door.
The unspoken ethic:
- In South Africa president Jacob Zuma was compelled to resign because of corruption scandals.
- Dilma Rousseff, the President, was impeached in Brazil in 2016.
- The Atlantic Council, whose largest funders include the United Arab Emirates, the Abu Dhabi National Oil Company, Airbus Group SE, Crescent Petroleum & the Foreign & Commonwealth Office of the United Kingdom describes the ruling United Russia party as the “party of crooks and thieves”.
- Narendra Modi came to power in India with a pledge to crack down on corruption among the elites. He has since abolished about 80% of the country’s currency, in an effort to ruin the black economy.
- In China, President Xi Jinping’s anti-corruption drive has seen more than 100,000 officials arrested.
- Mariano Rajoy has been forced to resign as prime minister of Spain after seven years in office, following a scandal in his political party.
- Malaysia’s ruling party lost power after allegations that the prime minister, Najib Razak, had embezzled vast sums.
Rachman believes that corruption has become more common and also easier to expose:
“The globalisation of business and finance opened up opportunities to make corrupt profits in fast-growing emerging economies.
“Industries that often need official involvement, such as natural resources and infrastructure, are particularly lucrative targets. There are contracts to be awarded and development projects that need official approval. And the money for bribes can always be deposited offshore.
“But such malpractice can be exposed. Strong, independent prosecutors and judges such as Brazil’s Sérgio Moro and South Africa’s Thulisile Madonsela have done heroic work in driving forward anti-corruption investigations. Press freedom in Brazil and South Africa has also been critical in keeping up the pressure on corrupt politicians. Even when the national media are muzzled, the internet provides an alternative medium for airing corruption allegations. The “Panama Papers”, which detailed the offshore financial affairs of many prominent politicians, was the result of an international journalistic project and based on hacked documents”.
He adds that new forms of international co-operation and transparency have also made would-be crooks more vulnerable to exposure. Changes in the Swiss laws on banking secrecy — made under pressure from the US — were crucial to allowing Brazilian prosecutors to uncover the proceeds of corruption. International investigations by the Swiss and Americans also kept up the pressure on Malaysia’s Mr Razak.
Lasting progress, Rachman writes, requires strong institutions that can survive changes in the political climate:
- independent courts and prosecutors with training and resources;
- a press that cannot easily be bought off, jailed or killed;
- efficient civil servants who cannot be fired at the whim of a corrupt boss.
He points out that if any of those elements are removed, corruption seeps back into the system.
The “clean hands” investigations in Italy in the early 1990s swept away many powerful figures — and were seen as a watershed. But Rachman cites the case of Silvio Berlusconi, tried 22 times on charges ranging from tax evasion and bribery to corruption and association with the Cosa Nostra. He was convicted of tax fraud in an Italian court and sentenced to four years’ imprisonment – served as community service – but has now been cleared to stand for election as prime minister once again.#
Following our tenth entry: MP Andrew Gwynne, who successfully introduced the Debt Relief (Developing Countries) Act and worked long and hard to get justice for those who received contaminated blood through the NHS, we turn to Botswana, after reading an obituary by Emily Langer in the Independent. Her subject was Ketumile Masire – a statesman who described himself as ‘a farmer who has been drawn into politics’.
A summary with added links and photographs
Masire herded cattle before enrolling in a primary school at 13 and receiving a scholarship to attend a high school in South Africa that trained many leaders of the first government of independent Botswana. When his parents died he supported his siblings, becoming a headmaster. He later earned a Master Farmers Certificate, and having saved enough money to buy a tractor and became a successful farmer.
He served on tribal and regional councils and was a founder and secretary-general of the Botswana Democratic Party, now the country’s leading political party. He once travelled 3,000 miles of the Kalahari Desert to attend two dozen meetings over two weeks.
After serving as minister of finance and development planning and Vice President, Ketumile Masire became President of Botswana (1980-1998): roads and schools were built, healthcare improved, access to clean water expanded, farming techniques advanced and life spans extended.
The discovery of diamond reserves had transformed the country’s prospects and Masire continued to use the revenues for the public good after the death of his predecessor Seretse Khama.
He became ‘a model leader in a model nation on a continent where poverty, corruption and violence had crushed the hopes of many for stability and prosperity’.
After leading Botswana through a drought that persisted for much of the 1980s, he shared the Africa Prize for Leadership awarded by the Hunger Project in recognition of the food distribution efforts that helped the country avoid starvation during the crisis.
Though South Africa was Botswana’s major economic partner, Botswana opposed apartheid. “He had to walk a fine line in a really rough neighbourhood,” said Chester Crocker, a former US assistant secretary of state for African affairs. “He had to get along with everybody, without sacrificing his principles.”
After leaving office, in addition to tending the cattle on his ranch, Masire advised other African leaders and chaired an international panel that investigated the Rwandan genocide of 1994. He made important contributions to peace efforts in Congo and, more recently, Mozambique. He established a foundation which seeks to improve agriculture, governance and children’s health in the region.
He once said: “We have a saying in Botswana: A man is never strong until he says what he believes and gives other men the chance to do the same. I am proud to say without a doubt – we are a strong democracy.”
A more chequered account of his life is given in Wikipedia..
Jehangir Pocha, CEO and Editor-in-chief of NewsX TV, New Delhi, writes:
In 2005, Harvard’s Michael Kremer and Seema Jayachandran of Northwestern University came up with a simple and neat solution to one of the world’s greatest economic problems – crushing national debt. Jayachandran and Kremer call it odious debt. Yes, unnecessarily literate, even archaic. But that’s how academics show their muscle.
Relevant seven years later: Ask any Greek. Or Italian. Or American . . .
Kremer and Jayachandran, who are also Fellows at the Center for Global Development in Washington, have rightly identified excessive debt as one of the central reasons nations are forced to cut social services and public spending. Ask any Greek. Or Italian. Or American.
The larger problem, as Jayachandran and Kremer point out, is that often a nation’s debt is run up under circumstances that are morally cumbersome, if not reprehensible. In such cases, they ask, isn’t it only fair to cancel such debt?
Is Iraq really liberated if its people are still chained to the debts of their oppressor?
Consider Iraq. Should Iraqi citizens who suffered and toiled under Saddam now have to suffer and toil to pay off the debts the dictator accumulated to buy his (Western) weapons and build his palaces? Is Iraq really liberated if its people are still chained to the debts of their oppressor?
Take South Africa. The apartheid regime took $23 billion in loans from Western banks, most of which was spent on the white population, save that which was spent on policing and terrorising the blacks. How is it acceptable or fair at any level to now ask black South Africans to repay this debt?
This is now the situation that faces much of the Arab world, as well as several Latin American, Asian and African countries.
Jayachandran and Kremer say it is time the world formulated a legal response to such “odious debts” brought on by war, dictators and such exceptional circumstances.
The argument is not new, but until now one had found a way to avoid the moral hazard inherent in such a move. After all, no matter how morally compelling the argument for cancelling odious debt, there is always the danger that some governments will mis-use it.
Bankers in London, New York, Zurich, and Paris line up to lend oppressive regimes money – at extortionate rates
This is where Kremer’s and Jayachandran’s genius shows up. Their proposal is as simple as it is great. They propose that whenever the international community identifies any particular regime or ruler as a pariah or illegitimate, it should also declare that any and all future contracts with that regime/ruler would be non-transferable to the state.
For example, if President Assad dictatorship in Syria was declared a pariah government, any money lent to Assad’s regime would automatically lapse if the regime was toppled. Assad’s debt would not pass on to the Syrian state that would succeed his tyranny.
This is essential to control sleazy bankers. When nations become pariahs, their aid and trade dry up. So bankers with addresses in London, New York, Zurich, and Paris line up to lend them money – at extortionist rates of course. The bankers become the pariah regime’s lifeline, often extending its lifespan – and the misery it speads – by decades.
Bankers don’t care much for human rights. But they do care for profit.
So whereas they once felt smug in the knowledge that their loans to dictators would have to be returned by their people, Jayachandran’s and Kremer’s proposal would make them think twice about funding dictators.
Without this funding, dictators and rogue regimes across the world would be squeezed and probably (or least hopefully) have their end hastened. Even support to dictators not yet declared rogues simply because they serve Western purposes, like Saddam Hussein in the 1980s, will find it hard to raise money because bankers will never be sure when the tables will turn and an ally become the enemy, like Saddam in the 1990s.
The work of Professor Jayachandran and Kremer could substantially change the world if their idea is adopted widely. Not only would it make Western bankers wary of bankrolling tyrants, it would allow newly liberated countries and people the freedom to start their new lives with a clean slate.
Read the paper here.
Read Jehangir Pocha’s blog here.