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In Support of Transparency International’s Global Corruption Barometer

 

July 22, 2013

Carlos Lipari, FreeBalance Analyst and Economist

Due to its nature, one of the hardest things to estimate about corruption is its size. As a result of this, it becomes even more difficult to estimate the real burden corruption represents to society.
Transparency International (TI) has developed different tools to try to provide a cross-sectional analysis of what is going on Worldwide in terms of corruption. Tools like the Corruption Perception Index gather info from different sources to provide an average estimate of the perceived level of corruption in a given country while the TI Corruption Barometer tries to provide a more objective estimate of corruption by asking people weather or not they paid a bribe in the last 12 months. I believe no tool is sufficient to draw clear conclusions about what is going on in each country but they do tend to provide an overall good picture of what is going on in the World.

Difficulties in Calculating “Corruption”

I believe it is important to keep always in mind that it is not possible to develop one perfect indicator to determine the exact level of corruption. Even when it comes to combining different indicators it is hard to decide what type of weight to give to each single indicator or even to be sure that a given indicator is telling the right history. To make everything just a bit harder, time series analysis for individual countries is not possible to run because the way the indexes are calculated each year keeps on suffering adjustments (according to the number of sources available, etc.) Moreover, whenever we choose to use perception indexes such as the CPI to understand what were the changes in corruption throughout time, one has to understand that one country can go down in a given ranking just because there was greater local media attention on corruption issues in that given period of time. In some cases, changes in international rankings occur simply because the perception of corruption in other countries suffered changes. Therefore, it is very challenging to understand what is really going on in one specific country without digging in much deeper and even if you do so, due to the nature of corruption we can never trust completely the results.

The Case of Sierra Leone

When it comes to the case of Sierra Leone, the local government rejected the 2013 Corruption Barometer arguing that in the local culture “it is normal, if you want to get land from the paramount
chief you go with what we call, kola.  You give the paramount chief the kola as a sign of respect, that is not bribery” and that is also part of the “culture to show appreciation to people for good things that they’ve done to you, that is not bribery.”  On top of that it is stated that “The government disputes the report as not being statistically representative, contending the sample size of 1,028 respondents in a population of about six-million people, the distribution of the sample population, and the sample frame was inadequate.”  Clearly, in this case the sample size should not be taken seriously as the problem (at most the quality of the sample) but it is easy to understand and perhaps accept the argument that the notion itself of corruption changes from one culture to another.  To say that TI is not doing well its job is a totally different history.

The subjective notion of what is corruption can differ just like many other notions but TI works with communities in order to understand what should be the best objective approach for its corruption assessments, paying attention even to small details such as ambiguity that can arise from the words used in questionnaires, and introducing improvements every now and then.  TI has no other choice but to use an objective methodology and definition for what it considers to be corruption. Small gifts can easily fall under the category of petty corruption, even if such practices are quite acceptable in a given society.

Social behaviors take time to change but there are a considerable number of examples where the right attitude allowed profound changes to operate. It seems to me that the way governments address this issue to be of fundamental importance.

Economic Impact of Corruption

There is also a huge debate the economic impact of corruption. To some extent corruption can be efficient if it speeds up the right processes, delivering greater speed to the resolution of problems that deliver greater economic benefit.  It is also true though, that even small “fees” can jeopardize equality of opportunities among citizens and work as a regressive tax that hurts the less wealthy in society.

If that is not enough to reconsider the benefits of corruptions, one should also have in mind the different types of economic distortions that arise from all different types of corruption. Corruption promotes asymmetry of information, leads to higher risk premiums (due to greater uncertainty in project outcomes), to bad investments decisions and translate in higher consumer prices (to accommodate both the “corruption tax” and its negative impacts in competition).

Countries like Sierra Leone need to pay special attention to two different types of corruption. One is the grand corruption (an area where the government seems to promise to have zero tolerance). The other is corruption for survival. Grand corruption tends to destroy long-term development strategies but corruption to survival causes tremendous pain to society, in particular to the poorest, while also eroding the fundamental trust citizens need to have in the rule of law. No matter what the TI ranking is saying, the fundamental question that I believe the local government should ask to its members and constituencies is whether or not these two types of corruption are being effectively curbed. 

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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