For every success in fighting corruption, there’s a fresh backslide. Although the U.S. and Europe have made spectacular gains in cracking down on corporate bribery, the financial crisis and its $20 trillion in bailouts and stimulus spending created a rash of opportunities to shift public resources to private pockets. It didn’t help that the programs concentrated on some of the most fraud-ridden sectors, such as banking, real estate, energy, and infrastructure. China alone has arrested more than 3,000 officials for graft related to its $586 billion stimulus.
What’s clear, however, is that some countries do much better than others in rooting out corruption. Their lessons, according to corruption experts at Transparency International, the Basel Institute on Governance, and the Brookings Institution:
Get government out of the shadows. Corruption thrives not just on plainly illegal bribes, but even more on legal practices such as political donations, lobbying, and the revolving doors that reward lawmakers and regulators with juicy jobs in industry. Sweden, a star performer in the corruption rankings, has cleaned up government by opening virtually all government records to the public. It’s no coincidence that economists consider Sweden the world’s textbook example for how to resolve a banking crisis resolutely and at minimal cost to taxpayers.
Peer pressure. For years, the U.S. was the only country seriously pursuing corporate bribery. After relentlessly exposing many of the world’s biggest companies, the U.S. shamed others into stiffening their laws and stepping up prosecution. Britain, where Prime Minister Tony Blair once snuffed out an inquiry into British Aerospace payments in Saudi Arabia, just passed the world’s toughest anti-bribery law. Germany, until recently, considered bribes standard business practice and even made them tax-deductible. Reluctant German prosecutors didn’t start investigations of their own until after German companies kept showing up in U.S. courts.
Litigate, litigate, litigate. Massive fines have made bribery a high-risk game. Germany’s Siemens has paid $1.6 billion and still faces prosecution in several other countries. That both the U.S. and U.K. can litigate any bribe anywhere as long as the company involved does business in America or Britain could one day make even Chinese, Indian, and Russian companies come clean (they now count among the world’s most corrupt, according to Transparency International’s Bribe Payer Index). Already, über-corrupt Russia has begun to cooperate with OECD anti-corruption fighters as the country tries to raise its standing in Western trade and economic bodies.
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The silver lining from the financial crisis: governments facing tighter budgets and exploding deficits will have all the more reason to fight the misuse of public funds.