Corruption in a corporate world

One of the major hindrances for developing free trade globally is corruption and the inability to measure it. This proposal will outline what attempts have been made to fight international corruption, and will present a outline for an objective benchmark to measure corruption in the form on an International Integrity Standard (IIS). The Standard will aid both the fight against international corruption and the development of fair free trade worldwide.

Corruption is not new, but the US has been at the forefront of fighting it. The Foreign Corrupt Practices Act (FCPA) was enacted in 1977. In the context of the US “War against Drugs,” the Money Laundering Control Act followed in1986. President George Bush continued to pursue international financial integrity by launching the G-7 initiative that led to the creation of the Financial Action Task Force (FATF), and the subsequent drafting of the 40 FATF Recommendations against money laundering in 1990. Those have effectively become the world standard for countries’ anti money laundering programs.

Fighting corruption

Fighting corruption with free trade

Recently, at the Summit of the Americas in Quebec, President G. W. Bush called for the reaffirmation of democracy and free trade and spoke of the need to “root out corruption.”  The new Bush Administration has already gone on the record when US Treasury Secretary, Paul O’Neill, stated that the need to find a better way to bolster the world economy rather than by bailing out mismanaged, corrupt governments. He stressed the need to find a way to systematically “collect global data and monitor situations before they turn into crises and then formulate policy initiatives to prevent possible catastrophes.”

The Statement of Finance Officials at the G-7 Meeting in Washington DC on April 28, stated: “we believe that implementation of internationally agreed standards and codes offers countries the opportunity to strengthen their basic infrastructure for growth and stability and to provide information to markets in a way that reinforces these goals.

Going international – United against corruption

In addition to the U.S. and the international lending organizations, Transparency International (TI) has attempted to fight corruption  — It has worked closely with the Clinton Administration, mostly through USAID and with the World Bank. Their Board includes many international figures from the political arena such as Oscar Arias, and their funding comes from organizations such as George Soros’ “Open Society” (about 1/3 of their annual budget.) — TI’s one major success was to help bring media attention to corruption. Unfortunately, its annual “Corruption Perception Index, based mostly on interviews with businessmen, as to how they perceive the “demand” and “supply” of corruption in a given country, is subjective.

Considering corruption’s destabilizing effects on national and international security, the U.S. and most international organizations, including the IMF, World Bank, OECD, UN, OAS and the ADB, have explicitly recognized the need to take more effective action against corruption on a worldwide basis. All these organizations fund programs to combat corruption with little to show for their efforts.

To begin with, there is no clear definition of what corruption is, nor is there an objective, uniform standard to identify and measure the vulnerability of countries to the various forms and prevalence of corruption. Add to this the fact that most international agreements lack teeth and are impossible to enforce. Furthermore, there is no objective instrument to gauge the success of reform programs.  Not surprisingly, all international conventions and programs fail to make even a dent in corruption.

As you could read, the most significant problem with corruption is that those that must fight it are the same people that profit from the same. Special groups that specialize in rooting out corruption are under-financed. Their superiors follow their every step, and that means that corrupt people know everything that those groups do.