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Governance and the Economy in Africa:Tools for Analysis and Reform of Corruption Contents
ForewordBy Anne Williams Africans today are beginning to talk openly about what they perceive as one of the greatest continuing barriers to good governance and to sustained economic development: "the climate of corruption." By this they mean that the everyday lives of most Africans are permeated by corruption: land use, road barriers, health care, credit, imports and exports, to name a few, all provide occasions for corrupt practices. From the highest levels, where substantial bribes and Swiss bank accounts are a way of life, to the lowest levels where obtaining simple documents requires a cadeau, Africans see public officials using their offices for private gain. For a variety of reasons, such corruption has been a taboo topic. However, Africans are coming to recognize that this climate of corruption cannot remain a topic hidden behind the silence of donors and Africans alike. For Africa to move into the global economy of the 21st Century, it must develop a different climate, one of good governance, where transparency and effective management become the rule of the day. In response to this demand for openness on the part of the Africans themselves, USAID/Senegal and IRIS held a training seminar on March 5-7, 1996 and developed this tool kit. These two "events" were designed pragmatically to demonstrate that YES, one can fight corruption, and YES, this climate of corruption can change. I would like, therefore, to offer this volume to all the transparency advocates and warriors, working to transform Africa to take its rightful place in the world of the 21st Century. About This VolumeIn the concluding scene of his classic 1959 film, Touch of Evil, Orson Welles acts out the demise of a corrupt local sheriff. The setting is a seedy Texas border town, along a pestilential stretch of the Rio Grande, dividing the U.S. from Mexico. Having failed to destroy his nemesis, a dashing young prosecutor and reformist, the sheriff is mortally wounded in an exchange of gunfire. As his bloated, ugly figure expires and sinks into the river, one is left to ponder whether his disappearance will make any real difference to the rotten moral and political order he leaves behind. Is corruption a recurring plague? Is there no way out? Will power always bring out the evil in us? Think of the prosecutor. It is a fair guess that there is at least one of him for every old sheriff, and potentially more. The open question is whether the system affords him a constructive role -- or denies it. If history is any guide, the quality of those government structures limiting the temptations of rulers plays a more important role in determining the reach of corruption than a people's moral fiber. Power alone doesn't corrupt -- untrammeled and unaccountable power corrupts. Where the struggle toward democracy and prosperity creates laws, policies, practices, indeed cultures of accountability, the young (and old) idealists of the world are able to discipline the powerful for the greater good. A SummaryThe present volume is about the ways in which contemporary developing nations have begun to impose discipline on those holding power, and more importantly how African societies can do so on a much greater and more permanent basis. This work, and the conference that began it, was prompted by the continuing economic hardship Africa has experienced, and the nexus of this suffering with corruption and related failures of governance. Corruption thwarts political choice and planning -- rarely for the good and often with severe negative consequences for economic development, the environment, health, and the political order generally. What is to be done? The sheer size and complexity of the problem in no way diminishes its urgency. This volume attempts to break down the large problem of corruption into many smaller problems, to suggest ways of analyzing these problems that are relevant and useful to reformers in Africa, to present a sampling of experiences that various countries have had in addressing corruption, and to examine the lessons of those experiences. This is not the first attempt to do this. Other books and resources on this subject are referred to in the text and listed at the back. This volume places the economic harms of corruption in the foreground, with the aim of helping to prioritize, to identify as focal points those areas where the harms are greatest and the problems most susceptible to resolution. This is the crux of policy choice in this area. Just as important, this volume focuses on African experiences and on approaches relevant to African reformers. The aim, in sum, is to provide an appropriate resource for the region. The volume begins with the analytical. Chapter 1 provides an overview. It addresses the threshhold issues: How to define corruption? Where is it situated in the scheme of governance and economic relations? Why is it difficult to stop? Understanding it as a problem primarily of institutions rather than personalities is the first step towards addressing it. The second chapter analyzes corruption as an institutional and organization failure, and discusses some of the specific economic and political impacts of this failure. It also provides illustrations of these failures in contemporary Africa. In doing so, it draws attention to those areas most vulnerable to corruption, where the harms are tangible, and hence where urgent attention is needed. The remainder of the volume concerns cases and approaches. The third chapter presents five case studies, three of them from Africa. Each of them illustrates the causes and consequences of corruption, and the strategies and approaches used in addressing it. In addition to Benin, Niger, and Uganda, additional cases come from Bolivia and the United States. This selection is meant to provide regional examples while stressing the relevance of outside experience -- sometimes a point of contention among political and academic adherents of particularism. The final chapter synthesizes the lessons of the case studies and attempts to provide guidance for those facing similar issues in the region. This guidance takes in both the macro or strategic level and the level of tactics and methodology. It addresses such questions as: What should the longer-term structural objectives be in an effort to contain corruption? What political strategies are available to bring about collective action for reform where views and vested interests conflict? What to do next -- what can be done in the near term to address these problems more fully? AcknowledgementsThe present volume has many progenitors. Most immediately, it grows out of the proceedings of a workshop entitled "Good Governance and the Economy in Francophone Africa," sponsored by USAID/Senegal in cooperation with the Center for Institutional Reform and the Informal Sector (IRIS) of the University of Maryland. Some 35 participants representing a broad span of governmental and private functions across the region worked with the IRIS team on discussions and case studies of corruption. These focused on aspects of institutional environments that lead to corruption, its effects on economic performance, and efforts to strengthen governance mechanisms in order to contain and prevent corruption. It was a rich discussion that deserves to be carried forward in many forms, of which the present volume is but one. The efforts of several people made the workshops and this written sequel possible. Anne Williams, in discussions with reformers during her tenure as USAID Mission Director, first in Chad and currently in Senegal, identified issues of corruption as important obstacles to development in the region and as worthy of USAID's special attention. Robert Klitgaard, who contributed the most material to this volume, inspired this undertaking with his pathbreaking book, Controlling Corruption. Numerous staff members of USAID/Senegal and IRIS worked hard to bring the workshop and this volume into being, aided by a small group of outside experts. Finally, the workshop participants, who included senior officials, jurists, academics, journalists, and heads of civic organizations from across Francophone Africa, provided no small measure of intellectual energy, ideas, examples, and inspiration to this work. The authorship of this volume has been a collective effort. The following people made written contributions:
Chapter 1: Governance, Development, and the Quality of InstitutionsDevelopment is about innovation. Many times in the world's history, technological breakthroughs, new markets, and innovative forms of organization have spurred growth and helped enhance the quality of life. What makes this possible? Most would agree that institutions and structures of governance play an important role. The quality of laws and political institutions in large measure determines whether innovators and their ideas are allowed into the marketplace, whether they can expect to gain from their labors, and whether they in turn can be expected to treat competitors and customers fairly. Political choices, embodied in constitutions, laws, policies, and conventions, set the rules of the game and empower their arbiters. The making and implementation of these choices is the labor of democracy. If these choices are not contested and adjusted over time, or if they are subverted by corruption, innovation and hence development grind to a halt in favor of powerful and protected interests opposed to change. The present volume addresses corruption. This chapter aims to lay the foundation for the rest of the volume by clarifying what corruption is and what it is not for purposes of our discussion. A complex and intractable phenomenon such as corruption can be addressed effectively only if it is analyzed and deconstructed in a way that yields insights into the means of correcting it. Corruption has many faces--the border town sheriff, the gendarme manning the roadblock, the government minister with a Swiss bank account. It also has many layers of meaning: physical, political, moral, religious. The practical intent of this volume means that we regard it first and foremost as a failure of governance, a failure with tangible economic and political consequences. Beginning the discussion at this point enables us to set aside spiritual issues, which are important but are not the focus here. Corruption, then, is a failure of governance. What do we mean by "governance?" It refers to the fact that a people manages its affairs according to its own norms of fairness and legitimacy, embodied in laws, procedures, policies, conventions, and organizations designed to carry them out. One could refer to all of these as "institutions." The quality of these institutions is an important determinant of both economic and political development. Institutions and the EconomyIn the most important sense, institutions are rules. There are, first, the "rules of the game" such as laws, regulations, policies, "customary" laws, and court decisions. Then, there are rules about who makes and applies those rules and how this is done, as in the case of administrative law and procedure, electoral laws, and civil service regulations. Finally, there are the rules that constrain all rulemaking -- this would be the level of the constitution, the rule of law, and the standard of legality or legitimacy that informs them in any given society. Institutions play a critical role in economic performance. There is good reason to believe that the difference between poor countries and rich countries has less to do with the existence of factors of production -- land, capital, and labor -- or even of technology, than with the institutions that affect their deployment. Rules and implementing agencies determine how those factors are obtained, how they are transferred, and how they are used. Institutions that support contract and property rights are essential for efficient markets. These can be either formal legal and regulatory structures created by the state or informal, indigenous institutions rooted in local traditions coexisting with the state. By reducing transaction and information costs for private entrepreneurs, these institutions promote risk-taking and investment. Institutions structure individuals' and firms' incentives for innovation, production and exchange and, thereby, either impede or enhance economic growth and development. They affect growth also through their effects on expectations, social norms and preferences. At the most basic level, incentives to save and to invest depend upon individual rights to marketable assets--on property rights. Cross-country studies confirm that institutions that protect property rights are crucial to economic growth. Impartial contract enforcement procedures also provide a critical incentive for the formation of complex commercial agreements. These procedures enhance predictability in the system by restraining opportunism and diminishing the arbitrary influence of elites. This reduces the costs and increases the benefits of exchange. According to Douglass North: Judicial and administrative institutions devoted to providing clear and transparent mechanisms for private and public sector interaction are also essential to economic growth and equity. Institutions of governance are at risk of abuse from illicit and rent-seeking behavior by public and private agents. The ability of the government to avoid these risks and enforce a consistent and transparent policy framework, or "rules of the game", determines the extent to which the private sector has confidence in that framework. Good institutions can also have powerful equality-promoting effects, enabling individuals with little property and without political connections to make investments in themselves and in their enterprises so that they can accumulate wealth. In countries with poorly developed legal and regulatory institutions for protecting property rights or enforcing contracts, it is the poorest who are most disadvantaged. Large and politically powerful interests are better able to operate despite -- or in some cases because of -- the lack of regularized institutions. In practical terms, we can look at a business transaction and analyze its institutional or governance aspects at several levels. First, a contract can set rules of the game between the parties, along with rules supplied by the state, such as the provisions of a civil code governing contracts for the sale of goods, or regulations dealing with taxes or permits. These laws and regulations may favor the entrepreneur, or they may not. At the second level, we are concerned with who makes and interprets these rules for the public, and how. If a contractual dispute goes before a judge, what procedures and rules of interpretation apply? Under what rules and influences do legislators and bureaucrats make laws and regulations that apply to the transaction? Finally, at the third level, the question arises of how judges, legislators, and administrators are constrained by a constitution and the rule of law. If legislation nullifies contracts and confiscates property without justification, can it be challenged? Are there constitutional provisions and public laws outlining the powers of higher courts to control abuses of power by administrators and courts of first instance? These institutions are unavoidably complex, and clearly there is much that can go wrong. If, for example, the laws and mechanisms of enforcement related to contracts are not clear, predictable, and effective, then factors of production are not likely to be used to their full economic potential. Also important is the performance of those organizations that make and implement the rules of the game. Internal standards and incentives affect how those rules are enforced -- or indeed whether they are enforced. These are provided by, for example, civil service codes, rules governing the selection and tenure of judges, and electoral laws. In addition, management practices, prevailing attitudes and traditions, as well as material conditions, are important. Chronically underpaid public servants are not likely to perform their functions optimally. Patterns of absenteeism, abuse of power, patronage, and theft can make public management, lawmaking, and adjudication unpredictable and predatory. Institutional Maladies: CorruptionThe problem of corruption, like the achievement of sustained economic growth, is at heart a matter of institutions. Many poor countries have weaker institutions, therefore more corruption and weaker economic performance, than wealthier countries. Just as good governance is one of the keys to broad-based economic growth, corruption, its opposite, can deter or distort economic growth. This focus on corruption is not meant to imply that all issues of governance boil down to the problem of corruption. Governance comprises a broader set of concerns. However, it is useful and important to understand corruption as a species of governance failure -- perhaps the most important one facing many African countries today -- with especially corrosive political and economic effects. The Role of the Office Holder Understanding corruption as failure of governance, we can define it simply as the abuse of public office for private gain. While the practical focus of this volume requires us to avoid lengthy discussion of definitions, it is worth unpacking this statement for clarity's sake. One reason the extent and impact of corruption can be difficult to assess is that it depends on other variables which are themselves contestable or which change across societies. The abuse involved in corruption has been formulated alternatively as legal or moral. For practical purposes, one could limit the term "corruption" to those actions by government officials which are illegal, but, this would not capture instances of government activity which one would want to prohibit. For example, in the United States and some European countries, there are extensive regulations which cover government behavior, but some of these laws encourage corruption. Examples of this include the case of the "Keating Five" in the U.S. and the laws in several European countries which permit the tax deductibility of bribes paid to foreign officials. As for the private gain involved in corruption, this can include both pecuniary and non-pecuniary benefits, such as when public authority is used to advance the parochial political interests of officials rather than any encompassing interest the government function was designed to serve. Such a circumstance can include everything from the use of political office to advance the interests of a powerful constituent, to the subversion of the constitutional foundations of the political system, as in the case of the Watergate Affair in the United States. Most usefully, one could express the standard contained in the above definition as conflict of interest. Public officials and indeed, people acting in almost every capacity have certain responsibilities which come with the role they are playing. By agreeing to serve in a certain role, people agree to serve the interests which that role was created to fulfill. When the private interests of a person occupying a certain public role conflict with the duties and responsibilities of that role, opportunities for abuse arise. In cases where public officials pursue their private interests at the expense of the public goals designated for a specific role -- such as the distribution of passports based on entitlement or the issuance of licenses to practice medicine based on qualification -- not only are those goals not met, but this failure undermines both the political legitimacy of the system and respect for the rule of law. The standard of conflict of interest comes not from a specific legal or moral code, but a more general concept the could be called "role-differentiation." This concept is inherent in any system of governance. Indeed, while specific public roles may vary across societies and government agencies, there appears to be little variation in the obligation to fulfill those public roles even at the expense of private gain. Socially, roles are developed as follows: people enter into relationships with each other which, when routinized over time, give rise to expectations about how people ought to behave. When these relationships are generalized across society, they create group expectations about how people in a certain role are expected to act. So, in taking on a role like that of a public official, one accepts special responsibilities which alter obligations and duties for people who enter that role. One should be careful to distinguish corruption from other problems of fairness. A particular region or subgroup with strong political allies will sometimes win a disproportionate share of public benefits -- public works projects, for example. This is not always evidence of corruption, and in some political systems -- the United States for example -- is viewed as a necessary evil, a result of democratic political bargaining rather than corruption. On the other hand, corruption is a type of undue political or administrative influence by an individual or group -- a type of influence that oversteps the bounds of legality and legitimacy. In this sense, it is related to special interest group politics in a more general sense. The narrow interests at issue are those of political leaders and bureaucrats in augmenting their power and resources, and those of client groups seeking special favors from these public agents. Public versus Private The challenge to systems of governance posed by corruption is that of distinguishing public and private roles and interests. In no society has this been an easy task, and in every society the process of making and maintaining this distinction faces new challenges. The continuous emergence of scandals in the industrialized countries illustrates that no country can claim immunity from the problem. In the U.S., the Watergate and Iran-Contra Affairs saw the Office of the President and other Executive departments such as the Internal Revenue Service and the Office of the National Security Advisor become the vehicles for the pursuit of personal or partisan goals in ways that were contrary to public policy, illegal, and even unconstitutional. In each of these cases, the personal agenda of a sitting President, or at least a group of overzealous advisors, became the unstated policy, and only the most aggressive and sustained intervention by the press, Congress, and the Judiciary exposed the scandal and brought some of the key offenders to justice. In Africa, the ferment of the late 1980's, the National Conferences of the early 1990's, and the election campaigns that followed have exposed problems of a similar kind, and in so doing provided public affirmation of the values of integrity in government. In most African countries, the earlier sense of impunity has eroded with the emergence of a freer press and political competition in some countries. Nevertheless, the problem of corruption in Africa continues to be a severe one. A host of reasons can be cited for this, including, in many cases, unresolved contradictions between public and private roles. African states have not fully emerged from the "patrimonial" or "neopatrimonial" status of the early post-independence period, in which indigenous and transplanted ideas of integrity had to compete with the opportunities for personal or class advancement offered by the state apparatus. The legacy of colonial legality, with its suppression of indigenous economic and political competition against the state, has fostered elite domination by means of the state rather than transparency and political accountability. African governance confronts not only the problem of untangling private from public interests, but of mediating the underlying conflict between two different "publics:" the "primordial" public, i.e. the indigenous sphere defined in moral, ethnic, and precolonial geographic terms, and the overlapping "civic" public, amoral and to some extent abstract, inherited from the colonial state. African elites have used the state apparatus to advance the interests of the public that really matters to them -- the primordial public. Interactions within this primordial public are characterized by a high level of integrity and responsiveness. By contrast, the civic public realm carries no effective duties with it, and is the scene of elite competition over spoils. While this problem perhaps takes on a distinctive form in Africa, it is by no means limited to Africa. Parallels to the "two publics" in Africa exist in such phenomena as ethnic Chinese networks in Southeast Asia, mafias in Italy and the former Soviet Union, and urban machine politics in the United States. In the case of the U.S., for example, rapid urbanization and mass immigration beginning in the mid-nineteenth century gave rise to political "machines" that came to dominate city governments. Weak and disorganized local governments formerly run by WASP elites came under the control of new immigrant groups during the nineteenth and early twentieth century -- primarily Irish, Italian, and East European immigrants. In some cases, the formal apparatus of local government remained in the hands of older elite representatives, but real decisions were in any event made informally by unelected "bosses" and implemented by means of a network based on ethnic, religious, and class identity. Membership in the network or "machine" involved the exchange of blocks of votes for the machine's formal political representatives for favors that advanced the interests of machine members -- government contracts, public sector employment, a certain level of public services, and the "fixing" of various problems including regulatory procedures and criminal liability. In some cases, demographic shifts and competition led to the machine's transfer into the hands of new factions or ethnic groups. The vestiges of urban machine politics continue in existence today, although this has been severely constrained as a result of changes in local electoral systems, "good government" campaigns, local government and civil service reforms, high-profile prosecutions, and interventions by the federal government. The point here is that American urban politics and administration demonstrates the transition from patrimonialism based on a form of solidarity akin to the African "primordial public" to a more transparent system that is to a greater extent disciplined by the law and responsive to the demands of the "civic public." A series of institutional reforms have been adopted that enable a vigilant public and its representatives to police the boundary between officials' public and private roles, to limit discretion and monopoly power, and hence to control abuses of office more effectively. Despite progress in this area, local government remains among the areas of American public life most susceptible to corruption. The struggle continues. Controlling Corruption This chapter, by way of introduction, has largely been devoted to defining what corruption is. The succeeding chapters will provide some more detail through analysis and examples. The chief aim of this volume, and the subject that will be the predominant concern in what follows, is how to analyze corruption and attack it effectively. This requires us to address the following questions: Why is it urgent to begin combatting corruption now? What causes corruption? How have some societies dealt with it successfully? How can those experiences be applied across Africa? This analytical process begins with a fundamental premise, which we introduce at this point, and which will surface throughout the volume. The institutional failures that encourage corruption have a common underlying logic. This logic, as proposed by Robert Klitgaard, is as follows: corruption equals monopoly plus discretion minus accountability, or stated as a formula, C = M + D - A. The key element of accountability refers to the extent to which government officials are subject to oversight and held to a standard, nformation is available to measure performance against the standard, and as a result discretion has limits. This way of analyzing corruption is sometimes called the principal-agent model, since it enables one to evaluate the behavior of public officials as agents of a higher authority or principal -- i.e. an immediate supervisor, the chief of state, or the citizenry. The remainder of the formula refers to the tasks that the government takes on and the way in which the public service is organized. Keeping monopoly in the provision of public services to a minimum, and creating incentives for good bureaucratic performance and public monitoring helps reduce opportunities for corruption. Good governance therefore depends in large part on limiting the tasks of government, providing the appropriate incentives and resources, and instilling an ethic of professionalism and public service. Organizations that consistently fail to provide the appropriate incentives, and which prey on the public, have been described as "sick." The importance of this formulation is its acknowledgement that individual integrity is sorely challenged in an environment of endemic corruption, and that the first priority for action should therefore be to change the organizational culture and incentive structure from top to bottom. Building on this analytical foundation, the following chapters provide concepts, examples, methods, and other tools that are relevant to the situations of many African countries and that can be applied, or at least adapted, to governance issues of concern to African policymakers and publics. They are offered in the hope that they might furnish both a guide and an encouragement to action against corruption. Chapter 2: Understanding Governance ChallengesWhile the previous chapter provided an overview of the thinking in this volume, this chapter aims to deepen understanding of the institutional analysis of corruption and its causes and consequences, focusing primarily on problems specific to Africa. The first essay presents the economic and political consequences of corruption, which include inefficiencies, distortions, heightened inequalities, and the loss of governmental legitimacy. Understanding these harms is essential for bringing the necessary urgency and focus to the tasks of combatting corruption. The second essay analyzes corruption as an outcome of the broader phenomenon of "sick institutions" -- where systems of information, incentives, and oversight have broken down. This enables us to bracket the dimension of personal ethics involved in corruption, which is as intractable as it is important, and focus on systems and institutions. Corruption, though it is committed by individuals, takes place in an institutional context, and it is this context that determines what opportunities arise that could tempt a bureaucrat or politician to engage in corrupt behavior. Finally, building on the economic and institutional reference points provided earlier, the last essay offers an overview of the types and systemic origins of major corruption problems occurring in Sub-Saharan Africa. It fits the preceding analysis within the context of current events in Africa. As a whole, the chapter helps identify the most important challenges to governance posed by corruption in Africa, and offers approaches to the analysis of their causes, consequences, and potential solutions. Section 2.1: Economic and Political Consequences of CorruptionThis section addresses the larger stakes involved in the issue of corruption. What is its impact? Why should we be concerned about it? It is critically important to be specific about the stakes, and to analyze the relative costs of the various forms of corruption. Only on this basis can resources be targeted to combat the most damaging forms of corruption, and only with the most complete information can skepticism and inertia be overcome. The impact of corruption is not limited to the size of the payments involved. In addition to the payments, the very process of extorting and giving bribes has distortionary effects that are both economic and political. Economic Consequences of Corruption There is some debate whether corruption is a serious problem or even undesirable. African countries are commonly cited as examples of the high cost which corruption inflicts on economic growth. However, some South East Asian economies are perhaps among the most corrupt in the world, and yet many of them have achieved spectacular economic growth. Some authors have argued that some corruption might be desirable and enhance economic growth. If corruption was a serious impediment to economic growth, they say, it would be difficult to explain the extraordinary success of South East Asian economies. Most authors, however, have challenged these views. Their arguments can be divided into three types of economic impacts, according to corruption's effects on growth, on private sector development, and on administrative efficiency and public sector projects. Macroeconomic distortions and barriers to growth:
Although no definitive evidence exists, given all the consequences of corruption, there are good reasons to suspect that even in high-growth economies in South East Asia, corruption is both unfair and inefficient. The fact that these economies grow is no confirmation that corruption is of no consequence. Corrupt economies can grow, as long as corruption has not gone so far as to undermine economic fundamentals. Inefficiency and favoritism in the private business sector:
Inefficiency in administrative operations and public sector projects:
Political Consequences of Corruption The economic consequences detailed above have political corollaries. Some of these effects are either mentioned or implied in the discussion in chapter one, and are developed throughout this volume.
These political effects are less quantifiable than economic harms. However, if one bears in mind the importance of governance institutions to stability as well as economic performance, then the wide ripple effects of erosion in the political order become clear. Section 2.2: Causes of CorruptionA useful way to think about corruption (and its cures) is to envision it as a symptom of "sick institutions." What are they? Let's get at this first through a chilling scenario that is likely to strike many African readers as familiar. It comes from Bolivia. A more analytical discussion will follow. La Paz, September 1985 Few municipal officials will face situations as extreme as the one encountered by Ronald MacLean-Abaroa when he took over as mayor of La Paz, Bolivia. Yet as his story has been related to officials in other countries, listeners have responded with knowing smiles. On September 13, 1985, I was sworn in as the first democratically elected mayor of La Paz since 1948. I knew I would be facing a difficult task, but I never imagined how grave the situation was. I quickly discovered that I had better find someone to loan me money to survive into the next month, because my new salary was the equivalent of less than US$100 per month. Not only that, I would find it almost impossible to form my immediate staff since they would be paid even less. At the end of that day, I boarded the mayor's vehicle, a decrepit 1978 four-wheel drive, to return home, wondering if I had not fallen into a trap from which it was impossible to escape, short of resigning from my first elected office. The idea that radical change was essential turned out to be my savior. I was facing a limiting case. Bolivia was still in the midst of its worst economic crisis ever. The former President had to cut his term short and leave office before being driven from it by the army, the people, or most likely a combination of both. Though an honest President, he was unable nonetheless to reverse the economic collapse. Inflation in August had reached an estimated annual rate of 40,000 percent. The next day I returned to my office, wondering where to start my reforms. The four-wheel drive had broken down and I had to drive to work in my own car. While parking in front of city hall, I noticed that there among the crippled vehicles were two conspicuously fancy cars. One belonged, I later learned, to a foreign expert working with the municipality. The other, an elegant sedan, belonged to the cashier of city hall. I had my first hints of where the resources were. The cashier was a fifth-class bureaucrat with a minimal salary who, I came to know, had the habit of changing several times a week which car he drove to work. He made no secret of his obvious prosperity. In fact he had taken the habit of offering loans to the impoverished municipal employees, including some of his superiors, charging a "competitive" weekly interest rate. Later, up in my office, I developed a deep sense of solitude. Accustomed to working in the private sector, where I managed fair-sized mining companies, I was used to working with a team. In my newly elected post, there was nothing that resembled a team. All the people I found looked and acted more like survivors of a wreck than anything else. The professional staff was earning an average of about US$30 per month. Many employees were anxiously seeking alternative sources of income to bring home. Corruption, if not always at the scale of the cashier, was everywhere. Bolivia had just had a change of government at the national level, and the new administration was from a different party than my own. I would not be able to count on support from the national government, as had been customary in the recent past when mayors were appointed by the President and subsidized by the national treasury. New laws meant that cities were on their own financially, and I learned that in two weeks I would have to meet a payroll that was worth more than the total monthly revenues of La Paz! Part of this was due to the hyperinflation and the changes in federal support. But part of it, maybe a lot of it, was due to corruption. I found many signs of malignancy in the municipality. The degree of institutional decay was such that authority had virtually collapsed in the municipality. Everyone was looking for his or her own survival in terms of income generation, and therefore corruption was widespread. Tax collectors used techniques ranging from extortion to speed money to arrangements for lower taxes in exchange for a bribe. Property taxes were particularly vulnerable to collusion between taxpayers and corrupt officials. A new assessment was needed as the result of the hyperinflation and a legion of municipal functionaries was ready to hit the streets, meet property owners, and "negotiate" a property value that would suit both owners and functionaries well, but one far below the true value. The result would be a tax saving for the property owners, particularly the rich; a bribe for the colluding functionary; and a city unable to provide services because it lacked even minimal resources. The city government was in effect a huge "construction company" that wasn't constructing much. The city owned tractors, trucks, and all kinds of construction machinery. There were two thousand city laborers, who were paid meager, fixed salaries and were only coming to work an average of five hours a day. Machinery was also used for a similar amount of time, rendering it extremely inefficient given its high capital cost. But I found that the use of gasoline, oil, and spare parts was abnormally high. Surely they were being sold in the black market, I thought, and soon this suspicion was sadly verified. New tires and expensive machinery parts such as fuel injectors, pumps, and Caterpillar parts were available for sale and in exchange broken and used parts were "replaced" on the city's machinery. Finally, there was the municipal police, a "soft police" that didn't conduct criminal investigations or carry arms but was responsible for regulating the informal sector, inspecting the markets for cleanliness, and keep order among the city vendors. This, too, was a source of corruption, as the municipal police would extort money in exchange for letting vendors undertake both legal and illegal activities. Sick Institutions Some readers will have been in positions not unlike Mayor MacLean-Abaroa's. As in Bolivia, the problems facing many countries in Africa go beyond economic liberalization and beyond multi-party democracies, welcome as these are. The task is now how to heal the sick institutions that plague our public and private sectors. Development strategies are shifting from policy reform to institutional reform. As we learn that economic policy reforms aren't enough for economic success, that multi-party democracy is not enough for political success, that better laws aren't enough for better justice, we focus on the institutions through which economic, political, and legal activity are carried out and mediated. If the past fifteen years were notable for macroeconomic and macropolitical reforms, the next fifteen years will be the era of institutional adjustment:
These topics are obviously sensitive and context-specific, and there is less agreement internationally or in Francophone Africa about the nature of the reforms to be pursued, compared with, say, the move to multi-party democracy. But the dynamics of reform in this area will not require that all countries agree to the same agenda-or even that all participate. The problem will be less and less how to persuade sovereign governments to "do something" about institutional development but how to do it. The new wave of democratically elected governments in the developing world is recognizing that neither free markets nor multi-party democracies will succeed if the institutions of the private and public sectors are riddled with institutional failure. And as a few countries make progress, others will follow. But what exactly are these "institutional failures" to which "institutional development" is the alleged answer? In this volume we focus on public sector institutions. We may usefully distinguish inefficient institutions that do not fulfill their purported aims of service delivery, fair judgment, and efficient allocation, from sick institutions, a phenomenon prevalent in though not confined to Africa, the former Communist world, some parts of Asia and some parts of Latin America and the Caribbean. It is provocative to speak of sick institutions, also indelicate to indicate their geographical concentration. But this distinction is not meant to be sensational. It is amazing that more people outside the countries affected do not seem to put sick institutions front and center. Sick institutions are those where a substantial number of employees do not come to work or do other work (or nothing at all) while there; where corruption and favoritism are not isolated instances but the corrosive norm; where pay scales in real terms have collapsed so that low- and middle-level employees cannot feed and house their families on their official pay; where employees therefore seek other forms of compensation, including travel, study allowances, non-wage benefits (which have exploded in many countries) as well as illicit payments for doing (or not doing) their public duties. These observations will undoubtedly sound familiar to many readers. Through their daily experiences, they know that sick institutions do not function. (Let's leave aside here a second category of sick institutions, those that function effectively but serve ends that are sick-for example, an apartheid state, a military apparatus, a secret police, perhaps in the view of some readers some transnational economic institutions.) Public service becomes a source of public embarrassment, or indignation. In many countries, both multiparty democracy and free-market reforms, such as they are, are threatened not just by inefficiency in government, but by institutions that have grown sick. Why are there sick institutions?
Institutional Adjustment Note that sick institutions can be analyzed in economic terms, without immediately invoking other factors that may be important such as political leadership, social and cultural features, and so forth. Economics also provides insights about possible solutions, which must be tailored to local political, social, and cultural realities. Yet economics has not been the metaphor through which international aid has usually conceptualized "institutional development." In the decade ahead we will rethink institutional development in economic terms, based on information, incentives, and organizational structure. The principles of institutional adjustment will include:
This approach contrasts with previous approaches to institutional development based on more: more training, more resources, more buildings, more coordination, more central planning, and more technical assistance. The argument is that without institutional adjustment, "more" won't heal sick institutions. Unfortunately, none of us have doctorates in how to heal sick institutions. And yet many of us confront "patients" that are gravely ill--the institutions in which we work, perhaps, or those that we regulate. The task is first to face up to the seriousness of our endeavor, and move beyond simple bromides such as "let the market do it" or "more of the same." Then, guided by success stories and by new work in the social sciences, we must experiment together with new cures for sick institutions. Restricting Opportunities for Corruption Corruption is but one of the manifestations of institutional decay. In the remainder of this section we focus on the systemic causes of corruption. The catalogue of corrupt acts, which may be defined as instances of misuse of office for unofficial ends, includes bribery, extortion, influence-peddling, nepotism, fraud, speed money, embezzlement, and more. Although we tend to think of corruption as a sin of government, of course it also exists in the private sector. Indeed, the private sector is involved in most government corruption. Different varieties of corruption are not equally harmful. Corruption that undercuts the rules of the game-for example, the justice system or property rights or banking and credit-devastates economic and political development. Corruption that lets polluters foul rivers or hospitals extort patients can be environmentally and socially corrosive. In comparison, some speed money for public services and mild corruption in campaign financing are less damaging. Of course the extent of corruption matters, too. Most systems can stand some corruption, and it is possible that some truly awful systems can be improved by it. But when corruption becomes the norm, its effects are crippling. So, although every country has corruption, the varieties and extent differ. The killer is systematic corruption that afflicts the rules of the game. It is one of the reasons why the most underdeveloped parts of our planet stay that way. What to do about systematic corruption? Both multi-party democracy and free-market reforms will help. Both enhance competition and accountability, and these in turn tend to reduce corruption. But democracy and freer markets are certainly not sufficient. Corruption tends to follow a formula: C = M + D - A. Corruption equals monopoly plus discretion minus accountability. Whether we are in La Paz, Lilongwe, or Los Angeles, we will tend to find corruption when someone has monopoly power over a good or service, has the discretion to decide whether or not you receive it and how much you get, and lacks accountability. In such an institutional context, and especially in particularly vulnerable areas of government, corrupt behaviors can develop as a response to specific opportunities. Transparency International identified the following areas as ones where corruption is most likely to flourish:
In these areas, but by no means in these areas only, illicit payments are generally paid for two reasons: to obtain government benefits or to avoid costs. Pay to Get a Benefit The government is a buyer and a seller of goods and services as well as a distributor of subsidies. This creates incentives for firms to bribe government officials. The incentives to bribe officials include the following:
These opportunities may arise in the allocation of all kinds of public goods and projects, from social security benefits to privatization projects. Pay to Avoid Costs The government also imposes regulations, levies taxes, and enforces laws. As it carries out these functions, government officials may delay and harass firms and individuals they deal with, and they can impose costs selectively in a way that affects firms' competitive positions. Under these circumstances, a firm may have the following incentives to bribe officials:
It is important to note that as the economy grows and economic opportunities increase, the opportunities for corruption may also expand. The emphasis is commonly--and rightly so--on the impact of corruption on the economy. However, growth may also influence corruption. The Impact of a Large Public Sector The scope of possible corrupt behavior, as defined in this volume, coincides with the range of public goods administered by officials. In most societies, these would include legislation, adjudication, licenses, and tax collection, for example, but in command economies, this would, of course, also include the means of production. Where goods and means of production are in private hands, owners have an incentive to protect them through such things as security measures and insurance, and will place them in others' hands only where relationships of trust or contract reduce the risk of opportunism and loss. However, where goods and means of production are publicly owned, the risk is spread across an entire polity, and therefore the incentives of individuals to act in order to police and protect public property is correspondingly diffused. Protecting the public's interests depends on governance mechanisms -- accounting standards, tendering procedures, auditors, separation of powers, and accountability to the public. The task of governance mechanisms is large enough even when the role of government is limited to little more than policymaking and revenue collection. Where it is broader and includes a large element of public ownership of economic enterprises, the stresses on public officials grow exponentially, and the ability of governance mechanisms effectively to control quality and impose accountability wears thin. In these circumstances, the public service can become both encrusted with bureaucratic special interests and hobbled by inadequate resources. The later history of the Soviet Union illustrates this problem in a general, but dramatic, way. The command economy required economic planners to gather and respond to huge amounts of information -- information which in a private sector economy would be processed by market signals. This information-processing function was far beyond the capacity of the state to handle. Especially when the widespread use of terror subsided after Stalin's death, producing and consuming units of the public sector were able to collude to withhold information from their superiors. For example, when technological or managerial advances improved productivity, state enterprises might withhold this information from economic planners in order to pocket the windfall through black market transactions or other means. Public accounting and subsidy practices applicable to state enterprises, now known as the "soft budget constraint," allowed this behavior to reach epidemic proportions and hastened the demise of the Soviet economy. In the absence of private property, the autocratic head of state had essentially the only direct interest in making the system function without corruption -- but the vast scope of the system and the erosion of deterrence made this task impossible. Many societies have experienced this syndrome in some way. Developing countries, including African nations, often have very large state sectors where mechanisms of accountability are ineffective and institutions have become "sick." In these situations, numerous opportunities for corruption arise. Economic actors confronting a failing and predatory public sector will seek opportunities to advance and protect their interests. As discussed above, they will provide bribes or favors to obtain government benefits or to avoid costs to themselves. The way out of this trap is to find means of limiting the tasks of government in a way that ensures accountability. Addressing the Problem Corruption is a crime of calculation, not passion. True, there are saints who resist all temptation, and honest officials who resist most. But when the size of the bribe is large, the chance of being caught small, and the penalty if caught meager, many officials will succumb. Solutions, therefore, begin with systems. Monopolies must be leavened. Discretion must be clarified. Accountability must be strengthened. The probability of being caught must increase, and the penalties for corruption (both givers and takers) must rise. Incentives must be linked to performance. Each of these headings introduces a vast topic, of course, but notice that none immediately refers to what most of us think of first when corruption is mentioned-new laws, a change in mentality, an ethical revolution. Laws and ethics codes prove insufficient when systems are not there to implement them. Moral awakenings do occur, but seldom by the design of our public leaders. If we cannot engineer incorruptible officials and citizens, we can nonetheless foster competition, change incentives, enhance accountability: in short, fix the systems that breed corruption. This is not easy. But three points deserve emphasis. First, successful examples do exist of reducing corruption, at the level of firms, cities, projects, ministries, and entire countries. Second, many of these success stories contain common themes. Third, the fight against corruption can be the leading edge to much broader and deeper reforms of government. How do these concepts help us understand the specific conditions of corruption on the African continent? The last section of this chapter applies our analysis of systemic causes and consequences generally to problems of corruption in Africa. Section 2.3: Corruption in Africa"Systematic" corruption is not as random, usually involves large gains, and is often associated with popular scandal. For example, the 1975 Nigerian cement scandal involved public officials and middlemen who embezzled huge sums of money, and eventually led to a government purge. Systematic corruption can become entrenched and involve very large numbers of corrupt officials, intermediaries and entrepreneurs. Smuggling exports, for example, is extensive in many African countries despite the presence of customs officials. The ease with which regulations can be contravened is well known. In Tanzania, especially in the late 1980s, business people in collusion with public officials regularly defrauded the government by purchasing non-existent goods. Patterns of systematic corruption can be associated with both compliant bureaucrats and key political actors. Kwame Nkrumah of Ghana, Siaka Stevens of Sierra Leone, Mobutu of Zaire, are all examples of corrupt senior political figures, and evidence of their malfeasance has been uncovered through investigative inquiries, and in the case of Mobutu, his own public confessions. In some cases, there have been symbiotic networks involving both political leaders and public sector workers. In Sierra Leone during the All People's Congress (APC) regime, 1968-1992, the civil service became highly politicized as workers joined the ruling party. In return for their loyalty, government employees were often shielded and pampered, allowed to increase the range of their powers and pursue opportunities for self-enrichment. In some cases, corruption becomes so entrenched that it creates negative patterns and expectations that can be difficult to break out of. Scholarly research has documented the widespread devastation of this phenomenon in Africa. In Ghana, there is a culture of corruption and an informal polity. Victor LeVine, an expert on African politics, quotes one Ghanian, "We Ghanians are so accustomed to bribing our officials, and they to stealing our rate-moneys, that it would be considered odd if we didn't bribe and they didn't steal." Nepotism--providing jobs for family members--arguably is socially compulsory in African countries, but is considered a grave offense in the West. It is worth reminding ourselves, however, that a culture of corruption characterized many jurisdictions in the West and in some cases was only defeated within the last few decades. Vulnerable Areas Corruption in public life typically occurs in a few key areas, regardless of the nature of the political system or the level of social and economic development. In general, corruption is most likely to occur where public and private sectors (broadly defined) meet, and especially where there is a direct responsibility for the provision of a desired service or the application of specific regulations or levies. In African countries, there are quite a few areas considered "high priority" areas--where corruption is most likely to flourish. For example, in response to a survey, participants in the USAID/IRIS workshop in Dakar identified the following as areas where corruption occurs in their countries:
In revenue collection departments, particularly income tax departments and customs, one can find numerous cases of either tax diversion, tax avoidance and/or tax evasion. Through bribery and other forms of patronage, a wealthy elite can escape the payment of taxes or a fair level of assessment. Customs officials can use the threat of delay or high levies, or alternatively, the promise of low assessments to extort funds from business people. There are also situations where goods are generally misdeclared, contrary to the customs and excise regulations in the various countries. Thus, smuggling, though illegal, is widespread in a majority of African countries, and appears to be related to the scarcity of foreign exchange. Kickbacks, percentages or other "gifts" are offered to public officials by businessmen who either over-invoice imports and under-invoice exports--a practice which denies the country its valuable foreign exchange and tax revenues. In quite a few African countries, corruption has been prevalent in the judiciary. Decisions on pending cases are made by judges before they are actually tried, either in accordance with directives issued from the government in power or because they were just plainly bribed. Bribing people who have a significant influence in the dispensation of justice ruins the public trust in the legal system. In Sierra Leone for example, nearly 80 percent of respondents in a survey think there are two interpretations of the law: one for the rich and one for the poor. Such attitudes grow out of the fact that questionable influence requires the use of special connections, knowledge and money. "Ghost" workers in the public service comprise another priority area where corruption has flourished. Investigations in many African countries have revealed large numbers of people on government payrolls that do not actually exist. This has been a continuous drain on public funds. In Uganda for example, a Public Sector Review Commission identified 42,000 "ghosts" on the public payroll--civil servants who have retired, died or simply never existed. Corruption also finds expression in the appointment of family members, relatives and friends to public organizations that have profitable monopoly positions in some area of private or public sector activity. Such positions are highly prized due to the material and pecuniary benefits office holding brings to its occupants. Consequently, corruption is widespread in appointments or elections of public officials of every rank. At a more petty level--but one which most directly affects an aggrieved public, corruption involves countless underpaid, or simply greedy civil servants who charge the public for services they should rightly receive without additional fee. Prime areas include issuing drivers licenses, passports, and business permits. In some cases, these civil servants pay a certain percentage of their illegal gains to their superiors so they can continue to hold the office and benefit from the illicit opportunities it affords them. Another common scam is for civil servants to seek travel abroad so they can submit grossly inflated claims, which, usually for a few days travel, can be worth as much as two to three months of their regular monthly earnings. Police officers, especially traffic policemen, offer a highly visible face of public sector corruption and routinely use their powers to extort bribes from those fearing wrongful or unjustifiable punishment. These activities, when practiced on a large scale, can have significant harmful effects on the social, political and economic life of any society -- the case in many African countries. Analysis of Corruption in Africa Public outrage about corruption in Africa has been openly expressed since early 1990, spawned by pro-democracy movements that drew large numbers of people into political debate and encouraged them to organize. Street protests, strikes and other outbursts of discontent introduced multiparty politics to many Africans and even sometimes urged people to remove unpopular leaders, either through the ballot box or outright revolt. The emerging pro-democracy forces not only asserted the right of ordinary citizens to speak out and organize independently of the state, but demanded accountability from their elected officials. High-level state corruption became a prominent target. Its punishment and eradication was frequently demanded by those assembled behind democratic banners. Independent newspapers and magazines ran numerous exposes. Trade unions, popular organizations and opposition parties urged the removal of corrupt officials and the recovery of embezzled funds. Elected legislators and members of incoming governments drafted codes of conduct and appointed investigative panels to cleanse the bureaucratic apparatus. These actors view corruption as vicious to democratic practice because by its very nature, it despises public scrutiny and control. And since it propped up many greatly disliked governments and administrations through political patronage, efforts by new democratic forces to expose and limit corruption weakened supporters of the old regime. One problem facing reformers such as African policymakers and nongovernmental organizations (NGOs) is to sift through the mass of problems, and determine those most disabling and those most susceptible to reform. Dele Olowu, an expert on Public Administration and corruption in Africa, argues that governmental corruption is pervasive in Africa because efforts have focused on remedies before a thorough analysis of the problem. Policymakers' lack of understanding of some of the root causes has led to ineffective reform. Michael Johnston, a political scientist who has written extensively on corruption, suggests that reforms implemented in a complex political setting that is only partially understood may have undesirable results. There have been numerous attempts to tackle corruption in Africa. Unfortunately, many of the approaches have not been systematic but merely political maneuvers to quiet a dissatisfied public and international donor community. On the other hand, devising an anticorruption strategy is complex because the success of any program depends heavily on a strong commitment from the country's president, cabinet members and the most senior officials--the abusers. Without their cooperation, or certainly the dedication of the president and people in key positions of authority, malfeasance becomes cyclical. The causes and diagnoses discussed below cut across the various types of corruption in Africa. As public pressure grows to combat corruption in Africa, it is nevertheless clear that greater understanding of the causes and stakes involved is necessary to the formulation of solutions that can make significant progress in limiting it. Lack of Accountability and Transparency At least until recently, African governments rarely have been held accountable by their citizens. The principle of transparency demands that every public act be done in an open manner. Actions of public officers must be above board and every act that may generate suspicion should be explained. Failure to observe openness in the conduct of public duties presents opportunities for the dishonest to cloak their activities in secrecy while in actuality involving themselves in extortion and favoritism. Democratic systems offer mechanisms to minimize corruption by introducing greater accountability and transparency into governance. In Sierra Leone, for example, there appears to be a direct link between corruption and undemocratic politics. Widespread abuse has been uncovered as an increasing number of scandals surfaced following the 1978 introduction of the one-party system, which closed the door on accountability. Any institution that might have served to check government agencies was eliminated. The all powerful president headed practically everything including the army, the state-run university and civil service, and tolerated no questions on matters that should have required public explanation. In Nigeria, especially during the Babaginda Administration, accountability was non-existent. The Administration refused to publish senior officials' declarations of assets and press critics were persecuted by the government, intensifying high-level corruption. If politicians had any intention of limiting corruption, any revelation of wrongdoing would have been accompanied by swift retaliatory measures, and failure to take such action would have provoked an immediate public outcry. Administrative misuse of funds would have been rare; the possibilities of being caught, high; the penalties, severe; and the potential gains, most problematic. Where politicians have indulged in wrongdoing and the public is passive, if not equally as self-indulgent, public employees feel as if they might as well get a share of the pickings. Some disclosures from the 1992 corruption inquiries in Sierra Leone seem to support the view that administrative and political malfeasance feed on each other. Senior civil servants during the APC's reign, according to commission testimonies, embezzled government funds with the knowledge of equally guilty politicians. It is particularly difficult to institute transparency and accountability in a system where those in top political positions connive with civil servants to defraud the country. Overcentralized and Interventionist Government Public bureaucracies in Africa are usually over-centralized, often with ambiguous lines of authority, and under or over-elaborated rules of authority. This is a major contributor to governmental corruption. The state tends to centralize its powers in the executive branch with few checks or balances from the legislature, the courts, or regional or local governments. According to one scholar who has extensively studied these issues in Africa: Corruption in Africa is primarily located in the executive branch of government for the obvious reason that the legislative and judicial branches have generally lost whatever independence and power they may have once possessed. The private sector is left to deal with an inflated central political authority which makes decisions that could well be left to the impersonal judgment of the civil service. The combination of vague definitions of public functions and the absence of effective oversight has led to senior government officials assuming extraneous tasks, thereby placing themselves in positions to influence matters for their personal benefit. For example in Sierra Leone, Ben Kanu, the Minister of State Enterprises and Industries during the Momoh Administration, decided to assume responsibility for the Maritime Freights Levy Fund, formerly the responsibility of the Sierra Leone Shipping Company. After he seized control, it was alleged that hundreds of thousands of dollars were misappropriated and embezzled. Furthermore, the government is the focus of all power in most developing countries, and especially in Africa. The scope of governmental authority, especially during one-party rule, extends to the private sector. No industry is protected from its interference including banking, retail trade and the import/export industry. The government usually is the largest employer, service provider, regulator, and contractor, and determines the level and nature of economic activity. It is this great concentration of power--political economic, and bureaucratic, together with the developmental needs of its citizenry that provide fertile ground for corruption. The constant pressure from local businessmen and transnational corporations--all clamoring for permits, contracts, certificates, import licenses--creates an overwhelming temptation to "grease the wheels," and ensure desired results. As argued previously, the wider the scope of government in the affairs of society, the greater the opportunities for corruption. In Sierra Leone for example, such opportunities were exploited by dishonest people in the early 1980s, especially during foreign exchange shortages that subsequently led to a significant decline in imports. Officials in the banking industry and the Ministry of Finance became targets of bribery. Corruption not only grew but gathered momentum during this period. Low Salary Scales for Public Officials Low salaries encourage corrupt behavior. Poorly paid civil servants administer highly-valued programs, budgets, taxes, custom regulations, etc., and there is an almost irresistible temptation to levy fees. Corruption is not only an issue for the powerful or a matter of uncontrolled greed. It is also a means of survival on the part of junior civil servants and poorly paid workers. Civil service remuneration and conditions of service have continuously deteriorated over many years in the wake of structural adjustment programs. Civil servants have a hard time surviving on just one salary -- hence workers look for alternative ways to generate additional income; and second jobs and moonlighting follow. Employees are not dedicated if their salaries are inadequate, and perhaps only the spoils of office keep them there. Vulnerable departments such as police and customs are ripe for corrupt behavior because they have large numbers of workers who are lower ranked and in direct contact with the public. Furthermore, not only are they unsure about receiving their salaries at the end of the month, they may not even be sure whether they are still employed because of frequent and sudden cutbacks. The notion of a stable and secure career structure, which has been absolutely central to the idea and reality of public service as it was developed in the West, is not well established in Africa. Lack of Commitment The absence of a strong commitment from political actors, who often talk of accountability and integrity yet translate few promises into genuine efforts to detect and penalize unethical behavior, has contributed to institutionalizing corruption. Even after anticorruption agencies are created, they are usually denied the resources and independence necessary to achieve their stated purposes. In Tanzania, for example, President Mwinyi's 1990 manifesto, Presidential Circular No. 1, provided guidelines on methods and strategies to curb malfeasance by incorporating the concepts of transparency and accountability into public service. Yet, these efforts lacked the material support institutions needed to fight corruption. Similarly in Sierra Leone, the anticorruption and antismuggling squads established by President Joseph Momoh achieved limited successes, and the 1992 commissions of inquiry revealed his anticorruption record was worse than all previous presidents. The key to ensuring that political actors make a strong commitment is to devise an action plan that constitutionally strengthens the institutions mandated to fight corruption. In Uganda, for example, the office of the Inspector General of Government has constitutional authority to enforce the Leadership Code of Conduct by arresting and prosecuting those suspected of wrongdoing. However, the effectiveness and success of such an institution has a lot to do with its degree of autonomy. As in Uganda, the best way to make such a body free from all extraneous and political pressures is to make it answerable to Parliament rather than the Head of State. Ineffective Law Enforcement Machinery In African countries where the government is known to be soft on corruption, wrongdoing blossoms. These countries are plagued by weak law enforcement agencies, senior officials collaborating with undesirable elements, and light punishment for those convicted of illegal activities. The Sierra Leone Government is known to tolerate illegal mining, for example. Desmond Luke, a Presidential candidate in the country's 1996 elections made the following observation: It seems no one can control this industry and the result is that our fertile soil is laid to waste, our school-going kids drop out to seek quick wealth and yet everything is smuggled out for the benefit of the outside world...This situation must change. Governments must "get tough on criminals". Of course, better laws can help effectively structure anticorruption campaigns but legal reforms are just part of the solution. In conclusion, it is important to point out that Africans are aware of the problems of corruption and abuse that have characterized authoritarian regimes, and believe these issues must be addressed immediately. Many are taking a very courageous stand in promoting democratization and democratic governance as ways to curb that abuse. But since the overall democratization process is usually long, painful and complex, rather than immediately alleviating conditions, it can intensify problems in the short term. The challenge is to survive the transition, not to avoid it. Note: This section is based in large part on a text supplied by IRIS Consultant Sahr John Kpundeh. Chapter 3: Responses to CorruptionEffective ways to combat corruption and ensure good governance are best understood through an examination of real cases. This chapter presents examples from several different settings, including Africa, other developing regions, and the industrialized world. Some of the examples fit the case study pattern more closely, and allow for the analysis of success stories. Others either provide lessons from failed efforts to curb wrongdoing or are more general in nature, offering an overview of reform efforts in particular countries or fields. Chapter 4 pulls together some of the threads running through the examples provided in this chapter into an analysis of the lessons learned and of strategies and methodologies related to governance reform. As with corruption problems generally, the cases that follow lend themselves to analysis as principal-agent problems, according to Klitgaard's formula, corruption equals monopoly plus discretion minus accountability. As such, the problems presented in the examples can be addressed by approaches that set clear standards, constrain discretion, provide positive incentives, increase the flow of information, and introduce competition. Another way to look at this is to say that the exercise of public power that is less visible and less constrained creates opportunities for corruption. In the long term, the answer is, where possible, to create or strengthen a plurality of checks and balances, such as:
The cases presented in this chapter represent a broad range of problems and approaches to reform. Three of the cases come from Africa. The Benin and Niger examples concern movements against corruption in the wake of political changes brought about by the National Conferences of 1990-1991. The Uganda case examines the struggles and successes of Uganda's continuing process of civil service reform and strengthening of transparency. The other two cases come from Latin America and the United States. The Bolivia case, which deals with reforms in the municipality of La Paz, was presented by Robert Klitgaard at the IRIS/USAID workshop in Dakar. The remaining case, from the United States, illustrates some of the ways in which the American system of separation of powers at the federal level has dealt with fraud and abuses of authority. Section 3.1: Benin - The Struggle Against Corruption in Theory and PracticeBetween 1960 and 1972, chronic political instability, evidenced by a series of military coups, earned Dahomey (known as Benin since 1975) the unfavorable title of «Africa's sick child». In October 1972 a coup brought to power young military officers and intellectuals who had been greatly influenced by the radicalism of international upheavals such as France's 1968 student movement. They pledged to end dependency on foreign assistance and to henceforth rely primarily on national resources to meet expenses related to the country's sovereignty and development. In 1974, the new regime carried out a nationalization of the economy, including the banking sector. This was facilitated by phenomenal increases in the transshipment of products to Nigeria which allowed the state to amass significant financial resources. As a result, the development of political cronyism in President Kerekou's official entourage could be sustained and orchestrated by appointments in new public companies that were considered fairly «lucrative». This practice of clientele favoritism quickly resulted in corruption, undermining the legitimacy of a regime which had elicited real popular support in its early stages. But the prosperity of the 1970s was illusory because it concealed the weakness of an economy characterized by chronically negative trade balances and the near-total lack of an industrial sector. Indeed, the income provided by the proximity of Nigeria, and the subsequent development of the informal sector, remained very vulnerable to fluctuations in oil prices as well as in the exchange rate of the Nigerian currency, the Naira. Thus, the difficulties experienced by the Nigerian economy from the early 1980s brought to the surface the aforementioned weaknesses. Benin plunged into an economic quagmire characterized by serious budgetary difficulties and the bankruptcy of almost all public companies, followed by major lay-offs. From 1988 onward, the moral legitimacy of the regime came to a definitive end with revelations in an independent newspaper, Tam-tam Express, of a series of scandals outlining the major role that several high ranking government officials had played in events leading to the nation's dire economic situation. The general public, for the first time, came to recognize the extent of this regime's unprecedented corruption and poor oversight. The fight against corruption and the desire to "make the grave diggers of the economy pay" were important action items on the agenda at the 1990 National Conference which would eventually put an end to the military/Marxist regime led by General Mathieu Kerekou. The Environment of Corruption in Benin and Local Elements Facilitating Its Development The problem of corruption in Benin, as in most African countries, is not just linked to the political and economic context of the time, but also to the general cultural values which make it either a crime or a widely accepted form of "making do with limited resources." In the 1960s, social and cultural norms contributed to the reputation of Dahomey's civil servants as workers demonstrating high levels of professionalism, diligence and integrity. These characteristics earned them the distinction of being the first choice among West and Central African colonial administrators looking for assistants. At that time, the intellectual demands and high status associated with the job of a civil servant made it more a distinguished position than a well-paying one. This is perhaps a reflection that at the time inflation was almost non-existent and services such as education and health were freely provided by the State. The 1970s ushered in a new generation of civil servants and politicians who quickly eroded these values of professionalism and integrity. At the same time, financial burdens bore more heavily on the civil servant because of worsening economic conditions, rampant inflation as a result of the 1973 oil crisis and privatization of health and education services. One must cautiously add, though, that the majority in this new generation of politicians from the 1970s came from rather modest backgrounds. Not having inherited any accumulated capital, whether in productive forms (such as parents' pharmacies, business ventures or medical practices) or non-productive forms (such as real estate), they had to start from scratch and often support a large family (which occasionally included in-laws). Minimal salaries (100, 000 FCFA a month on average for a high-ranking civil servant at the start of a career), and needs far exceeding the level of income engendered a tendency to partake in different forms of corruption to "make ends meet," and if possible to save a little toward difficult times. The cultural context that supported the development of political cronyism through the allocation of positions deemed "lucrative," eventually legitimized corruption, especially from those holding these favorable positions. Proverbs such as "goats graze where they are tied" or "you can't prevent a child whom you sent to buy peanuts from eating a few" illustrate the tolerance in the public arena for this form of illegal enrichment. Thus, given the long history of leaders living well beyond their means with little fear of punishment, it is not surprising that the gendarme, the policeman, the customs officer or the soldier should indulge with full immunity in the practice of what has been called "racketeering in uniform." The National Conference and the Elements of an Anti-Corruption Strategy in Benin Despite Kerekou's warnings to delegates not to turn the Conference and its opening on 19 February 1990 into judicial proceedings against the former regime, the very first interventions condemned its seventeen years of embezzlement as manifestations of a destructive form of State gangsterism. Thus was established the moral tenor of a judicial framework which would endeavor, at a minimum, to fight against corruption and illegal self-enrichment, partly by relying on the provisions included in the new 1990 constitution. The 1990 Constitution, the Regulation of Public Markets and the Independence of the Judicial Branch At the outset, the preamble of the new constitution sets the tone: "We, the Beninese people, reassert our fundamental opposition to any political regime based on arbitrariness, dictatorship, injustice, corruption, misappropriation of funds, regionalism, nepotism, abuses of power and personal power." Though merely a statement without legal consequence, this reveals the degree to which the former regime's corruption impacted upon the fathers of the new constitution. Moreover, the desire to create a lawful State implied looking for assurances against the types of abuses which traditionally characterize authoritarian regimes. However, stipulations become more precise in Title II, which contains provisions relating to individual rights and responsibilities. Regarding the obligation to respect public assets, article 37 states: "Public assets are sacred and inviolable. They must be scrupulously respected and protected by every Beninese citizen. Any act of sabotage, vandalism, corruption, embezzlement, or illicit enrichment will be repressed within the conditions set down by law." Moreover, the authors of the new constitution were cognizant of the fact that power had become a source of illegal and scandalous enrichment, in a context where the law books did not provide any legal means to impose accountability. Thus, they introduced provisions aimed at determining the assets of the President and of the Ministers both at the beginning and end of their terms. Article 52 of the Constitution drafted 11 December 1990 specifies that: "During the time they are in office, the President of the Republic and the members of the Government cannot, of their own accord nor though an intermediary, buy nor rent anything which belongs to the state, without prior authorization by the Constitutional Court within the conditions set down by law. They are required on assuming office and at the end of their term, to declare on their honor, in writing, their assets and to send the document to the Auditor General of the Supreme Court. They are not to take part in public procurement nor in adjudications concerning institutions that depend upon the State or are under its control." At the regulatory level, the implementation and working of the procurement mechanism has been the object of oversight since the colonial period. The legal foundation of this mechanism in Benin remains statute number 4042 of 31 May 1954. This applied the list of clauses and general conditions relative to all the goods and services markets under then-current French law, to all of French West Africa. A new code, however, has recently been submitted to the National Assembly. The objectives of the latter are, among others, to encourage efficiency, true competition, integrity, equity, and transparency. At the judicial level, the Constitution, drafted 11 December 1990, states in article 125: "Judicial power is independent of legislative and executive power." The judicial system in Benin is a legacy from the French. It continues to be largely based on the French system despite cultural differences and more than thirty years of political independence. While a number of rules applicable to the career path of magistrates and to the judicial organization support judicial independence, nevertheless the judiciary remains in part under the authority of the executive power. The independence of the magistrate is legally assured by, on the one hand: - secure tenure for judges ("inamovabilité"): this translates into the fact that "the presiding magistrate cannot receive, without his consent, a new position, even by promotion" and on the other hand, - the role given to the Conseil Supérieur de la Magistrature (CSM): it must ensure the independence of the Judiciary and make sure that the status of the judges is respected. Administrative Oversight Commissions At the height of the economic and financial crisis which preceded the 1990 National Conference, and following a series of revelations on scandalous cases of corruption by the newspaper Tam-Tam Express, General Kerekou set up an Asset Oversight Commission, called Ahouansou Commission, named after one of the deputies who had asked President Kerekou to liberalize political life in the country. But from the onset, the Ahouansou Commission was poorly equipped to carry out its mandate, both because of members who did not have the required training, and because of the political context that was still dominated by those whom it was meant to "investigate." It was therefore not surprising that the commission did not reach any conclusion and was replaced during the period of democratic transition by the Amoussou-Kpakpa Commission. The new commission was supposed to draw upon the mistakes made by its predecessor. Its president, Amoussou-Kpakpa, was a seasoned magistrate who could rely on the assistance of several Inspectors of Finance. But the new commission, unfortunately, did not fare much better than the former one. None of the lords who had obviously prospered under the preceding regime were threatened. Only the courts that had been dealing with the attested malfeasance cases at the level of the State banks, continued their investigations. At that level, the true challenge for the Prime Minister of the transition period who had promised to "make the grave diggers of the national economy pay up," as he said, was the arrest of Amadou Cissé, who played a central role in the practice of malfeasance and was a true "Rasputin" for President Kerekou. Breaking the Culture of Impunity: the Amadou Cissé Case Amadou Cissé, who entered Beninese political life in the early 1980s, very quickly became President Kerekou's evil genius. He took advantage of his position to make himself indispensable. He would make and unmake political careers and had managed to set up a parallel structure which intervened in ensuring the safety of the President as well as in the secret diplomatic dealings of Benin. There is little doubt that all the nominations to the main positions of responsibility in the Ministry of Finance and the two State banks between 1985 and 1988 were made on his own volition or with his accord. In return, the "chosen" persons would have to bribe him with cash or fraudulent money transfers. Thus between 1986 and 1988, billions were transferred into European accounts without any local counterpart. Feeling protected by the political position of Cissé, ministers, heads of banks, and accountants freely helped themselves throughout this time. After such embezzlement, which bordered on gangsterism, banks found themselves "deprived of" tens of billions of francs which caused them directly to discontinue disbursements, and subsequently led to their plain and simple demise. In 1988, scandal and the pressures from debtors and beneficiaries were so great that the party in power could no longer hide anything. Kerekou had no choice but to sacrifice a few black sheep. An inquest was launched, but for some odd reason, it was entrusted to the presidential guard. Two ministers were imprisoned, as well as the bank directors and some of their collaborators. Amadou Cissé, the "untouchable," however, remained as free as air. It was in this context that the National Conference was launched. It recommended that Cissé's dossier be submitted for judicial review. An international arrest warrant was issued for Amadou Cissé, who had fled the country in the interim. The challenge for the new Prime Minister was then to have such an arrest warrant served while Cissé's protector still enjoyed power, knowing that any revelation could hurt him. But apparently Kerekou had made up his mind to let go of his "Rasputin" whom he reproached with having abused his trust. Shortly before the presidential elections in March 1991, Amadou Cissé was arrested in the Ivory Coast and extradited to Benin. The trial of Amadou Cissé and his followers finally took place in 1992 under the regime of democratic Renewal. The various persons tried received prison terms ranging from 5 to 10 years. They also had to pay the defendants billions of fran |