Becoming Denmark

Historical pathways to European

control of corruption

Alina Mungiu-Pippidi

Hertie School of Governance

ANTICORRP FP7 EU Framework Project

pippidi@hertie-school.org

www.againstcorruption.eu

The problem

Any social group of people living together for any length of time, from a hiking expedition to a nation sharing territory faces the problem of having to share resources to produce collective goods

How to achieve the management of common (i.e. pooled) resources on the basis of fairness and integrity old problem imperfectly solved

Modernity is only one solution to this, often presumed as exclusive solution and always presumed as implicit – most assistance budgets tailored to this

Where do we get it wrong?

Modernity presumptions: representative leaders are trustworthy principals (since they are elected), bureaucratic agents (civil servants or magistrates) are autonomous from private interests, voters are effective principals at least at elections time

Huntington’s observed that corruption grew with modernization in the Third World, opposite to Europe

Markets are hardly competitive in developing countries (of which many are not developing)

The invisible hand often acts to promote the welfare of those who are already well-off while pushing down the vast majority (institutional losers)

Elites oppose change or support it only formally (institutional winners)

Better an island; and a democracy,

maybe

26/04/2016 4

2011CC lowest

tercileCC mid tercile

CC top tercile Total

Free 5 27 50 82Partially free 31 26 3 60Not free 32 10 5 47Total 68 63 58 189

Liberal democracies do ten times better than autocracies in clean countries 50/5 (of which 21 islands)

But two out of three corrupt countries are free and partly free (89 pluralist/42 not free); of former, 59 are electoral democracies

Weber‘s status society,

Mousnier‘s

estates

State-society theory

Interpersonal exchanges

(particular versus universal)

Eisenstadt and Roniger

Power distance

and individualism Hofstede

Extractive versus

inclusive institutions-

Acemoglu and Robinson

Open versus limited

access order North

Why do some societies manage to control corruption,

so it manifests itself only occasionally, as an exception,

while other societies do not and remain systemically

corrupt?

And is the superior performance of this first group of

countries a result of what they do (as assistance

industry believes, and this is why we transfer

‘institutions’) or of who they are (their formal institutions

work because certain behavior is already there)?

How has control of corruption got built historically

and what lessons we can derive from this for current

anticorruption policies?

My research questions

My research strategies – caring for

contexts, learning from achievers

Develop reliable indicators and measurements sensitive to change and policy intervention

Document policy interventions and compare across countries checking for progress

Compare achieving countries versus non-achievers, their regions

Process trace change, historical and contemporary

Instrument- EU funded research grants FP7 ANTICORRP, DIGIWHIST Horizon 20-20, based on consortia

From Cicero to UNCAC

Can we have a definition of corruption which is universal (across history and regimes) but also bounded?

Corruption cannot be ANY abuse of trust including conversion of authority into undue private profit but also private-private dishonest behavior (cheating, fraud)

Public corruption as systematic abuse of PUBLIC authority to channel universal PUBLIC resources to particular PRIVATE interests

Presumes public interest and ethical universalism as main value – 170 ratifying state parties

Operational

Corruption at macro level = particular distribution of PUBLIC goods leading to undue PRIVATE profit

Control of corruption= capacity of a given society to keep corruption an exception

We can measure what is rule and what is exception and how this changes (public contract data, subnational transfers)

I measure favoritism, state capture, particularism

Example- How control of corruption

does NOT go up when an ACA is created

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2.5

33.5

44.5

ICR

G C

ontr

ol of C

orr

uption

-5 0 50=year ACA came into power

ICRG Control of Corruption

Example- how govt

party mayors get all

floods fund

2004

(SDP)

2008

(Liberals)

2010

(Democrat

Liberals)

Share of funds for main govt

party %49 45 62

Share of vote in local elections

of govt party %36 16 29

614.75

937.25

612.84

345.6

148.51.4

2.82.2

1.7

1.3

2004 2008 2010 2012 2012-Ponta

Fon

du

rile

ch

elt

uit

e

EUR (millioane)

Indice clientelism

Source: MaKAB, Note: market share=total value of contracts won / total value of

contracts won in EU funded construction in time t

elections

Example- how favorite firms

change with elections

My argument - Parsimonious model

of control of corruption over time as

equilibrium

Factor 1- State ‘scope’- Size of public goods

delivered (Resources/opportunities)

Factor 2- Power discretion – Political AND

social pluralism, power distance

(Constraints/deterrents)

Potential

public spoils

Power discretion

Control of corruption in time

time

Waquet’s

Florence

Simple prescriptions- reduce potential

spoils, increase watch based on losers

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Opportunities: Constraints:

vsPower discretion

Material

resources

Autonomous

judiciary

Demanding

citizens

CorruptionControl of

Corruption

Three modes of corruption control-

I- Monarchy

Autocratic Favor (particularism) is rule of game, so ‘corruption’ is associated loss of favor. One principal and high occasional repression

Absolute to constitutional –development of bureaucracy and transition

The longest enduring monarchies have successful transitions from patrimonialism

A third of the world’s best governed countries are traditional monarchies – mostly constitutional but not only – and two thirds of present monarchies rank in the top category of good governance.

Three modes of corruption control-

II, III Elite Republics. Ethical universalism is rule

of game, so corruption is factionalism and

factional distribution. All elite members are

principals and surveillance (prevention) rules

Democracy. Principal is unclear, diffuse,

disempowered. Both prevention and

repression entrusted to agents (bureaucrats).

If franchise and party factionalism precedes

creation of strong bureaucracy, control of

corruption does not get built

Contemporary pathways

1. A good principal exists? Enlightened despots - Follow the king of Denmark

2. A modern individualistic society exists with enough demand? Build capacity and a more optimal equilibrium

3. None of the above? Solve collective action problem based on the real principals you have (losers, donors…) and manipulate size (cut down)

The Sicilian villagers dilemma

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7

0.9

1.1

1.3

1.5

1996 2000 2003 2005 2007 2009 2011 2013

Co

ntr

ol

of

Co

rru

pti

on

-2.5

(w

ors

t) to 2

.5 (

best)

Est…

0

5000

10000

15000

20000

25000

30000

35000

GD

P p

er

cap

ita P

PP

(2

011 c

onsta

nt

inte

rnational $)

Est…

Success so far?

Estonia-

Reducing

resources,

developing

constraints

Public integrity score 2014

for the EU28:How do countries rank?

26/04/2016 20

26/04/2016 21

Rwanda

Denmark

Bhutan

New Zealand

Singapore

Cape Verde

Netherlands

Botswana

Lesotho

Mozambique

St. Lucia

Burkina Faso

Chile

Norway

BarbadosQatar

Liberia

Niger

Uruguay

St. Kitts and Nevis

Mexico

Kyrgyz Republic

ItalyGreece

Myanmar

Iraq

Tajikistan

Equatorial Guinea

ArgentinaPalau

Ecuador

Uzbekistan

Kazakhstan

AzerbaijanRussia

Turkmenistan

Venezuela

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

WG

I C

on

tro

l o

f C

orr

up

tio

n

(-2.5

to 2

.5 b

est)

HDI Score (0 to 1 best)

Integrity by development-why human agency matters

AN EU IN DIFFERENT SPEEDS:THE R&C DIVIDES WITHIN EUROPE

26/04/2016

CONSTRAINTS

High Medium Low

RE

SO

UR

CE

S

Low

Finland France

Lithuania -

Netherlands Estonia

Denmark UK

Sweden Ireland

Belgium

Medium

Luxembourg Latvia Hungary

ItalyGermany Portugal Greece

Austria Spain Slovenia

High Malta

Cyprus Poland Croatia

Slovak Rep. Czech Rep. Romania

Bulgaria

THANK YOU!

WHAT TO DO: REDUCE RESOURCES AND OPPORTUNITIES

Cyprus

Estonia

Hungary

Lithuania

Bulgaria

Czech Republic

Greece

Latvia

Poland

Italy

Romania

• Cut red tape to reduce administrative discretion (time to

import, export, pay taxes and so on)

• Streamline regulation to reduce informality

• Increase electronic access to all public services and

foster more Internet access, usage

• Increase transparency, especially fiscal transparency

(online expense tracking systems become fast best

practice)

• Far more transparency needed for EU funds

• Publish all affiliations, relations (lobby registers)

accounts of officials to prevent conflict of interest, fiscal

evasion and corruption

WHAT TO DO: INCREASE CONSTRAINTS, BUT NOT JUST LEGAL CONSTRAINTS

Italy

Portugal

Slovakia

Slovenia

Spain

Bulgaria

Czech Republic

Greece

Latvia

Poland

Romania

• Protect media from capture (transparency of

ownership, government advertising)

• Protect and encourage civil society and

Internet media watchdogs

• Adopt social accountability designs to protect

EU funds (involve local stakeholders and

consumers in the planning and monitoring of

EU funds)

• Develop judicial capacity

• Develop further audit and monitoring capacity

CONTROL OF CORRUPTION AND INTERACTION OF ITS DETERMINANTS

(1) (2) (3)

HDI 1.861*** 2.203*** 2.125***

(0.000) (0.000) (0.000)

Administrative Burden -0.059

(0.222)

Judicial Independence 0.037

(0.720)

Administrative Burden x 0.032*

Judicial Independence (0.010)

ME Administrative Burden 0.099*

(0.008)

Budget Transparency -0.262***

(0.000)

Freedom of the Press -0.143* 0.0126

(0.026) (0.785)

Budget Transparency x 0.055***

Freedom of the Press (0.000)

ME Budget Transparency 0.254

(0.385)

E-Government -0.068

(0.157)

E-Government x 0.027**

Freedom of the Press (0.001)

ME E-Government 0.072*

(0.009)

Constant -2.455*** -1.293** -2.134***

(0.000) (0.005) (0.000)

Countries 91 91 91

Adj. R-squared 0.800 0.729 0.670