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The Founding of Transparency International

A Global Campaign Against Corruption Takes Form

By Peter Eigen | Innovations: Technology, Governance, Globalization, Transparency International | October 1, 2008

CREDIT: Michael Goodine (CC).

This article is excerpted from the Spring 2008 edition of Innovations: Technology, Governance, Globalization. The full article is also available.

In the early 1990s, I presented a concept for attacking corruption at a retreat in Swaziland of World Bank representatives from all over Africa. I presented it to thirty country directors and the Bank's Vice President for Africa. Everybody there was very excited by my proposals. They said, "Why don't we simply start a task force, which will develop a systematic approach on how we deal with corruption in Africa." We appeared to be on our way.

But a week later I received a memorandum from our legal department stating that the activity I had initiated was totally off limits. It was too political. It was not permitted under the Charter of the Bank.

Rather than abandoning the initiative, our group decided to pursue it as private citizens. We were undeterred.

During my tenure at the World Bank, I made many excellent contacts both within and outside the Bank. The idea had lit a candle in the minds of quite a number of people. I received letters, telexes, visits from interested colleagues, phone calls from people who had heard about the initiative. Building on these contacts, I convened a number of different meetings with overlapping groups of 20 or 30 people.

Among those who expressed interest, there was a core group of ten or so people, who were very closely connected with us from the very beginning. They all had different skills. One was skillful in public relations. Another had been the deputy inspector general of the United States Agency for International Development (USAID); he was like a policeman, attuned to any the clues that would indicate corruption. We had a business person intimately familiar with the motivations of large corporations. Others wanted to participate while remaining in the background; one of these was Robert McNamara. Each of these people was in their own way suffering from the fact that their work was handicapped by the corruption they encountered on a regular basis.

While preparing the launch conference for Transparency International, we developed three key insights, which are still the guiding principles of the organization today:

  • First of all, we knew that we could not investigate individual cases, to expose them as Amnesty International was doing. The reason was that, because corruption is so complex and is so technical, we needed to engage people who were directly exposed to or peripherally involved in corrupt practices to work with us and in joint programs. That was probably the most important shift from what I had initially conceived when I left Kenya.
  • Second, we realized that we would have to deal with corruption by mobilizing the knowledge, enthusiasm, courage, and credibility of committed people in each of the localities in which we intended to work. We wouldn't be able to operate like the Catholic Church or the World Bank, preaching and dictating from the center. Therefore, we began very early on to initiate the creation of what we call national chapters, which are autonomous nongovernmental organizations incorporated in their countries of operation, bound loosely in a global network, with basic governance criteria for its members.
  • Third, we recognized that criminal law is a relatively blunt weapon against corruption. Consequently, we sought to develop a holistic approach, seeking to identify the different elements of the so-called "integrity system," which has to be in place in order to protect society against corruption. This includes a legal dimension, laws, institutions, and guidelines, but it also includes the media, civil society, and the different branches of government. It covers very technical matters, like how to select contractors under international competitive bidding; how much transparency to enforce in a legislative body; to what extent politicians and office holders can be forced to disclose their assets and liabilities; and how to deal with conflicts of interest in a society. The approach became a mosaic of many different elements, which together created a holistic system of integrity.

We initially thought we would focus on development projects, on large transactions. But we also had the idea that our national chapters should define their own agenda and decide their own priorities. As a consequence, we were very quickly caught in a dilemma. Some of the chapters said, "We are not really interested in these big international transactions. We don't care whether our President gets another million dollars in some bank account in Europe. What we care about is whether a policeman, for instance, extorts money from the poor and the powerless in our slums. Or whether a teacher extorts money from the parents of his students, in order to let them come to school or give them a certain grade." And therefore we began to look at the corruption within countries, as well as international corruption.

The challenge of confronting domestic corruption was not only one we faced in developing countries. The German chapter, for instance, insisted from the outset that if we wanted to carry the anti-corruption message into the world from the North, we would have to clean up our side of the street first. At that point we came to a really frightening realization: the establishment in Germany was not really against corruption as long as it took place outside the country. To get around this indifference, we went to the media, and began to expose the mechanisms of corruption. Thus, while political and business leaders continued to view our attempt to eradicate corruption as idealistic and naive, they did everything to avoid a conflict with us.

Paradoxically, many of the governments in the South—particularly a new generation of more enlightened leaders who recognized the self-destructive impacts of corruption—were much more committed to change. For instance, I attended a conference of the global coalition for Africa in The Hague at which the then-president of Ethiopia rose and addressed the ministers of development of the North, including the German minister of development. His message was: "We are trying to do our damnedest to clean up our homes and we are working with Transparency International on this. But please, our brothers in the North, stop your own exporters from bribing our elites and undermining our economic management."

Thus as we developed further and began to build our network of national chapters, we came to realize the importance of distinguishing between different types of corruption, from petty corruption at the local level to grand-scale corruption at the international level. Each of these types of corruption is abhorrent in its own way, but the response to each has to be different.

Petty corruption at the community level takes many forms. Civil service in many countries in Africa, for instance, is terribly bloated, there's no budget for proper pay or for rewarding good performance. Therefore, many governments simply rely on the fact that these civil servants will supplement their incomes by extorting money. When public servants do, predictably, turn to bribery, they naturally target the most vulnerable people, the poorest, because they are the least able to object. As a direct consequence, in some countries whole generations of young people are being lost because their parents cannot afford the bribes that are being demanded by school officials or by teachers.

This sort of petty corruption has to be addressed through awareness building, through campaigns, but also through the development of anticorruption tools and their deployment by civil society. In some countries, for instance, we have helped puppet players to go into the villages and perform pieces for the villagers in order demonstrate to them their rights and obligations. In some Indian villages we have helped implement report card systems that rate the performance of local civil servants, which the people are asked to complete. In Argentina we have supported campaigns where school children stood in front of the entrance of municipal buildings and asked passersby if they had been asked for money, and if so, how much. If then the mayor objects and throws them out, the groups go to the media. We are also working with cartoonists in different places, who are very powerful in shaping the awareness of people. We work to make sure that this corruption awareness enters into the curriculum of schools as well—if possible, at a very early stage. Students need to understand integrity as an important value of their culture, of their society.

At the other end of the scale is grand corruption—large-scale bribery that crosses borders. A vast disproportion exists between the salary that civil servants, bureaucrats, or even politicians earn and the huge amounts of money that are at play in large procurement contracts—often hundreds of millions of dollars. Now there is a state of the art in preventing corruption in such transactions, which, at this point, has been mainly developed by the World Bank. If and when careful ground rules are followed—by putting in place monitoring processes, giving access to civil society, and making the entire process open to media scrutiny—procurement can be very clean and very effective. But unfortunately, many situations, for instance, directly following natural catastrophes or in other contexts in which there is a sense of urgency, negotiations can take place behind closed doors and huge sums of money can end up in the wrong pockets. (We have seen this in connection with the procurement of the supplies and reconstruction of Iraq, for instance, even though the United States normally has a very strict procurement system.) What is needed, as a consequence, is the development of a zero-tolerance philosophy, linked to credible monitoring and severe sanctions for noncompliance.

The Breakthrough

The first real breakthrough for Transparency International came when we finally managed to get a dialogue going with the business leadership in Germany. Over a period of two years we arranged meetings at the Aspen Institute in Berlin and worked to the point where they acknowledged that what they were doing was not simply adapting to conditions outside their control, but rather blatant bribery, blatant perversion of economic decision-making. At the last meeting we held with them they went so far as to say, "Yes we have to try to stop it. But how can we stop when our competitors bribe and get all the contracts?" So it was a dilemma, in which they were caught; a true sort of "prisoner's dilemma," where the company or the exporting country that behaves better than the other is punished for their good behavior. I find this quite interesting because this kind of prisoner's dilemma is not only found in the fight against corruption. It also exists in other areas of failed global governance—for example, human rights violations, child labor, exploitation of women, slavery, violation of labor standards, and destruction of the environment. Very often, it is more expensive, in the short run at least, to produce with a higher standard of social responsibility.

Our exit route from this dilemma was an attempt to help them find a way to avoid corruption without losing contracts. We had a couple of ideas regarding how we could do this. One very simple way I proposed was that we find and identify competitive situations, say for certain major contracts where very few companies had the capability to bid. This is true in civil works contracts financed by the World Bank, where sometimes you have five, or perhaps eight, global companies prequalified to participate. It is also true in the privatization of public utilities, telecommunications companies, and in the area of minerals, extractive industries, and petroleum development. We offered to bring the competitors together and induce an agreement to stop bribing, backed up by a system of monitoring and a system of sanctions.

When the business people met with us again and heard this proposal, they quickly got on board. "If you are able to stop our competitors from bribing, we are going to support you," they said, "because we want to get away from corruption. We understand that corruption is not only destroying the host country, which is afflicted by this cancer, but it's also destroying the companies that are allowing this kind of behavior." The companies signed an open letter to the German government, in which they demanded that the Kohl government—which had been resisting any attempt to outlaw international corruption—participate in the negotiation of a convention that was being prepared with our help, under the auspices of the Organization for Economic Cooperation and Development (OECD).

The OECD Convention signified a quantum leap in the efforts to fight corruption. For the first time, exporting countries signed a binding convention, in which they promised to change their own laws to prohibit their exporters from bribing abroad. The convention entered into force in 1999. It was a tremendous step. Also, at the time, the German government abolished the tax deductibility of foreign bribes—a particularly scandalous feature of its tax system. From that moment on, at least on paper, the system had changed, and the days of transnational corruption as a business practice were suddenly numbered.

This article is excerpted from the Spring 2008 edition of Innovations: Technology, Governance, Globalization. The full article is also available.

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