In lieu of an abstract, here is a brief excerpt of the content:

2 DOES COMPETITION IN THE EUROPEAN UNION CORRUPT? Colonel Pickering: Have you no morals, man? Mr. Doolittle: Can’t afford them, Governor. —George Bernard Shaw, Pygmalion On the morning of February 20, 1992, in Orlando, Florida, police were called to a not entirely atypical south Florida scene: a wild, half-naked middle-aged man standing seventeen floors up on a balcony of the Hyatt Regency Grand Cypress hotel, threatening to jump into the lushly planted atrium below. Within little less than an hour, a police officer had talked the man down and back into his hotel room, where a twenty-two-year-old woman from Escorts-in-a-Flash was sprawled on the bed, high on cocaine. The escort, Denise Wojcik, said she and another escort, Sherri, had spent the night with the deranged man, snorting cocaine through rolled up hundred-dollar bills. The man in question was searched and found to have a bit more than thirty-one grams of cocaine in his possession, enough to make him a drug trafficker under Florida law. He was also found to be Ben Dunne, supermarket mogul and scion of one of Ireland’s wealthiest families. In a twist worthy of a Carl Hiassen novel, Dunne blamed his behavior on his having been kidnapped by the IRA eleven years previously. Incredibly, the IRA reference turned out to be true. Although this story may have been dismissed as just another tale of the moral turpitude of the rich, the ensuing legal battle, which triggered a government investigation , revealed that at the debut of the Celtic Tiger’s unprecedented economic takeoff, Irish politics was being financed by an elaborate network of illegal financial transactions, undisclosed donations, and tax dodges, and that Charles Haughey, leader of Fianna Fail and former Irish prime minister, was at the center of it.1 Some might say that a corruption case such as this is the last gasp of “old Eu30 rope” as it confronts the competitive market economy, but indications are that corruption is making the transition to the more competitive economy and into new economic sectors. There are serious allegations that Silvio Berlusconi, Italian prime minister (1994–95 and 2001–6) and founder of the party Forza Italia became Italy’s modern media mogul and billionaire the old-fashioned way: by bribing judges and the tax authorities.2 In Ireland, evidence indicates that in 1995 the bid procedure for awarding the license to run second-generation mobile phones was rigged, and, despite the professed openness to international competition and an EU legal framework that required it, internal memos suggest that the amount of “Irish content” was a factor in determining the winner.3 In 2001, Dutch television exposed extensive collusion that had been going on for years in public contracting between construction firms and public authorities,despite EU competition rules,and in a market sector with over two thousand firms.4 In 2005, employees of the French electronics and defense firm Thales (formerly Thomson CSF) were investigated for making payments to win a city rail contract in Nice.5 These cases raise the question of whether and how economic competition restructures the opportunities and risks of corruption. Free trade between states is expected to increase competitive pressures on firms, which lowers their ability to tolerate the costs of corruption that they may have been paying. If free trade also includes an agreement to open up a state’s public procurement practices to bids from foreign firms, then politicians and bureaucrats should also find it harder to continue corrupt practices. On this virtuous path, even under domestic policing and judicial systems that remain unchanged, everyone should have less incentive to engage in corruption: there is more risk and less profit in it.6 This happy scenario assumes that foreign firms cannot be bought off as easily as domestic firms, that an increase in the number of participants in a given market sector will disrupt any preexisting corrupt practices,that the long-term effects of competition will influence short-term business calculations, and that when a country’s economy is forced to be more competitive, politicians will not just increase public spending to cover extra outlays for corruption (thus absorbing the costs so that businesses can continue to give kickbacks).7 It also assumes that the free trade rules and open public procurement rules will be observed and enforced. In other words, international free trade accompanied by an oversight body raises the risks and thus...

Share