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389 Corruption poses similar problems to both governments and private firms. Contracts are awarded to those paying bribes rather than delivering quality. Public policies as well as corporate strategies are distorted by side payments and resources are embezzled for private use. Due to these similarities , most of the ideas developed herein are equally applicable to public and private organizations. Anti-corruption approaches can either relate to rules or to principles; they can be either top-down or bottom-up. This chapter reviews a variety of widely discussed approaches to anti-corruption and highlights some of the shortcomings of rules-based, top-down anti-corruption. The chapter makes the argument that many in government and the private sector can contribute to bottom-up endeavors. The chapter then emphasizes the need for bottom-up methods to complement top-down approaches. The last section seeks to reconcile top-down and bottom-up approaches and provides practical reform proposals. Rules-Based Anti-Corruption Many anti-corruption methods refer to rules. These rules have two dimensions . The first element is repression, which emphasizes draconian penalties and a high probability of detecting malfeasance. Since the seminal work of Becker, criminal behavior is seen as being driven by rational calculus. A fully rational, risk-neutral actor opts for criminal behavior if the expected benefit 15 The Organization of Anti-Corruption: Getting Incentives Right johann graf lambsdorff I am indebted to Mathias Nell, Robert Rotberg, and Emily Wood for helpful comments and assistance. 15 0328-0 ch15.qxd 7/15/09 3:52 PM Page 389 390 Johann Graf Lambsdorff exceeds the sanction multiplied by the probability of being convicted. Even if rationality is imperfect, this calculus captures many of the incentives faced by human beings. This argument is further supported by the fact that bribery, fraud, and embezzlement are less emotional, and more rational, forms of misconduct . They require sophistication, skills, and long-term planning, emphasizing the sober balancing between pros and cons. The 2003 United Nations Convention against Corruption requests that all signatory countries implement criminal codes that counter corruption. As of 2008, this approach is the most important rules-based approach to deterring criminal behavior. Repression is an indispensable element in the fight against corruption. But judiciaries perform quite differently across countries. Data on prosecutions and court convictions related to fraud, bribery, and embezzlement reveal that such cases are common in countries such as Canada, Finland, Germany, and New Zealand, reaching annually up to 100 cases per 100,000 inhabitants.1 But in many less developed countries these figures are drastically lower; often fewer than one single case per 100,000 inhabitants is reported. What might cause these huge discrepancies? First, law enforcement is costly and, second, such convictions require an honest judiciary. But resources for developing an honest judiciary may be in short supply, particularly in developing countries. Apart from the costs, increasing repression also has detrimental effects. Threats of penalties and enhanced monitoring may adversely affect the intrinsic motivation of public and private employees. Thus, employees may not support the repressive actions of their superiors with their own efforts and civic engagement. To the contrary, employees are induced to fight corruption for their superiors but not for themselves. Empirical evidence exists that casts doubt on approaches that focus on formal, rules-based anti-corruption endeavors. For example, Voigt, Feld, and van Aaken investigate the impact of prosecutorial independence in containing corruption and find that de facto independence decreases corruption.2 However, de jure independence does not exert the same impact. A similar finding related to strict campaign financing rules is reported by Stratmann.3 Employing only formal rules may thus be insufficient for containing corruption. Global Integrity, a Washington-based think-tank, assesses various key issues of governance and anti-corruption. These data, as presented on its website , reveal to what extent rules, in what Global Integrity calls the“legal framework ,” are effective in reducing corruption. It investigates issues such as elections , civil society and the media, accountability, administration, oversight, and the rule of law. Table 15-1 reveals how the “legal framework” and its “practical implementation” (another dataset assembled by Global Integrity) 15 0328-0 ch15.qxd 7/15/09 3:52 PM Page 390 affect perceived levels of corruption in a cross-country investigation. The data on practical implementation positively correlate with Transparency International ’s (TI) Corruption Perceptions Index. This correlation is revealed by a coefficient of 0.098, which drops to 0.032 when controlling for GDP per capita, but...


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