By: Raquel Mayer and Juanita Riaño, Office of Institutional Integrity, Inter-American Development Bank
A few days ago we were reminded on this blog of an idea to reduce the incidence of bribery proposed last year by Kaushik Basu, then India’s Chief Economic Adviser to the Government of India and, and since last month, the World Banks’ Chief Economist.
Dr. Basu argued in 2011 that in order to cut down the bribes that public officials demand from citizens and private companies to allow them to receive a service they were entitled to receive,
the giver of [such] bribe should have full immunity from any punitive action by the state.
His main arguments and caveats are explained in detail in his paper and in multiple articles his paper provoked last year (see for example on NPR, the Wall Street Journal, the Financial Times and The Economist).
The argument, albeit controversial, is an interesting one.
We think, however, that legalizing the act of bribe-giving, even if only for bribes people pay to obtain a service they are entitled to receive, is not an effective way to fight corruption.
Here are seven reasons why:
1. Legalizing some types of bribes might tackle one of the symptoms, but not the root causes of the problem. Much has been written about the causes of bribery, so much that it would require far more than one blog-post to expose all the arguments.
In essence however, these arguments boil down to the idea that bribery is caused by weak governance and lack of transparency. We fail to see how legalizing any type of bribery could strengthen institutions or the rule of law or correct asymmetries of information.
To us, it seems we would be closing one hole by digging another one.
2. Legalizing bribes to obtain services penalizes vulnerable citizens the most, thus perpetuating inequality and hindering development. Legalizing bribe-paying might result in an initial increase in the number of public officials penalized for corruption.
In the long run, however, it is very likely that public officials will increase the bribe demanded in order to compensate for the greater likelihood of them getting caught. This will have a greater impact, in relative terms, on low-income families and small companies.
Let us use an example to illustrate how legalizing bribe-paying would increase the burden on marginalized citizens. Let’s assume a parent pays a bribe to enroll his child in a public school and reports the teacher who asked for the bribe.
What happens next?
More likely than not, the teacher will have to confront his accuser. Depending on how the penalties are set and if the case against the teacher can be supported, s/he may be dismissed or compelled to pay a penalty. If the teacher is simply fined, the child will have to face her/him the entire year.
If the teacher is fired, the child and the parent will have to face her/him fellow teachers.
Either way, reprisals can be expected. For a family that can afford private school, this might not be a problem: they can always move the child to a different school. What happens to the low income family that cannot afford that?
3. Potential threats or intimidation may discourage the bribe-giver to report the bribe-taker. The proposal rests on the premise that the bribe-giver will report the bribe-taker because s/he has not only the moral incentive to do so, but also a monetary incentive of recovering the amount paid as a bribe.
However, in cases where bribe-givers consider themselves to be at risk, particularly in countries where there is not a strong rule of law or an independent judiciary, it will be harder to provide the right incentives to report bribes. Weak judiciary and law enforcement systems discourage whistleblowers due to lack of trust and high probabilities of impunity.
4. In many cases it is not possible to distinguish who initiates the transaction. To illustrate this point, let us look at Transparency International’s household survey, the Global Corruption Barometer.
In 2005 the Barometer asked 50,000 respondents whether bribes were asked for or whether they were offered by the respondents themselves to obtain a service. The survey found no striking differences between one side and the other.
Under the proposed approach, how is the system going to react to cases in which public officials, who in many countries work in precarious circumstances, are offered non-negligible amount to speed up the issuance of a driver’s license? Why would we give the bribe-payer a free-pass when s/he is corrupting public officials?
5. Legalizing one type of bribe-paying while making other types illegal generates conflicting messages that might adversely affect anti-corruption efforts. How does a regular citizen working in a country where red tape is a problem, understand that being asked for a bribe to obtain a driver’s license (something that s/he is entitled to) is different from being asked for a bribe to obtain a driver’s license not in nine months, but in one week?
From the citizen’s perspective they might seem similar, however, technically speaking the first bribe is to obtain a service and the second one is to speed things up.
Would they be treated differently by the system? If so, how do we explain the difference between the two types of bribes to the general public?
If not, aren’t we telling the public that those who can pay more will receive better attention from the government?
6. In most cases, bribery does not leave a paper-trail. Because of its illegal nature, usually, bribe-payers are not given a receipt when they pay a bribe.
Dr. Basu’s proposal suggests that when the bribe-giver blows the whistle on the public official who demanded the bribe, s/he will be given back the bribe paid.
How would the system know that the amount reported by the bribe-giver is the correct one? Wouldn’t they have an incentive to also trick the system and over-report the payment? Wouldn’t this create another way of extracting rents from the government?
7. The legalization of a type of bribe will put countries at cross-roads with national laws and international commitments. Legalizing bribes to obtain services is considered to be illegal under international agreements such as the United Nations Conventions Against Corruption, the OECD Anti-Bribery Convention and the Inter-American Convention Against Corruption.
How would signatories of these conventions manage the resulting conflict? Moreover, because we live in an interconnected world, what would happen if a developing country legalizes the payment of bribes to obtain services and an employee of a company registered in the US or UK pays a bribe to get a license?
He might be given full immunity in the developing country but he or his company may face charges under the United States Foreign Corrupt Practice Act (FCPA) or the United Kingdom Bribery Act.
In the past 20 years the anti-corruption agenda has great stride in promoting the message that in order to tackle corruption, supply is equally important as demand. After significant progress made in this arena, we should not give up.
The bribe-takers feed off the bribe-payers and vice-versa; it is a vicious cycle that will not be broken by just addressing one side of the equation.
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