Corruption has a corrosive effect on democracy.  This point is captured in Transparency International’s “Global Corruption Barometer 2006,” which was released last week.  One of the findings that points towards linkages between widespread corruption and democratic governance failures is the continued perception that political parties and parliaments are the most corrupt institutions.

The Barometer is a public opinion survey of nearly 60,000 people in more than 60 countries.  As Transparency International notes on its website, although the Barometer is somewhat different from its Corruption Perceptions Index (CPI) in that it surveys the public rather than captures an analysis by country experts and business leaders, there is correlation between the findings of the two surveys.

Who are the most common recipients of bribes according to the Barometer?  The police top the list, with 17% of respondents reporting that interactions with the police often involve bribes.  Also listed are medical services, the educational system, and utilities, all of which underscore the point that it is often the poor who suffer most from corruption.  In Latin America, for example, the average cost of a bribe paid for medical services is more than $600. 

In light of these findings, the continued legitimacy problems that many governments face are not surprising.  Democratic values of equal participation, access, and transparency are thwarted when citizens have to pay bribes to get services to which they are entitled in the first place.

Bribes in registry and permit services, as well as in the legal system and judiciary, are ranked second and third.  These findings go hand-in-hand with what Hernando de Soto has captured brilliantly in his work on the informal sector – barriers to doing business trap entrepreneurs in the informal sector, where they have few opportunities to expand their business and often fall victim to corruption and abuse by public officials.

The perceptions of governments’ responses to corruption are also troubling.  In Latin America, 23% of respondents think that their governments are encouraging, not fighting, corruption.  In the Newly Independent States, 64% think that their governments are not effective in fighting corruption or are not fighting it at all.  Interestingly, Africa has the highest percentage (27%) of people who think that their governments are effective in fighting corruption.

Widespread corruption in political institutions and the common perception that, in general, governments are not effective in curbing corruption suggest that the private sector could be viewed as a potential source of measures to fight corruption.  The private sector could also ensure that public institutions deliver services to the poor and that resources are not squandered.

The private sector is not often recognized as a solution to the corruption problem.  It is not uncommon to hear that business is a source of corruption.  This may be true in some cases, but it is also true that companies often become victims of corruption, which increases the cost of doing business, limits investment, and undermines their competitiveness.  The bottom line – there are incentives for the private sector to curb corruption, and there are a number of successful initiatives to do so.

CIPE has worked with many voluntary business associations and think tanks on a variety of anti-corruption programs, all of which attack corruption at its source – inefficient regulations and poor governance mechanisms.  Over the past decade, corporate governance has also emerged a successful anti-bribery tool.

One successful initiative that deserves more attention is Transparency International’s own “Business Principles for Countering Bribery.”  The steering committee for the Business Principles includes a number of private sector, academic, and NGO experts, including BP, HSBC, Norsk Hydro, FIDIC, PricewaterhouseCoopers, Shell International, and Social Accountability International.

The Business Principles provide guidelines for companies that want to institute internal anti-bribery mechanisms.  Companies can use the Business Principles to develop their own anti-bribery programs that take into the account company-specific and country-specific issues.  Transparency International is developing a number of supporting tools to help companies ensure that they not only subscribe to certain anti-corruption measures, but that their anti-bribery programs are implemented effectively.

Ultimately, however, it is democratic governance that can provide all the required tools to combat corruption.  As Kenneth Wollack, president of the National Democratic Institute, argues in his article, “Political Competition as an Anti-Corruption Tool,” published by CIPE, functional democracies have the required components to control corruption: inter-party competition, legitimacy, and diffusion of political power.  Putting these measures in place are the first steps toward combating corruption and ensuring that guarantors of democracy are no longer perceived as the most corrupt institutions.