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Last Updated: 02/15/2012
Corruption: ‘Smoke and Mirrors’ Symptom of a Diseased Neoliberal World Order
Tara Ruttenberg

In critique of the corruption-causes-poverty narrative, Tara Ruttenberg exposes the international community's misguided attempts to combat poverty and inequality through the unfruitful anti-corruption policy agenda currently championed by leading development agencies.


In recent years, the international community has championed a development policy framework that emphasizes good governance and strengthening institutions to combat corruption, which they perceive to be a leading cause of poverty in the Global South. visual images Walden Bello (2010), the “world's leading no-nonsense revolutionary”[1] has exposed this "corruption-causes-poverty narrative" for the sham that it is, rightfully redirecting the poverty debate back on track by stressing that neoliberal economic policies, not corruption, are to blame for the ill fate of the developing world. Following Walden’s lead, and taking the neoliberalism-poverty-corruption conversation a step further, this paper argues that corruption must be seen as a direct symptom of a global neoliberal system that both promotes rent-seeking behavior and relies on it for its very survival. In the words of Douglas Dowd (2010), “If every thing has a price, every person has a price.” And in a world driven by the exponential desire for things bred through capitalism and consumer culture, the system itself both requires and ensures that wealth creation and accumulation, by any means necessary, continue unabated. That said, why are we continuously shocked by individuals who seek profit by exploiting the system, when it is only a natural outcome of the system itself that they should be so inclined? After all, are they not the offspring of a neoliberal world order that exalts such rent-seeking behavior above all else, not least above the wellbeing of the vast majority of poor and marginalized populations who suffer the consequences? Must we label this corruption in order to blame and shame the ones who get caught and divert attention from the real issues lurking beneath the surface? Or is it time we reconsider the concept of corruption altogether by re-examining its systemic causes within the neoliberal world order?

These questions challenge us to examine corruption from both a systemic as well as moral perspective. Firstly, differentiating between the need versus greed motives behind acts of corruption tells of a two-fold systemic discrepancy; that is, between those who engage in needs-motivated corruption to fulfill their basic survival needs in instances where the system has been unable to provide, versus those who greedily exploit the system’s loopholes for personal material gain above and beyond the satisfaction of their basic needs. Is it “right” to judge both motives as immoral and unjust, punishable by law? While both acts are considered corrupt from a legal standpoint – consider a poor, low-paid policeman accepting a bribe in order to afford groceries for his family (needs motive) versus a well-to-do municipal official pocketing government-allocated funds to make a down-payment on a new Mercedes (greed motive) – our challenge is to begin differentiating between the two in order to reframe the corruption debate within both a systemic and values-based framework. That is, wouldn’t it be more reasonable to judge not the poor policeman who accepts the bribe, but rather the system itself as corrupt and immoral when it neglects and impoverishes large populations, leaving them unable to feed, house and clothe their families? Further, nepotism, or the favoring of relatives or friends in positions of power or material gain, might even be reconsidered as the most human face of corruption whereby exploiting the system to take care of loved ones can be seen as morally desirable instead of judged as perverse. On a larger scale, we are called upon to consider the ways in which our moral bias as a global human society has been diverted away from judging the inherent social ills created by the neoliberal world order through the same moral lens we use to judge, dishonor and punish acts labeled as corruption, when in fact the impact of the former (neoliberal policies) on poverty and inequality is much greater than the latter (corruption) (Bello, 2010).

As for the development policy implications of re-envisioning our understanding of corruption as an outcome of the system, and much to the dismay of today’s global hegemons, the reality is that anti-corruption policy prescriptions will continue to be unsuccessful until they serve to redress corruption’s root causes within a perverse neoliberal system, rather than attempting to treat its symptoms alone. Unfortunately, however, those in power and wealth care infinitely less about abolishing corruption than they do about maintaining the system that keeps them rich and powerful. After all, this would require a fundamental reprogramming of the way we as a global humanity understand our economic system and its inherently distortional impact on the vast majority of the world’s population, including ourselves. This paper is a call for such introspection as a first step toward recognizing the social ills ingrained in the immoral system we have come to accept rather than challenge; celebrate when we should condemn. Only then may we begin to deconstruct a failed world order and reinvent a new socioeconomic framework that corrects for poverty and inequality while serving and strengthening the quality of life for all as opposed to the very, very select few.

The first section presents the mainstream policy understanding of the supposed links between corruption, poverty and inequality, juxtaposed against the unpalatable social implications of the larger neoliberal world order within which corruption is born and bred. The second section examines the moral-bias issue behind our programmed anti-corruption value judgments, forcing us to reexamine the way we perceive corruption and its position within the larger systemic context. Conclusions drawn from this work challenge the international community, policymakers and grassroots activists to shift their focus away from anti-corruption efforts and towards a comprehensive restructuring of the global socioeconomic order to treat the systemic causes of corruption, poverty and inequality, rather than attempting to bandage the symptoms of an increasingly diseased system.

Corruption: A Global Pandemic

againstcorruption.eu

According to the International Criminal Police Organization (Interpol), “corruption is any course of action or failure to act by individuals or organizations, public or private, in violation of law or trust for profit or gain’’. This broad definition has been narrowed by anti-corruption policy expert Robert Klitgaard (2011), who defines corruption as the misuse of office for private ends; using public funds for yourself, your family, or close relations. He describes the propensity toward corruption as a formula of low risk, mild penalties and great rewards, whereby the corruption equation works as follows:

Corruption = monopoly + discretion – accountability

Among other things, Klitgaard prescribes a policy solution framework that increases the risks of engaging in corruption, particularly by going after the “big fish” combined with systemic reform, good governance and transparency initiatives. These big fish he’s talking about include government leaders across the globe, most notably those topping the corruption “lists of shame” publicized by anti-corruption organizations like Transparency International. According to their estimates, corruption absorbs $1.8 trillion world-wide, with $14.8 billion in Africa alone, equal to 25% of the entire continent’s GDP (Transparency International, 2010; World Bank, 2004; World Bank, 2007). The ills of corruption have been treated like a global pandemic, perceived as “one of the world’s greatest challenges” (Ouzounov, 2004, as cited in Stachowicz-Stanush, 2010), blamed for undermining social development and poverty alleviation, contributing to income inequality and “attacking the underprivileged population by benefiting a few people at the expenses of many cuts to social services like education, health care, affordable housing and public transportation” (Satchowicz-Stanush, 2010).

Similarly, corruption literature emphasizes the relationships between high levels of corruption, high income inequality and increased poverty (Chetwynd, Chetwynd & Spector, 2003; Gupta, Davoodi & Terme, 1998; Banerjee, Benabou & Mookherjee, 2006; Chillarige, 2007). Researchers highlight the distributional consequences of corruption’s relationship to perpetuating unequal distribution of asset ownership and access to education; pointing out that corruption contributes to poverty and inequality through its impact on factor endowments and factor ownership (Gupta, Davoodi & Terme, 1998). While this research may serve to validate the corruption-causes-poverty narrative and corresponding policy package promoted by the international community, it is unforgivably remiss in its failure to connect the growing incidence of corruption to the larger context. That is, poverty and inequality continue to rise as a result of the global neoliberal policy framework, which is blatantly at fault for the major distortions of the same skewed factor endowments and ownership that these researchers rightfully attribute as the creators of poverty and inequality.

This points to the harder-to-swallow reality that corruption, while contributing marginally to these distortions as indicated in the research, is in fact itself an outcome of the neoliberal system, alongside this rising poverty and inequality, rather than their significant causal factor. In this light, blaming corruption as the cause of poverty and inequality is an entirely gross misunderstanding of a reality that ignores the Earth-sized elephant in the room. In other words, policymakers focus on corruption, which has conveniently been proven to marginally impact poverty and inequality, while failing to recognize the neoliberal system’s causal role in exacerbating the social ills of corruption, poverty and inequality alike. As such, policy prescriptions like Klitgaard’s that seek to harpoon the biggest fish in the sea of corruption will never reverse the growing trend of poverty and inequality when the biggest fish of them all, the corrupt neoliberal system, is still basking gloriously in the protected waters of its powerful keepers.

Most disturbing, however, is not the realization that neoliberal policies are the greatest contributor to poverty and inequality and that, resultantly, anti-corruption strategies will never solve the problem. In fact, this is actually old news when we read Marx, Chomsky, Dossani, Sader, Harvey, Klein, Stiglitz, Bello, Weisbrot, Dowd, and many other well-educated and informed economists and writers whose past and present deconstructions of capitalism and neoliberalism have voiced this concern for decades if not centuries. No, what’s most disturbing is that no one is listening. The international community continues to turn the other cheek, investing time, money and energy in a development policy agenda coopted by the wealthy and powerful few whose vested interests require maintaining a class-based status quo they will defend at all costs. Where the international community could be making real progress to reduce poverty and inequality by listening to these authors and policy experts, they are instead misguiding the global policy agenda toward unfruitful ends. In the mean time, more and more people are broke, jobless, diseased, hungry, homeless, barefoot and dying.

Under Review: Misguided Moral Bias in the Corruption Conversation

Maintaining this unfruitful yet useful anti-corruption policy agenda requires engaging the moral heart-strings of an easily swayed global society; dismantling it, then, entails a fundamental re-moralization of how we understand corruption. First of all, we can agree that corruption is viewed through a moral lens, judged as unfair and unethical if not simply illegal – the equivalent of stealing from the poor (Alesina & Angelitos, 2005; Satchowicz-Stanush, 2010). “In developing and developed countries, people watch with frustration, cynicism and anger corrupt leaders amassing fortunes and enjoying a luxurious lifestyle while many are denied the most basic services” (United Nations, United Nations Development Programme, and Asian Development Bank, 2007, as cited in Satchowicz-Stanush, 2010). As a result, anti-corruption strategies increasingly top the development policy agenda, as the World Bank, IMF and the UN share in this understanding that eliminating corruption will help eradicate poverty, emphasizing that “the fight against corruption is therefore not only a building block for good governance and transparency in democratic societies, but also to poverty alleviation and true sustainable and social development” (United Nations, 2004, as cited in Stachowicz-Stanish, 2010).

Alesina and Angeletos (2005) write of the risk for public expenditures, particularly in developing countries, to be lost to corruption at the expense of the poor. Similarly, Transparency International reports on government leaders who have amassed outrageous wealth through illicit means, in the majority of cases channeling public funds into their private bank accounts. Names like Mohammed Suharto, former leader of Indonesia, Mobutu Sese Seko of the Democratic Republic of Congo, Alberto Fujimori of Peru, along with Libya’s Muammar Gaddafi and Egypt’s Hosni Mubarak present extreme cases, whose countries’ poverty rates soared while their personal wealth skyrocketed into the hundreds of millions and multi-billions. Exposing these and other leaders successfully serves to arouse sentiments of shame, disdain and dishonor among the global public. We gasp at the sheer numbers on the page, incredulous in disbelief that an African, Asian or Latin American president could “steal” so much public wealth for private gain while the poor in his country suffer so terribly. Corruption has become a moral values issue, whereby we judge those whose incredible wealth has blood on its hands, in stark contrast with images of their countries’ rampant poverty, widespread malnutrition and millions dying of hunger and disease. Perception has a narrow lens when it comes to corruption and its associated moral judgment.

AFP

Next image: Safe at home in their comfortable living rooms, middle and upper-class patrons mourn the loss of Steve Jobs of Apple fame, a billionaire innovator whose prosperous technological breakthroughs and marketing genius are a living model of why we can all still believe in the American Dream. Sure, we’re aware that the production of cell phones contributes to environmental degradation through the extraction of copper, gold, palladium, silicon and other natural resources, requiring heavy energy output and water use, not to mention the well-known negative social impacts associated with the mining industry in developing countries, including human rights abuses, community displacement and water shortage. Furthermore, of relevance to our admiration for Steve Jobs, iPhone manufacturing in particular employs underage laborers in inhumane working conditions:

Sum of US

“On the other side of the world, a young girl is also swiping those screens. In fact, every day, during her 12+ hour shifts, six days a week, she repetitively swipes tens of thousands of them. She spends those hours inhaling n-hexane, a potent neurotoxin used to clean iPhone glass, because it dries a few seconds faster than a safe alternative. After just a few years on the line, she will be fired because the neurological damage from the n-hexane and the repetitive stress injuries to her wrists and hands make her unable to continue performing up to standard” (Sum of Us, 2011).

At the expense of these nameless workers, Steve Jobs and his corporate comrades have amassed incredible wealth and fame, and it is no exaggeration to say that throughout the US and Europe, populations mourned the loss of the decade’s most admired technological innovator and his iEmpire; an empire built on some of neoliberalism’s most prized economic strategies to the tune of labor outsourcing to developing countries irrespective of human rights standards, plus invasive, energy intensive mining practices to the detriment of community and environmental wellbeing.

How is it, then, that Jobs has come to be known as a celebrated tech icon while the “corrupt” leaders of Transparency International’s lists of shame bear the burden of moral judgment, global shaming campaigns, jail time and legal retaliation? Why does our global moral lens not include those corporate billionaires whose wealth has also come at the expense of the poor? And what’s more, these corporate billionaires’ interests continue to be promoted and protected through Western governments and their powerful ownership of the international community, not least the World Bank, IMF, UN and WTO, the very same institutions in charge of global economics, poverty alleviation strategies and development initiatives across the developing world. With the fate of billions resting in the hands of these development agencies whose interests are controlled by the wealthy and powerful, the real prospects for poverty and inequality reduction are both dismal and terrifying.

Morally-speaking, Alesina and Angeletos (2005) present a perplexing conclusion requiring serious consideration, pointing to the heart of the matter concerning our value judgments on issues of fairness: societies consider inequality through rent-seeking and corruption more unfair than inequality resulting from productive effort and market competition, the pillars of a neoliberal economic framework. Why is it that we as a global society judge corruption as unethical and immoral, as “stealing from the poor” through its impact on poverty and inequality, while at the same time we continue to support a global economic framework that produces the very same social detriments? Why are “corrupt leaders” any more to blame for poverty and inequality than those who promote and impose on developing countries the policies of trade liberalization, privatization of enterprise, no state intervention, conditional loans and structural adjustment programs that have drastically increased income disparities and plunged millions of people into chronic poverty, unemployment, hunger, inhumane living conditions, and resultantly, death? As neoliberal policies and supporting power structures allow the rich to get richer, they do so at the expense of the poor whose already marginal share of wealth continues to diminish (Palma, 2011; Sutcliffe, 2005; Dowd, 2011) and whose meager hope for survival rests not in punishing leaders deemed corrupt, but through transforming the corrupt system itself and redistributing its wealth where it is needed most, dismantling the neoliberal world order by first recognizing it as the disease and then treating it as such. Instead, misguided corruption and anti-corruption efforts act as the smoke and mirrors diverting global attention away from the root causes of poverty and inequality, hijacking the hearts and minds of a morality-driven humanity and leading them to perceive corruption as the root of all evil, instead of understanding it as just another of the many symptoms of the neoliberal world order and the politics of power that ensure its survival. As long as our moral bias continues to turn a blind eye to the social ills of neoliberalism, this status quo will endure unabated with no hope for reducing poverty and inequality in the developing world.

Conclusions

medpedia

This work has sought to demonstrate that in keeping with Western medicine’s approach to illness, the international community’s anti-corruption strategies treat the symptom of corruption rather than the cause; seeking to stifle the outcomes of a flawed system rather than rightfully treating it as the disease itself. The most significant conclusions relate to a re-conceptualization of our understanding of the corruption-causes-poverty narrative by calling for a re-moralization of the corruption debate within the larger systemic context of the neoliberal world order. Further, this forces a significant conclusion in the form of important questions: Why are we still relying on the international community as the arbiter of the global development policy agenda? If it is not in their interests to ever admit that neoliberal policies are the cause of poverty and inequality and therefore make the necessary changes to the global economic framework, why should we believe that they will ever do what is necessary to combat poverty and inequality? It is time we consider alternatives to the international financial and multilateral governmental institutions currently responsible for the fate of the poor so that we may begin making the changes necessary to reverse the growing trends of poverty and inequality across the globe.



[1] In the words of Naomi Klein, author of Shock Doctrine.

Works Cited

Alesina, A. & Angeletos, G. (2005). Corruption, inequality and fairness. Journal of Monetary Economics 52 (2005): 1227-1244. United States: Elsevier B.V.

Banarjee, A., Benabou, R. & Mookherjee, D. (2006). Understanding Poverty. London: Oxford University Press.

Bello, W. (2010). Is Corruption the Cause? The Poverty Trap. Counterpunch, May 2010. Retrieved 13 February 2012 from http://www.tni.org/article/corruption-cause-poverty-trap.

Chetwynd, E., Chetwynd, F. & Spector, B. (2003). Corruption and Poverty: A Review of Recent Literature. Washington DC: Management Systems International

Chillarige, Y. (2007). Corruption and Poverty Alleviation: An Empirical Study. Singapore: Singapore Management University School of Economics and Social Sciences.

Dowd, D. (2011). Inequality and the Global Economic Crisis. New York: Pluto Press.

Gupta, S., Davoodi, H. & Alonso-Terme, R. (1998). Does Corruption Affect Income Inequality and Poverty? IMF Working Paper. International Monetary Fund Fiscal Affairs Department.

Klitgaard, R. (2011). Corruption and Poverty: Interview with Robert Klitgaard Part I. Asian Trends Monitoring, August 2011. Retrieved 13 February 2012 from http://www.youtube.com/watch?v=_4eVARvi7gU

Palma, G. (2011). Homogenous Middles vs. Heterogenous Tails, and the End of the ‘Inverted-U’: It’s All About the Share of the Rich. Development and Change 42(1): 8-153. Institute of Social Studies. Oxford: Blackwell Publishing.

Stachowicz-Stanusch, A. (2010). Organizational Immunity to Corruption: Building Theoretical and Research Foundations. USA: Age Publishing.

Sum of Us. (2011). Apple: Make the iPhone 5 ethically. Retrieved 13 Feb, 2011 from http://sumofus.org/campaigns/ethical-iphone/?sub=taf

Sutcliffe, B. (2005). A Converging or Diverging World? United Nations Department of Economic and Social Affairs Working Paper No. 2, October, 2005. New York: UNDESA


Tara Ruttenberg is Assistant Editor for the Peace and Conflict Monitor and PhD Candidate in Peace Studies at the University of Bradford.
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