# Presentation: 094750

## Corruption and Intervention:A Strategic Framework forUSAID/Central Asia

- Corbin B. Lyday, Ph.D.
- PADCO, Inc
- (USAID Contract No.: DFD-I-00-03-00143-00)
- USAID/CAR, Almaty, Kazakhstan
- March 4, 2004

**Introductions**

- Who am I?
- Who are you?
- Why are we here today?

## Goals for Today

- To understand how _systemic corruption_ works—in theory and practice in post-communist Central Asia;
- To highlight new _approaches_, lessons learned, and on-going research being undertaken by USAID and other donors in this area;
- To suggest a _strategic framework_ for programmatic interventions; and
- To launch a _working relationship_ between USAID/CAR and Transparency International through technical workshops.

## Some Ground Rules

- Please be _punctual_...
- Please _respect_ your colleagues and their opinions...
- Please _honor rules_ for asking questions and sharing information
- Stay _engaged and energized_!

## Learning Icebreaker:“How Well Do You Know Your Watch?”

- Things you Know
- (and _know_ that you know them)

**Things You Don’t Know**
- (but _think_ you do!)

- Things You Don’t Know
- (but know you _don’t_ know them)

## I. Systemic Corruption – An Overview

_**Corruption 101:  ‘Private Gain at Public Expense’**_
**Assumes private/public boundaries are **_**clear**_
**Focuses explanation on **_**personal**_** greed**
**Necessary, but *****not***** sufficient**
_**Corruption 201:  ‘Whole Greater than Sum of its Parts’**_
**In reality, boundaries are generally **_**unclear**_
**Locates explanation **_**not**_** in individuals but on...**
**Informal ‘Rules of the Game’**
**Larger Symptoms**
**Deeper Causes**
**Enabling Environments**

## (What Level Was That Again?)

| Petty | Grand | Systemic |
| --- | --- | --- |
| Individual
Sporadic | Institutional
Occasional | Rule not Exception |
| Small
Unorganized | $ vs. ¢ | Political Networks
Organized |

## A Non-Systemic Approach...

- Only diagnoses _symptoms_
- May _ignore_ deeper causes
- Misunderstands _incentives_
- Fails to capture the ‘_bigger picture_’

## Systemic Bad Governance: The “Vicious Circle”

- Lower Efficiency

- Administrative Corruption

- Reduced Transparency

- Less economic opportunity

**Public-Private Confusion**

**Autocracy/Weak Institutions**

**Patron-Client Relations**

- Increased transaction costs

- Decreased Competition

**Notes:**
Those who perceive current income distribution as unjust are, overall, about 20 percent less likely to express satisfaction with democracy
Poverty reflects exclusion of large numbers of people from benefits of economic development; they gain nothing from following the ‘rules of the game,’ when them game does not benefit them

## How Does a Country Get Trapped?

- Culture
- Denmark 10 – Armenia 2?
- Interesting, but...
- Economic Scarcity
- Global ‘Core’ v. Global ‘Periphery’
- Statecraft
- Mismanagement and Clientelism
- Authoritarianism and Secrecy
- Passive “Political” Culture

## Democracy-Integrity LinkGlobalization-Openness Link

- ‘Birds of a Feather Flock Together’
- Transparency International CPI Index
- Shared Wealth – Integrity – Accountability  (FINLAND)
- Income Gulfs – Corruption – Authoritarianism  (NIGERIA)
- Globalization/Foreign Policy Magazine Index
- Linkages – Trade – Adaptability  (IRELAND)
- (Increased Employment by 50% since 1990)
- Isolation – Barriers – Dinosaurs  (ZAMBIA)
- _CENTRAL ASIA_ – TOO FEW INDICATORS TO MEASURE

## Patronage and Clientelism

- _Patronage_: a reliance on personal connections to ‘get things done’...
- _Clientelism_: the systematic provision of state-controlled goods, resources, services, or jobs to _favored groups_.

## Patronage and Clientelism (cont’d)

_**Informal**_** rules of behavior that answer...**
- ‘who gets what?’ in society
_**Modern**_** form of statecraft flowing out of...**
*psychology and culture,*
*kinship and loyalty*
*ethnicity, religion and personal networks*
**Which **_**skew**_** formal institutional outcomes.**

## A Clientelist Political Economy...

- _Reinforces_ inequality
- _Blurs_ public-private boundaries
- _Strengthens_ ‘crony’ and elite networks
- _Diminishes_ quantity/quality of public goods
- Education in Brazil...

## Why are these systems so durable?

- They create genuine _reciprocities_ between rulers/ruled;
- They ‘_get things done_’ in inefficient environments marked by scarcity;
- They are _familiar_ and _well-understood_ rules of the game, which **strengthen** under
- _rapid_ economic or political transitions
- widespread social _stress_, _dislocation_ or _collapse_

## Clientelism and Stalled Democracies

- “Semi-Authoritarian” Democracies
- Egypt, Venezuela, Azerbaijan, Senegal, Russia
- “Illiberal” Democracies
- Bosnia, Iran, Bangladesh, Morocco
- “Backsliding” Democracies
- Just About Everywhere Else?

## Why So Many Troubled Democracies?

- an Unholy Trinity...
**Clientelism**
**Authoritarianism**
**Secrecy**
- with _ability_, _means_ & _motive_ to undermine
- Elections
- Institutions
- Outcomes

## Post-Soviet Political Economy

- _Authoritarianism_ and _Clientelism_
- _Scarcity_ and _Inefficiency_
- Public-Private _Confusion_...and
- Non-Participatory Culture
- Extraction Economies (KAZ and RUS)

## Non-Participation: Then and Now

- _Imperial Russia_:
- “...*the severity of our laws is blessed only by the infrequency with which they are enforced*.”
- ‘_Soviet Man_’:
- “*the state pretends to pay and we pretend to work*...”
- _Post-Soviet?_:
- “*the West pretends to assist and we pretend to reform*...”

## Regional Corruption Growing, not Diminishing

| 2001 | 2002 | 2003 |
| --- | --- | --- |
|  | USA (16) |  |
| USA (17) |  |  |
|  |  | USA (19) |
|  |  |  |
|  | UZ (69) |  |
| KZ (73) |  |  |
| UZ (74) | RU (74) |  |
| RU (81) |  |  |
|  | KZ (87) | RU ( 87) |
|  |  | KZ (101) |
|  |  | UZ (103) |
|  |  | KG (119) |
|  |  | TJ (128) |

**Regional Corruption Growing, **_**not**_** Diminishing**

## Why is it Getting Worse?

- _Economics_
- Privatization without Governance or Competition
- Managers Empowered over Owners
- Macro-stability without _Micro-restructuring_
*(accentuated in extractive economies...)*
- _Politics_
- Elections without Competition
- Sovereignty without Governance
- Administration without *Accountability*

## Corruption and Development:A Common Theme...

**“****SED QUIS CUSTODIET IPSOS CUSTODES?”**
**	****(”But Who Shall Watch the Watchers Themselves?”)**

-  “...it is not hard for a country rich in natural resources to find investors abroad willing to exploit those resources, especially if the price is right.  Far more difficult, however, is creating an industrial or service-based economy.”
- --James Wolfensohn
- President, World Bank

## Kazakhstan:Some Potential Futures?

- Italy
- Korea
- Indonesia
- Mexico
- Kenya

## USAID and Donor Responses

- Checking Corruption’s *Enabling Environment*
- USAID/LAC Bureau (1990s)
- World Bank Wakes Up...
- “Helping Countries Combat Corruption” (1997)
- OECD Anti-Bribery Convention (1997)
- USAID/E&E Bureau (1998- )
- Information Dissemination/Management
- Donor Coordination
- USG ‘Global Forum on Corruption’ (1999)

## Some Early Lessons Learned?

- Donor Coordination/Collaboration
- OECD/USAID Anti-Corruption Network
- ‘Too Much Information – Too Little Digestion’
- Information ‘Clearinghouse’ Approach
- USAID/DG Field Survey
- Short-Term v. Long-Term
- Anticipating Resistance
- Georgia/ROL
- Russia/Media
- Excessive Reliance on ‘Political Will’

## The Nine Lives of ‘Political Will’...

- 9

- 6

- 2

- 3

- 4

- 5

- 8

- 7

- 1

- and (2) Public **AWARENESS**** and **Political **CONSENSUS** on corruption...
- (3) Corruption-Fighting** ****AGENDAS** and public **COMMITMENTS** made...
- (4) Anticorruption **COMMISSIONS** begins work amid much fanfare...
- (5) Commission gets **BOGGED DOWN** as issue fades (or is encouraged to fade)
- (6) and (7) **RECRIMINATIONS**...attention **WANES**, other issues surface...
- (8) Anticorruption commissions, initiatives, bodies quietly **EXPIRE** (after accomplishing far less than they set out to do)...
- (9) Expanded public **CYNICISM** at “broken promises” directed at political leadership, organizations and power structures.

## What Programs Did Not Attempt

- Political Party Financing
- Customs, Police, Interior Reform
- Deferred to DOJ/OPDAT ICITAP or S/INL
- Broader Civil Service Reform
- Government Ethics Offices
- Pilot Programs in USAID/Colombia

## A Strategic Framework for USAID/CAR

- ANTI-CORRUPTION ACT OF 2000 REQUIRES THE UNITED STATES TO...
- "ensure that...assistance programs _promote good governance_ by assisting other countries to combat corruption throughout society and to improve transparency and accountability at all levels of government and throughout the private sector.“

## Choose a Frame for your Building

**Awareness**

**Prevention**

**Enforcement**

## Choose the Right Bolts to Build It

- BOLT ONE

- BOLT TWO

- TECHNICAL

- POLITICAL

**Awareness**
**Prevention**
**Enforcement**

## AWARENESS...

- Public Education
- Costs of Corruption
- Publicize Conflicts of Interest
- Donor Information-Sharing
- Countering Information-Poor Environments
- Practice Freedom of Information
- Integrity Conferences, Peer Review Workshops
- Publicize Examples of Integrity
**‘**Sunshine’ and ‘Take a Cent and You’re Out’ (Korea)
- Anti-Bribery Pacts and “Open Fee” Schedules
- Investigative Media Integrity and Support
- ‘Whistleblower’ and Witness Protection

## PREVENTION...

- Supply Side
- Public Budgets..._Open-Sourced_ Budgets
- Blind Trusts and Asset Disclosure
- Account and Program Firewalls
- Ministry Program Audits
- NGO and Peer Review Practices
- Demand Side
- Minority Shareholder Protection
- Extractive Industry Initiative (UK)
- ‘Publish What You Pay’ (Soros/OSI)
- ‘Publish What You Allocate’ (MKSS in Rajasthan, India)
- Community ‘Scorecards’ (Health/Education)

## and ENFORCEMENT

- Judicial Independence
- Enforcement of Court Judgments
- Internal Police/Interior Reform
- Management _and_ Salaries
- Anti-Corruption Commissions?
- Only with NGO and Media Oversight
- Fully Criminalize Corrupt Practices
- Political Support to Ratify UN Anti-Corruption and OECD Anti-Bribery Conventions

## A Test for Interventions:Helping, Harming or Idling?

**PRIMUM NON NOCERE**
**(“First, Do No Harm...”)**
- Which Programs Help...and by How Much?
- What are Meaningful Indicators?
- Which _Don’t_ Help..and by How Much?
- Integrity-Aware Programming
- Separating False from Real Victories
- Articulating Successes
- Owning and Understanding Failure

## The ‘Tech’ Commandments:A Quick Recap

- ‘First, Do No Harm...’
- MICRO is _better_ than MACRO
- If you Can’t Heal...try to _Stop the Bleeding_
- ‘It’s the sequencing, stupid...’
- Cornerstones *before* Capstones
- Understand _Incentives_ – Anticipate _Resistance_
- Honor Fears for Counterpart Safety
- Counter Information-Poor Environments
- Disseminate! Disseminate! Disseminate!

## Keep Your Eyes on the Prize:

**Keep Your Eyes on the Prize:**
**The “Virtuous Circle”**

*Increased*
*Productive*
*Investment*

*Increased*
*Political*
*Stability*

*Increased Civic *
*Behavior*

*Increased*
*Economic Growth*

**Public-Private-Nonprofit**

**Democracy**
**Strong Institutions**

*Increased *

*Inclusion*

**Civic Relations**

*More Responsive*
*Politics*

## Small Group Breakout

- You’ve just been elected President of Kazakhstan (Congratulations!)
- You campaigned on an anti-corruption platform...
- What are your supporters expecting from you now?
- What are the first _three_ things you would you do to implement your platform?

## Conclusions:First, the Bad News...

- Because incentives for corrupt governance are _stronger_ than those for good...
- Alternatives to corruption must be _*at least as*_ appealing to _enough_ groups with _enough_ stakes in the outcome;
- USAID and its implementers _don’t_ have good track records in this area.

## ...But Some Good News

- The burden of proof for good governance is _shifting _— governments must now _prove_ their integrity;
- The more people understand the _full costs_ of corruption and clientelism, the less likely they are to tolerate them;
- Corruption and clientelism are *expensive* and subject to _breakdown_ *and* _breakthrough_...

## And Some News on Breakthroughs...

- They can be facilitated _internally_ by...
**the emergence of a **_**middle class**_
_**repeated**_*** *****democratic experience and civil society engagement.**
- and _externally_ by...
**well-crafted ‘carrots***** ***_***and***_*** *****sticks’ diplomacy**
***enforced***** global standards**
**publicity *****and***** peer pressure**