Transitions to good governance - Contextual choices in fighting corruption

This report addresses the question of why, despite unprecedented investment in anti-corruption in the last fifteen years since the existence of global monitoring instruments and global legislation, so few countries have managed to register any progress (Section 1). The answer draws on qualitative as well as quantitative methods. This project aims to create a new database of 189 cases, including good governance tools and policies, such as anti-corruption agencies, ombudsmen, the adoption of transparency legislation and of the United Nations Convention against Corruption (UNCAC). It also makes use of detailed case studies. To facilitate their selection, countries are classified into contemporary governance regime categories, as well as into historical achievement categories. Past achievers reached impartial governance by using ethical universalism, as has been done in modern times. The report analyses the case of Denmark. Early achievers managed to achieve good governance after the First World War, and contemporary achievers after the second. The report looks at Estonia, Uruguay, Chile, Taiwan, South Korea and Botswana based on the latter category. Finally, a number of borderline cases which appear to have achieved good governance, such as Georgia and Ghana, are also examined, while other cases, such as Brazil and Romania, are used as examples of the difficulty to change governance regimes.

The report starts with a criticism of the conceptual framework used in the anti-corruption policy community (Section 2), which accounts for the almost-premeditated, ill-fitting nature of anti-corruption instruments from developed countries, where corruption is the exception and ethical universalism the norm, in contrast to the developing countries, which have never managed to enshrine ethical universalism as a central governance practice in their history. Instruments developed in environments where corruption is a deviation from the norm do not fit those contexts where particularistic distribution is the norm. The general theoretical approach of the principal agent, which is dominant in corruption studies, is of little help when the real problem that development agents have to solve is how to transition from a governance regime based on particularism to one based on universalism, which is a collective action problem. The principal agent theory assumes that the state is autonomous from private interests until bribery occurs. Political development theory assumes the opposite: that state autonomy is a modern feature acquired in time and after much confrontation. Historical and contemporary evidence suggests that the state is seldom impartial, but rather caters to particular interests by default. Corruption perception indicators in fact measure particularism, a governance regime, and not illegal corruption – which accounts for the huge gap in public opinion surveys between the perception of corruption and the experience of bribery. If we define any deviation from the norm of ethical universalism (legal or illegal) as corruption, then particularism is the same as corruption. However, most good governance strategies have the overambitious goal of changing the governance regime and therefore corruption becomes merely a catchword used to indicate all non-universalistic practices, in other words, the non-modernity of a society. Empirical evidence indicates this clearly. The World Bank Governance indicator, a regression model of controlling corruption that uses classic modernisation determinants, explains two-thirds of the variance without any policy-related or governance-related variables. The extent of the formalisation of a society (using the estimates of the informal economy as a proxy) or, alternatively, the percentage of the rural population (as the two are closely correlated) explain at least a third of the WGI control of corruption. In other words, if we know the degree of modernity of a society, we can to a large extent predict how ‘corrupt’ or 'free of corruption’  that particular society is, regardless of its government policies, income, religion, economics, type of legal system, natural resources, colonial or communist past. Modernity, consisting of formalisation, public-private separation and a society structured around individualism and not collectivism, should not be assumed if we are to understand governance and fight it effectively.

The report then proceeds to classify governance regimes, propose a diagnosis tool and classify countries into categories (Section 3). Governance in this report is defined as the set of formal and informal rules that are responsible for who gets what in a given polity. Any meaningful intervention in a given society needs at first to clarify what type of governance regime one is dealing with, in order to comprehend the rules of the game and chart the position of the actors (for or against the status quo), and thus be able to obtain a clear diagnosis. This is the preliminary step of any anti-corruption strategy and the main source of failure for most of the current strategies, which, instead of understanding the rules of the game in that particular society, simply operate with perception surveys that are merely replicated from one country to another without any noticeable difference.

Following the classic approaches of Max Weber and Talcott Parsons, as well as recent approaches by North, Weingast and Wallis (2009) and Mungiu-Pippidi (2006), the report identifies open-order regimes based on ethical universalism and closed-order regimes based on particularism (neopatrimonialism and competitive particularism, which differ on the characteristic of pluralism). Diagnosing particularism/neopatrimonialism should be the preliminary step of any good governance approach, and it can only be a qualitative endeavour if it is to emerge with a worthwhile picture for programme design. In order to capture the global spread of governance regimes, the report cross-tabulates pluralism with the control of corruption. Countries rated by Freedom House as non-free and rated below the threshold of 60 on the Control of Corruption scale are assumed to be neopatrimonial (32). Countries rated by Freedom House as partly-free, and free countries rated below the threshold of 60 on the Control of Corruption, are assumed to be competitive particularistic (88). Countries that have experienced a major change recently (i.e. a revolution or coup d’etat), or lie between 60 and 75 but are on an upwards trend, can be considered 'borderline' cases, where the two norms are in confrontation and a stable governance regime has not yet been established.  

Conceptualising corruption in a broader social-order framework, i.e. as a governance regime, has important policy consequences. Particularism is not a social ‘malady’, as corruption is usually described, but a default state of equilibrium, which is natural and therefore frequent. The fourth section (Section 4) of the report starts with Robert Klitgaard's classic formula which defines a governance regime as a system in equilibrium, where governance is determined by power and material resources on the one hand, and legal and normative constraints on the other. However, rather than testing disparate causes of corruption, many of which have theoretical problems, the report proposes a model which exclusively uses determinants that are not theoretically-controversial and whose relation, not only to the dependent factors but also to the other determinants, can offer a full theoretical model of complex interacting factors. This is the resources-versus-constraints model, which can be used qualitatively and tested quantitatively both in cross-sectional and panel models (Table 12). This model is then tested empirically using a database of 114 countries and has been proven to have high explanatory power and able to provide an alternative to the modernisation model, with the advantage that most of its components are not path-dependent, structural determinants, but can be influenced by human agency.

The following sections of the report investigate transitions from good governance, posing the question of how equilibrium changes and under what circumstances that change takes place. Section 5 examines historical achievers, focusing on the two different European experiences of good governance: the monarchical path (Denmark) and the city-state path (Italy). The former achieved good governance via a paternalistic path, and only perfected it during political modernisation; the latter achieved good governance in pre-modern times, but this was confined to the city-state and lost with the advent of political modernity. Table 11 offers some pre-modern tools of good governance which can work at the community level. The report argues that the explanation for good governance in developed countries is not to be found in their present organisation (legislation, political institutions), which should not be seen as causes, as they have a purely maintenance function, but rather in their history, seen as a development through successive equilibriums.

Section 6 tests the performance of institutional imports, which are privileged by many anti-corruption policies such as AC agencies, ombudsmen, freedom of information acts and the comprehensive package included in the United Nations Convention against Corruption. Except for FOIAs, none of them are found to be significant determinants of either control of corruption or change in control of corruption. The results are extremely robust, having been tested on more than one dependent variable, using alternative statistical methods where development are controlled (Table 13 and figures). The report argues that over-reliance on these tools and on legal constraints in general is responsible for the ineffectiveness of many anti-corruption policies. Governance regimes are states of equilibrium that have been reached historically and which can be changed only by those who have a stake in creating new rules of the game at the national level, which is the main playing field. Governance regimes are therefore difficult to change and their change is an eminently political process – a battle of losers of the status quo against predatory elites. Classic conditionality does not seem to work, even in exceptional historical circumstances such as the European enlargement: the evidence suggests that selectivity (cash on delivery) works better.

Section 7 examines six contemporary achievers (Chile, Uruguay, Botswana, Estonia, South Korea and Taiwan), and two borderline cases (Georgia and Ghana), concluding that change only occurs through progress in at least three elements of the resources-and-constraints formula, as well as through domestic agency (sometimes emulation), which is often triggered by major destabilisation, and not by maverick import institutions.

Section 8 contains a policy analysis/evaluation approach that examines the circumstances under which external agents seem to be more effective in bringing about good governance in a country. Three sets of conditions for good governance are examined (Millennium Challenge Corporation threshold grants, European Union accession and European Neighbourhood Policy) with the conclusion that countries seem to show greater progress when there is an incentive to be upgraded to a more desirable status rather than under classic conditions.

Section 9 reviews the evidence and formulates some recommendations. The evidence review presents a ‘glass half-empty’ perspective, drawing attention to the low level of sustainable improvement in governance that has been achieved around the world since the World Bank started to measure corruption. Few of these improvements have been brought about by good governance campaigns and the tools prescribed by the international anti-corruption community. Particularism is the main rule of the game in the allocation of public funds, and factors such as a lack of separation between private and public sectors as well as rampant informality are widespread and difficult to change. These characteristics can only be improved by those who have a stake in the different rules of the game at the national level, where the main playing field remains. Governance regimes are difficult to change and their change is an eminently political process, a battle between those who lose the status quo and predatory elites. Classic conditions do not seem to be effective, even in exceptional historical circumstances such as the European enlargement.

However, the report offers a ‘glass half-full’ perspective as well. If we leave out the path-dependent modernisation/development factors, which cannot be affected by policy in the short run, as well as the many institutional transplants, which are irrelevant, we are still left with significant determinants for control of corruption which can be influenced (presented in Table 12): the strong impact of Internet infrastructure, a reduction in red tape, civil society watchdog activity, freedom of information acts, media freedom, and all areas where development donors can play a large role. One can even leave out individual rights and the independence of the judiciary, which are purely political items and thus can hardly be influenced. Although some of these factors do not seem to address corruption directly, any contribution to their improvement is in fact a clear and substantial anti-corruption contribution which can be measured.

Financed by NORAD, the Norwegian Agency for Development Cooperation.

Contextual choices in fighting corruption: Lessons learned

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