Radical steps must be taken to halt the renaissance of corruption, the most dangerous growth industry of our time

Global Outlook: The illegal privatisation of formerly democratic institutions is so dangerous

Today, corruption and the problems it produces are in the focus of policymakers worldwide.

By consensus, corruption threatens the proper functioning of the global economic system almost to the same extent it threatened the US economy in the Gilded Age at the end of the 19th century. The renaissance of corruption is linked to the financial rise of developing, emerging markets; to the expansion of businesses that are only interested in seeking advantage and not creating wealth; and to the exhaustion of the “third wave” of democratisation in the late 1990s.

But this provides only a partial explanation and does not supply a full understanding of the problem and its significance. We believe the time has come to distinguish clearly between the “everyday” bribery that takes place at the grassroots level and to some extent facilitates ordinary people’s lives in less developed countries, and the corruption that permeates all levels of the state apparatus and connects public officials with the entrepreneurial class.

Corruption, not bribery, is the most dangerous growth industry of our time since it creates international criminal networks and generates tolerance to all types of misbehaviour inside the developed and democratic countries.

This corruption is a consequence of illegitimate “privatisation” of the state and its turning into a kind of private property of the bureaucratic caste. In some countries, where tradition allows the authorities to become legally the owners of state assets (which applies, for example, to the Gulf monarchies), the problem does not arise in the same form as it does in Russia or the Democratic Republic of the Congo, where the rulers seek to strike a balance between the rules of counterfeit democracy and rampant aspiration to maximise their share of society’s wealth.

It is the illegal privatisation of formerly democratic institutions for acquiring private fortunes that is so dangerous for the West – and for several reasons. First, it undermines the people’s confidence in democracy (which is perfectly reflected by Russia’s experience); second, it provokes unrest, creating areas of instability (as happened recently, in Egypt or in Ukraine); third, it leads to the formation of a network of corrupt business interests.

We respect all the researchers who point to the enormous damage corruption causes to the citizens of developing countries (Lawrence Cockcroft, for example, estimates the direct cost of corrupt practices in Nigeria and Peru as reaching 5-6 per cent of GDP annually).  But we are convinced that the main source of corruption is the privatisation of public finances, and its most dangerous consequence is the investment of stolen money in the Western financial and property markets.

Politicians in Europe and America must focus on the problem of corruption in the developing countries, not so much because its solution can ease the lives of their citizens, but rather that it also threatens the basic foundations of the functioning of their own societies. The methods for fighting corrupt practices need urgent rethinking.

In recent years, the flow of dirty money from developing countries to developed ones is estimated to have reached $1trn annually. The developing countries’ elites deposit their money in the largest international banks, buy property in European capitals and send their children to study in Western universities. This strategy of turning a blind eye does not work – rather the opposite, it heightens the West’s dependence on corrupt regimes and reduces the negative perception of corruption.

Achieving a global convention against corruption unfortunately make little sense simply because there is no consensus. Decisive action is required to prevent the penetration of corrupt practices into the developed world. The analogy we suggest is with the EU laws on human rights – it does not extend worldwide but is followed successfully within the EU. We say the same approach should be adopted towards corruption.

We would suggest radical measures. First, to adopt an anti-corruption charter signed by the EU and North American states, as well as by Japan and other countries appearing in the highest ranks in anti-corruption rankings. Second, to impose a ban on opening bank accounts in the countries signing up to the charter, for companies registered in offshore jurisdictions. Third, to prohibit all the subjects from countries that have not signed the charter from acquiring real estate,  and setting up companies or taking over businesses in signatory countries. Fourth, to create a single database of corrupt deals and individuals. Fifth, to establish an international police force operating along the lines of Interpol, authorised to investigate and prosecute corrupt activities in the signatory countries.

This enforcement and investigative body would have the power to “join the dots” between different jurisdictions, and be able to tie together the corrupt person’s different bank accounts and business interests to build a complete picture of their activities. Given the high level of financial sophistication deployed to disguise the extent of corruption, it is essential that this international police force has substantial powers of arrest and seizure. There may be other measures as well. But these steps should not be considered as discriminatory vis-à-vis the non-charter nations – they do not restrict any trade with them, or investment in their economies, or their participation in international politics. But they may greatly help the West in not falling under the influence of corrupt elements; and they will highlight corruption and make the battle against it far more visible.

Moreover, the charter would be open for new signatories, so the corruption-prone countries will not be excluded from the developed world but rather will deliberately exclude themselves from it, by not wanting to accept international investigators and policemen operating on their territory.

The world will become much more clear and transparent if these reforms were implemented; if not, corruption may well evolve from the challenge it is today, into a truly established global practice of tomorrow.

Alexander Lebedev is the financial backer of The Independent and of Novaya Gazeta in Moscow; Vladislav Inozemtsev is director of the Centre for Post-Industrial Studies in Moscow and visiting fellow at the Centre for Strategic and International Studies in Washington

Arts and Entertainment
TVShow's twee, safe facade smashed by ice cream melting scandal
News
newsVideo for No campaign was meant to get women voting
Sport
Wayne Rooney talks to the media during a press conference
sport
Arts and Entertainment
tv
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
News
i100
News
Down time: an employee of Google uses the slide to get to the canteen
scienceBosses are inventing surprising ways of making us work harder
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

PMO Analyst - Risk - Banking - London - £350-£400

£350 - £400 per day: Orgtel: PMO Analyst - Risk - Banking - London - £350 - £4...

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?