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

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
Powdered colors are displayed for sale at a market ahead of the Holi festival in Bhopal, India
techHere's what you need to know about the riotous occasion
Arts and Entertainment
Larry David and Rosie Perez in ‘Fish in the Dark’
theatreReview: Had Fish in the Dark been penned by a civilian it would have barely got a reading, let alone £10m advance sales
News
Details of the self-cleaning coating were published last night in the journal Science
science
News
Approved Food sell products past their sell-by dates at discounted prices
i100
News
Life-changing: Simone de Beauvoir in 1947, two years before she wrote 'The Second Sex', credited as the starting point of second wave feminism
peopleHer seminal feminist polemic, The Second Sex, has been published in short-form to mark International Women's Day
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

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable