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Should aid fight corruption? New book questions logic behind this week’s anti-corruption summit

Duncan Green's picture

Over at the Center for Global Development, Charles Kenny wants comments on the draft of his book on Aid and Corruption (deadline end of May). Let’s hope this becomes standard practice – it worked brilliantly for me on How Change Happens – more varied voices can chip in good new ideas, spot mistakes or contradictions, and it all helps get a buzz going ahead of publication.

But let me take it one step further. As a contribution to the corruption summit, hosted by David Cameron on 12 May 2016, I thought I would summarize/review the book. Charles gave the green light, provided I stress the ‘preliminary, drafty, subject-to-revisiony nature of the text’. Done.

The summit is about a lot more than aid – for example the rich countries putting their houses in order on tax havens. Which is just as well, because the book poses some real challenges to the whole ‘anti-corruption’ narrative on aid. What’s more, it is erudite, engagingly written and upbeat – as you’d expect given Charles’ optimistic previous takes like Getting Better. He’s got a great eye for telling research and ‘man bites dog’ surprise findings. Example: ‘Taking a cross section of countries and comparing current income (2010) to corruption perceptions in 2002 and income in 2002, results suggests more corrupt countries in 2002 have higher incomes in 2010.’

His core argument is pretty striking – when it comes to aid and corruption, corruption does indeed matter, but the cure is often worse than the disease: ‘an important and justified focus on corruption as a barrier to development progress has led to policy and institutional change in donor agencies that is damaging the potential for aid to deliver development.’ Ouch.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Curbing corruption and fostering accountability in fragile settings - why an imperilled media needs better support
BBC Media Action
An independent media is one of the most effective assets we have in efforts to curb corruption and foster accountability. Yet it is deeply imperilled, particularly in fragile states and often poorly understood by the international development sector. This policy working paper argues that unless development strategies begin to prioritise support to independent media, corruption may continue to go unchecked and the accountability of states will diminish.

Africa’s digital revolution: a look at the technologies, trends and people driving it
World Economic Forum
We are at the dawn of a technological revolution that will change almost every part of our lives – jobs, relationships, economies, industries and entire regions. It promises to be, as Professor Klaus Schwab has written, “a transformation unlike anything humankind has experienced before”. In no place is that more true than Africa, a continent that has yet to see all the benefits of previous industrial revolutions. Today, only 40% of Africans have a reliable energy supply, and just 20% of people on the continent have internet access.

The way out of poverty and corruption is paved with good governance

Sri Mulyani Indrawati's picture

Woman speaks to World Bank MD and COO Sri Mulyani Indrawati in the Nyabithu District of Rwanda. © Simone D. McCourtie/World Bank

For the first time in history, the number of people living in extreme poverty has fallen below 10%. The world has never been as ambitious about development as it is today. After adopting the Sustainable Development Goals and signing the Paris climate deal at the end of 2015, the global community is now looking into the best and most effective ways of reaching these milestones. In this five-part series I will discuss what the World Bank Group is doing and what we are planning to do in key areas that are critical for ending poverty by 2030: good governance, gender equality, conflict and fragility, creating jobs, and, finally, preventing and adapting to climate change.


Twenty years ago, the World Bank took up the fight against corruption as an integral part of reducing poverty, hunger, and disease. The decision was groundbreaking then and remains valid today. Corruption diverts resources from the poor to the rich, leads to a culture of bribes, and distorts public expenditures, deterring foreign investors and hampering economic growth.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Corruption? The developing world has bigger problems
Prospect
Few challenges in international development ignite as much passion as corruption. Perhaps ironically given the recent Panama Papers scandal, the UK government has encouraged the “zero tolerance” approach to corruption in international development. This approach may be the ideal, but an effective strategy for tackling corruption must acknowledge that it is a social and political problem, rather than purely a moral one.  In March, we contributed to the UK parliament’s International Development Committee inquiry on tackling corruption overseas. In our evidence, we argued that corruption in the developing world is not the worst of all evils—and that it cannot be wiped out without collateral damage.

Time to let go: remaking humanitarian action for the modern era
ODI
The humanitarian sector is suffering a crisis of legitimacy. Despite a decade of system-wide reforms, the sector is failing to adapt to meet the needs of people in crises. As humanitarian emergencies become more frequent, more complex and last longer, the need for radical change is ever growing. Drawing on four years of research, this report argues that the humanitarian system needs to let go of some fundamental – but outdated – assumptions, structures and behaviours to respond effectively to modern day crises. It argues for a new model of humanitarian action, one that requires letting go of the current paradigm.
 

Quote of the week: Ramón Fonseca

Sina Odugbemi's picture

“We are not afraid — we haven’t done anything bad. I always sleep well at night. My conscience is clear.”

- Ramón Fonseca, a Panamanian novelist and lawyer. He is a co-founder of Mossack Fonseca, a law firm based in Panama with more than 40 offices worldwide that specialises in setting up offshore companies in tax havens. He was president of the Panameñista Party until he was dismissed in March 2016, due to the Brazilian Operation Car Wash (Operação Lava Jato). In early 2015, more than 11.5 million documents, including emails, bank records and client information dating back several decades, were leaked from Mossack Fonseca. On April 3, 2016, the first news reports based on the papers, and 149 of the documents themselves, were published. These documents have come to be known as the "Panama Papers", and have provided an unprecedented insight into the use of offshore financial centres by the rich and powerful. They show how wealthy individuals, including public officials, hide their money from public scrutiny.

The ‘decentralisation agenda’ must succeed

Suvojit Chattopadhyay's picture

MoroccoDuncan Green’s blog hosted a post by LSE’s Jean-Paul Faguet titled: Is Decentralisation good for Development? Faguet has edited a book by the same name that you can find here. This is a subject very close to my heart, and I believe in decentralisation as a value, just as I believe in democracy. It is often a work in progress, but it is a project worth persisting with, an ideal worth pursuing. Faguet’s research (at least, my interpretation of his work) therefore, really speaks to me. In this post, he makes several interesting and compelling points. For instance:

On the advantage of competitive politics generated by decentralised systems:

Imagine you live in a centralized country, a hurricane is coming, and the government is inept. To whom can you turn? No one – you’re sunk. In a decentralized country, ineptitude in regional government implies nothing about the ability of local government. And even if both regional and local governments are inept, central government is independently constituted, probably run by a different party, and may be able to help. Indeed, the very fact of multiple government levels in a democracy generates a competitive dynamic in which candidates and parties use the far greater number of platforms to outdo each other by showing competence, and project themselves hierarchically upwards.  In a centralized system, by contrast, there is only really one – very big – prize, and not much of a training ground on which to prepare.

Four ways open data is changing the world

Stefaan Verhulst's picture

Library at Mohammed V University at Agdal, RabatDespite global commitments to and increasing enthusiasm for open data, little is actually known about its use and impact. What kinds of social and economic transformation has open data brought about, and what is its future potential? How—and under what circumstances—has it been most effective? How have open data practitioners mitigated risks and maximized social good?

Even as proponents of open data extol its virtues, the field continues to suffer from a paucity of empirical evidence. This limits our understanding of open data and its impact.

Over the last few months, The GovLab (@thegovlab), in collaboration with Omidyar Network (@OmidyarNetwork), has worked to address these shortcomings by developing 19 detailed open data case studies from around the world. The case studies have been selected for their sectoral and geographic representativeness. They are built in part from secondary sources (“desk research”), and also from more than 60 first-hand interviews with important players and key stakeholders. In a related collaboration with Omidyar Network, Becky Hogge (@barefoot_techie), an independent researcher, has developed an additional six open data case studies, all focused on the United Kingdom.  Together, these case studies, seek to provide a more nuanced understanding of the various processes and factors underlying the demand, supply, release, use and impact of open data.

After receiving and integrating comments from dozens of peer reviewers through a unique open process, we are delighted to share an initial batch of 10 case studies, as well three of Hogge’s UK-based stories. These are being made available at a new custom-built repository, Open Data’s Impact, that will eventually house all the case studies, key findings across the studies, and additional resources related to the impact of open data. All this information will be stored in machine-readable HTML and PDF format, and will be searchable by area of impact, sector and region.

The things we do: The high price of cheating a little

Roxanne Bauer's picture

"A Fool and His Money" by David Goehring Dishonesty is usually something we think about at the individual level.  Lies are errant, definite actions that individuals perform at specific moments. 

But lies are also important in aggregate because the effect of many small lies taken together can be devastating.

Dan Ariely, a Professor of Psychology and Behavioral Economics at Duke University, and his collaborators, starting in 2002, conducted a series of studies called “The Matrix Experiments”. In this experiment, the team gave participants, men and women from different age groups, 20 simple math questions. They asked them to solve as many questions as they can in five minutes and promised to reward the participants $1 for each problem solved. After five minutes, the participants are instructed to count how many problems they solved, insert their answer sheets into paper shredder machines, and report their results to one of the test supervisors to receive their cash. They did not need to show their answers as a proof. What the test takers did not know was that Ariely’s team programmed the shredders in such a way that they only shredded the margins of the papers while the main body of the page remained intact.

In the end, Ariely and his colleagues found that very few people lie a lot, but almost everyone lies a little.  They tested over 40,000 people and found that only a few dozen were “big cheaters” who claimed to have completed many more problems than they did.  Conversely, more than 28,000 people, or nearly 70 percent, were “small cheaters” who, on average, solved four problems but reported to have solved six.

What is interesting to note is that the sum of the team’s losses to so-called big cheaters was a total of $400.  Compare this to the few dollars each that “small cheaters” stole. Together, these small transgressions added up to a whopping $50,000, causing a much higher impact than the few bad apples.

How corruption hurts innovation in smaller firms

Caroline Paunov's picture
Firms invest in innovations if they expect future benefits from these investments. Patents and quality certificates are means for firms to claim such exclusive gains. However, in order to obtain quality certificates and patents for innovations firms have to apply to the accredited national institutions. If national officials ask for bribes in exchange of dealing favorably with applications, then the costs of engaging in innovation rise and possibly stop firms from innovating. 
 

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