Air Date: March 26, 1996 Program 9613

GLOBAL CORRUPTION

Guest:
Frank Vogl, cofounder, Transparency International

MARY GRAY DAVIDSON, host: This is Common Ground. One of the greatest threats today to the success of the emerging democracies is corruption.

FRANK VOGL, cofounder of Transparency International: I think Americans have a vital interest in working to curb corruption around the world. It directly affects the security of our country if we can work with other countries around the world that are open, transparent, democratic.

DAVIDSON: Fighting global corruption is the topic during this half hour of Common Ground.

VOGL: It tremendously affects our value system, because corruption is the biggest danger to human rights. In addition to that, there's global commerce.

DAVIDSON: Common Ground is a program on world affairs and the people who shape events. It's produced by the Stanley Foundation. I'm Mary Gray Davidson. My guest today is Frank Vogl, one of the cofounders of a nonprofit organization called Transparency International, which works with governments and private companies to fight corruption. Vogl is now a private businessman, but he used to work for The World Bank, where he saw the effects of corruption firsthand. Those were the same effects and problems that the other founders of Transparency International were running into.

VOGL: All of us had a shared perception that, first of all, corruption was doing enormous damage to the efforts to secure human rights, democracy, and free open global commerce around the world and, second of all, that there was no organization to do anything about this dilemma. So we thought we'd create one.

DAVIDSON: Are you mainly dealing with governmental corruption?

VOGL: We define corruption as the misuse of public power for private gain. Now, it always takes two. Very often we're talking about businesses, corporations who are paying bribes to win government contracts—paying bribes of course into the accounts of politicians and public officials. That's our focus.

DAVIDSON: Well now that you've defined corruption, define transparency.

VOGL: We believe that when governmental actions can take place in secret then all manner of abuse is possible. Put the sunlight on government actions, make politicians publicly accountable, make all of the transactions of government transparent and you start to make corruption so much more difficult for the corrupt. Transparency has become used now more and more as a term all over the world to define corruption.

DAVIDSON: Isn't there anything within the United Nations that's dealing with governmental corruption?

VOGL: Yes. There are all manner of high and lofty declarations against corruption. But there is nothing happening to actually make a real difference. It is so easy for top government officials—for presidents, for heads of the corporations—to go out and say, we're going to stop corruption, we're going to fight corruption, and then do nothing about it. We were quite determined to launch initiatives around the world to really see that you could make a difference through constructive actions to curb corruption. The fantastic thing is we started in 1993 and in less than two years we already had over forty national organizations going. There is enormous public demand all over the world for action of this kind.

DAVIDSON: Forty separate countries have come to you and sought your advice?

VOGL: Yes. From the United States we have a TI-USA, we have a TI-South Africa, TI-Tanzania, TI-Philippines, and two weeks ago TI-Spain. All over the world we're finding that there are individuals and organizations who really believe that corruption is the biggest threat to their democracy, to their future economic success. They are forming their own groups and working with us.

DAVIDSON: Do you even have governments that are coming to you that want to be more transparent?

VOGL: Absolutely. One of the most exciting aspects of all of this is that there is a rapid increase in the number of governments that are getting freely elected. Just take Africa. In the last five years more than twenty of the forty sub-Saharan African countries have had for the first time, in this generation at least if not more, first time ever for many, free open elections. We are finding that as democracy spreads a new generation of political leaders is coming to the fore who genuinely want to attack the corruption in their societies and who are willing to say, we don't have all the answers, let's go to the international community, find the best brains in the world to help us to really bring about meaningful reform.

DAVIDSON: Is democracy the best system for transparency in your opinion?

VOGL: I believe it is. Others may have a different point of view. If I may, let me put my American hat on for a moment. Americans have a vital interest in working to curb corruption around the world. It directly affects the security of our country if we can work with other countries around the world that are open, transparent, democratic. It tremendously affects our value system, because corruption is the biggest danger to human rights. I'll get into that more if you want to. In addition to that there's global commerce. American corporations are subject to the Foreign Corrupt Practices Act which means they cannot pay bribes abroad to win contracts. The United States is the only country in the world that criminalizes foreign business corruption. We want to see that other countries have similar laws. America has a lot of vital interest in this, and having democracy around the world is certainly in our interest.

DAVIDSON: Where have you seen real concrete progress?

VOGL: We're a very young organization, so I...

DAVIDSON: Yes. Three years is not a lot of time to...

VOGL: ...you don't want to claim victory in a battle that probably will never have an end. But in Uganda, in Tanzania, in Malawi, in South Africa (just to take Africa as an example), we have had in recent times meetings, workshops of top government officials with the private sector and academia, where agendas have been worked out for reform and actual changes have as a result taken place. New laws have been passed for the first time. Greater press freedoms have been allowed. Civil service reform is taking place in Uganda. The office of the Inspector General, like an Auditor General's office that could monitor, investigate government actions has been given more powers. Many of these sort of rather specific, particular things are starting to happen in many countries. We feel that's truly encouraging. They're not headline grabbing; they're not sensational. If you add them all up and if the momentum can be kept going, it can make a difference.

DAVIDSON: I'm interested in what motivated you to get into this. Is it purely altruistic or...

VOGL: Yes, partly. I have two motivations. One is because I worked for many years in foreign assistance and in development. Like some of the other founders of Transparency International, [I] became quite frustrated about the fact that brilliant ideas for using taxpayer money to improve the lives of the world's poorest people were somehow or other going off track. Implementation was not as good as it should be. People in many tax paying countries, donor countries like the United States, were starting to become very disenchanted with the whole notion of foreign aid, because basically they saw money going down rat holes or in the Swiss bank accounts of foreign dictators and not really alleviating poverty. And the more we looked into this, my colleagues and I, the more we were convinced one of the major reasons was corruption. That brilliant ideas on the part of the foreign aid workers were somehow or other not having their full benefit because of corruption, and that somebody had to attack corruption. Nobody was doing it. It was as if it was a word nobody wanted to mention. It was as if it wasn't quite polite. Well we thought, this is absolutely wrong. The taxpayer needs to have a sense that taxpayer money is being used efficiently and effectively. In our sense, we spent so many years working in development; we'd seen the poverty first hand; we'd seen also what's possible. We thought that was important.

There's another reason as well. I'm a businessman. I was once a journalist; I was once in development. Now I'm in international business. Together with my partner, James Sinclair, we have been building an international corporation. As we have been doing that, working in sometimes quite difficult countries, for example in Africa, we have been convinced more and more that the next twenty to thirty years will see spectacular growth and dynamism in the developing world—what we call emerging markets. We will see tremendous growth there with the tremendous possibility of making great business deals, great profits. It's not just altruistic, at the same time alleviating poverty in these countries. But at the same time, we are convinced that corruption is the greatest threat to that scenario. We really believe that businessmen, and all American businessmen are going to find they're going to have to go international more and more in the future, businessmen need to know how to deal with corruption, how to face it, how to do successful business without paying bribes.

This became a great concern and preoccupation of ours. In fact, we've just written a book about it. It's called Boom. We really believe, and we've tried to explain it at length in the book, that business can succeed without paying bribes, but it has to know how to do it.

DAVIDSON: My guest on this edition of Common Ground is Frank Vogl who runs a private communications consulting firm and is Vice-Chairman of Transparency International, which works to fight corruption in business and government. Audio cassettes of this program are available. Please listen at the end of the broadcast for details on how to order. Common Ground is a service of the Stanley Foundation, a nonprofit, nonpartisan organization that conducts a wide range of programs meant to provoke thought and encourage dialogue on world affairs.

Do you feel that a corporation has to develop its own set of values or do laws need to be instituted that mandate levels of conduct?

VOGL: I think you need both. I say that because I am not sure if there would be as stringent an effort by US corporations, particularly the largest ones, not to pay bribes abroad if it wasn't for the fact that there is a Foreign Corrupt Practices Act which makes it a criminal offense to pay bribes abroad. That is an added pressure on US corporations.

Now you take a German company. German companies do not have a Foreign Corrupt Practices Act. In fact, under German law a German company can go and pay a bribe abroad to win business and make the bribe tax deductible at home. So the German laws actually give you an incentive to pay bribes. Clearly if you change that and end the tax deductibility of bribes. You criminalize the act of making foreign bribes, you would add significant pressures on the German corporations to, as it were, adopt what I would like to see as a universal set of global values for business.

DAVIDSON: In the German system, are bribes abroad considered the cost of doing business?

VOGL: Absolutely. It's encouraged because there is a fallacious view that says if you pay bribes abroad you can get the contracts which could help boost employment at home. It's not just the Germans. Most Europeans have the same system. In some countries they don't call them bribes, they call them commissions. Then they're tax deductible, but it's really the same thing and everybody knows it goes on in France or in Japan and many other countries. As I said before, the United States is the only country in the world to have a Foreign Corrupt Practices Act that criminalizes foreign bribery.

Now there are lots of initiatives right now, and Transparency International's working very hard at this, to try and change the laws in Europe and in other countries. Fortunately, there have been enough domestic bribery scandals, not foreign ones but domestic bribery scandals, in Britain, in France, in Germany, in Spain, in Italy in just the last few years that therefore the whole issue of bribery has hit the headlines, become part of the public debate, and made it much easier perhaps to change some of the laws there.

DAVIDSON: It would seem that if that's your mode of conduct abroad, then why not at home?

VOGL: Absolutely. It's a tough but very important battle.

DAVIDSON: Is there any place in the world that you see as exemplary or exempt from corruption, or is this a human failing?

VOGL: I think it is. It's a function of greed, but I do think there have been a number of countries that have taken some very bold measures to try to do things the right way. Singapore has amongst the highest pay scales for civil servants in the world. As a result, it's got some of the most honest civil servants in the world. The high salaries paid public officials in Singapore are directly related to an effort by that government to reduce corruption. Some of the Scandinavian countries have adopted systems of transparency through having strong orders of general functions, through having very open ways in which government does business that have clearly minimized the degree of corruption.

And then to take a much more controversial point for this audience who's listening to this program, the US campaign financing laws, with all of their problems and all their needs for reform, at least allow us to understand who is putting money into the campaign coffers of politicians.

DAVIDSON: If somebody wants to take the time to find out.

VOGL: Okay, but we can find out. It is transparent, and it's one of the few countries in the world where all of the aspects of the relationships between money and politics—or most of them, not all of them, because there is corruption here too of course—but most of the aspects of money and its relationship to politics are at least out there in the public domain. We can analyze it. We can reach our own conclusions about it, but at least it's transparent. That's a model to some extent for other countries.

DAVIDSON: What are some of the other roadblocks to transparency? You mentioned the low pay scales for many civil servants. For them it might just help them have a decent standard of living to take a bribe.

VOGL: You know it's a terrible tragedy. I was at a conference not so long ago and there was a judge there from Ukraine, a newly independent, democratic state. The rule of law is a fragile beast in that country, a fragile instrument. The judge plays a key role. The judge was being paid $10 a month. He can't survive on that. He is faced every day with an enormous predicament in how he enforces the rule of law and doesn't take a bribe and yet has to survive. So I think the salaries issues is absolutely crucial, but I would add a few others. We need to have systems in countries that have independent judiciaries—not judges and public prosecutors who can be dismissed at whim by corrupt politicians. We need to have systems of a free press. The United States takes its free press for granted. It exists in very few countries. Libel laws in many countries are so stringent that they in fact prevent any media from ever doing any exposés or any investigative journalism. So we need a free press. We need an independent judiciary. We need institutions like an auditor general's office in many countries that could be an independent watchdog over what government does. And most important of all, we need independent parliaments full of people of integrity. Okay, that's wishful thinking perhaps for any country, but it must be a goal because a parliament can be a bulwark against corrupt civil servants and corrupt presidents and administrations.

DAVIDSON: How do government officials or judiciaries combat organized crime? I was thinking of that when you said independent judiciaries and in Colombia, for example, where so many judges have been murdered.

VOGL: I think for us today, sitting here in the United States, one aspect of corruption that is enormously important for us is what is colloquially called narco-corruption—the corruption related to the whole drugs trafficking, the drugs business. Through money laundering, for example, the amount of illicit funds that are available to these drug kings to corrupt governments, to undermine governments, is enormous. How do you deal with that? Part of our response in the United States has been to say, let's clamp down on the importation of these drugs, let's go after the laundered accounts in the banks of Miami and elsewhere. I think that's fine; I think we have to do much more. Part of it has to be directly in strengthening the processes of democracy in many of the drug-producing countries. We have enormous experience in the United States that we can put to help some of these governments in building independent judiciaries and legal systems, in strengthening parliaments and legislative processes. If we did that, we would also find that we would be conquering corruption and narco-corruption.

DAVIDSON: Are you working at all with people in Russia where corruption certainly seems to be one of the greater threats to democracy there?

VOGL: Yes. But in Russia, as in many other countries, I don't want to suggest to you for a moment that we're making great progress. We're starting. The climb is a very long, very difficult one. I might sound idealistic, but I'm also quite realistic about what is possible. We have had several missions to Russia by our experts, we've been invited to Russia even by the Russian parliament, to help them forge new legislation against corruption. But we are acutely aware that in countries where the rule of law is frankly meaningless, it is very difficult to even get to stage one in trying to curb corruption. We are hopeful that the transition process in Russia to a more democratic system will also elevate the rule of law that property rights will be meaningful, that contract rights will be meaningful and through that a space can be set from which you can start to attack some of the problems of corruption. But clearly corruption in Russia is rampant as it is in much of the newly independent states (the successor states of the Soviet Union). It is an enormous problem.

We get many calls from many individuals in those countries who say, come on, help us. But the fact is that we need far more resources than one volunteer group has, to do something about it. Also, we have to see what the Russian people do themselves. Ultimately, fighting corruption within the national borders is the prerogative of the people, the citizens of those countries. An international group like ours can only help at the edges to cajole, to encourage, to bring together expertise, and to try and move the agenda forward.

DAVIDSON: Can you rank countries on their level of corruption and say where the worst and the best are?

VOGL: Yes!

DAVIDSON: I know I saw on the Internet today that you have this Internet Corruption Project, so I wanted to talk a little bit about that.

VOGL: Who's the most corrupt in the world! Who's the cleanest in the world! Who's the best! A professor in Germany did a survey, and worked with us to some extent, of many surveys that businessmen had done or been conducted amongst international businessmen about their perceptions of the most corrupt countries. What I'm talking about now is what businessmen think is the most corrupt country, which doesn't necessarily mean it is the most corrupt country.

Now what we found was that countries like New Zealand, Sweden, Australia came at the very top. Nobody seemed to think these were corrupt at all. The United States came around the middle of the list, which surprised many Americans who wanted to say our country is much cleaner than that, this is all wrong. Some of the Asian countries, Asian emerging countries, have come right at the bottom of the list as the most corrupt. I must tell you, this so-called corruption index is very unscientific. It's just images; it's just perceptions. We have to do a lot more work before we really can come out with something and say, yes we're pretty confident, this is definitive.

The interesting thing about publishing this first index, with all the caveats, was that it aroused an enormous amount of international interest, an enormous amount of attention. It got some governments very mad indeed. Perhaps that was good in raising public awareness of the fundamentalist use of corruption, which I think is vital if you're going to do something about the problem.

DAVIDSON: When we talk about ranking countries, in a way it would be very difficult because there are so many factors. You brought up Singapore and the fact that their public servants are decently paid so that the bribery level is lower there. But we heard a lot about Singapore last year, I believe, and there are some pretty harsh laws there. A lot of human rights groups here would cry foul in the face of those. We had talked early on at the beginning about how this relates to human rights.

VOGL: This is enormously complicated. I do not want to overgeneralize, and that's why I threw in all these caveats just now into the question about ranking countries. It is very, very complicated indeed. If I may, just to put my business hat on once more, if you are an international investor, you will feel much more secure going into a country where you feel the government is committed to curbing corruption and doing something about corruption, than to going into countries where nobody is doing anything about corruption. As more and more of the emerging countries now compete with each other to get foreign investment and it's an enormous, enormous competition—we're talking about $80 billion a year of foreign investment going now into the emerging countries of the world—some of these countries are finding that they themselves have a commercial interest in getting reputations for stamping out corruption. In other words, their own wallets are being affected by their reputation for corruption.

This is a new phenomenon. It's a new factor in global business. It's very exciting. It's one of the reasons why you've had, for example, the investigations of former presidents in Korea, in Brazil, in other countries. There is a new realization in many of the developing countries of the world that it's good for them commercially to stamp out corruption. A very new world we're entering, very exciting.

DAVIDSON: Still it must take great courage for some people that you work with to fight corruption and speak publicly, because there are obviously people who are in power that don't want some of the corruption ended or maybe they're fighting organized crime and take great personal risk.

VOGL: Yes. Many of my colleagues in Transparency International in many countries of the world every day encounter great risk, are people of enormous courage by standing up against corruption. Let me if I may give you one example. A man of outstanding integrity is the former President of Nigeria, General [Olusegan] Obasanjo. He has stood out as a leader for human rights and democracy in Africa. He has fought very hard for it. He was arrested one year ago in Nigeria by a thoroughly corrupt Nigerian government. He was arrested, in my opinion, solely because of his willingness to speak up for democracy and against corruption. He was sentenced to prison in a secret trial. The US public, the US press, former President Jimmy Carter, have done a lot to make his case well known in the world. I hope much more is done. I hope the Nigerians are not allowed to get away with keeping him in prison. He is one of the victims in the area that you have just spoken about. Yes. A lot of courage is necessary for people in many countries of the world to speak out against corruption, but they're doing it. It's remarkable, but it just shows you how serious the corruption issue is and how terrific it is that there are so many bold people around.

DAVIDSON: Frank Vogl has been my guest on Common Ground. He is the cofounder of Transparency International and the author of Boom: Visions and Insights for Creating Wealth in the 21st Century. For Common Ground I'm Mary Gray Davidson.

Cassettes of this program are available at a cost of $5.00. To order a tape or if you'd like to share your thoughts about the program, write to us at the Stanley Foundation, 216 Sycamore Street, Suite 500, Muscatine, Iowa 52761. Be sure to refer to Program No. 9613. To order by credit card you can call us at 319-264-1500.

Our theme music was created by B.J. Liederman. Common Ground was produced and funded by the Stanley Foundation.


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