fig. 1 Big variations in corruption within every continent

will get what they want without having to wait too long. In the Republic of Korea, where Communist-style control of the state has not existed, few feel they have the connections needed to push civil servants to do what they want.

Where there is a choice for a service, the market offers a legal alternative for satisfcing. Among Koreans and Czechs, this is most evident in the readiness to buy a house in the private sector or to pay a tutor to help their child to qualify for a university place. If Russians have the choice between spending money to get a public service by paying cash or using their social capital network, they are inclined to make use of Soviet-style social capital to escape from a corrupt public service.

Nonetheless, even if people are prepared to pay a bribe to get a public service, this does not mean that they think it is the right thing to do (fig. 1). On every continent, there is a consensus that it is wrong for offceholders to proft by claiming bribes. Whatever the level of bribery in a country, questions about the acceptability of bribery fnd overwhelming

EBRD

GCB 86%

85%

Eurobarometer

LAPOP 82%

81%

Afrobarometer 77%

0% 20% 40% 60% 80% 100%

Percent saying public officials behaving wrongly

Fig. 1 Global consensus bribery is wrong (Sources Here and subsequently sources are as given in Table 2 in Chapter 1 unless otherwise noted)

majorities do not excuse corrupt payments as even occasionally acceptable. When people in formerly Communist countries are asked what they think of a public offcial asking for a favour or gift in return for services, almost seven-eighths say it is unacceptable, a higher level even than in Europe. When Latin Americans are asked—Do you think the way things are sometimes paying a bribe is justifed?—more than four-ffths say it is unacceptable. When Africans are asked about bribery, 77% describe it as wrong and say that the offcial collecting the bribe should be punished.

Individuals who think that bribery is wrong are nonetheless vulnerable to being asked to pay a bribe by a corrupt public offcial. When this happens, they may resolve the confict between their ethical and behavioural norms by deciding that paying a bribe is a lesser evil than going without a valuable service for themselves, their child or a parent needing health care. The extent to which this happens means that most bribes are paid by people who think it is wrong to do so. People pay bribes because they are afraid that if they do not they will not get what they want. Very few citizens offer bribes because they see this as an acceptable way of obtaining public services.

2 The heaLTh of The BoDy PoLiTic

An underlying assumption of models of good governance is that public services are delivered by people who act like robots, who respond automatically to requests according to formal bureaucratic rules that are programmed into their electronic control system. Because of this, robots lack discretion and autonomy. However, the body politic is better understood by analogy with the empirical and normative approaches that doctors use in handling patients (cf. Etzioni 1985). Medical textbooks set out a model of the anatomy and physiology of the human body in a state of perfect health. However, doctors do not assume that everyone they see is in a state of perfect health. The textbook model of perfect health is used as a standard for identifying bad health.

Many textbooks of public administration concentrate on describing the practice of a system of good governance in perfect health. People get what they want if they are entitled to do so and do not get what they should not have. A realistic model needs to take into account symptoms of bad health in the anatomy and physiology of governance. Corruption provides many symptoms of governance in bad health.

Institutions constitute the anatomy of governance. In the classic model of a unitary body politic, institutions are linked hierarchically from head to toe. At the head is a single authority, whether a monarch, a dictator, a cabal, a president or prime minister. In an era of big government, the headship includes political principals who give direction to the departments and agencies that collectively constitute the body politic. The scale and variety of a department’s activities mean that political principals must rely on offcials lower down in the department to act as agents carrying out the decisions that principals make. Military defence comes closest to meeting the ideal of hierarchical governance. At the top is a commander-in-chief who has the legitimate authority to issue commands to army, navy and air force institutions. Obedience to commands from above is a fundamental rule from privates up to generals. However, the military is an exceptional government institution. The french practice of technocracy places at the head people with the technical expertise to make decisions in collaboration with politicians with the skills to secure the popular compliance necessary to make decisions effective.

The multiplicity of policies for which governors are responsible today results in the functional division of governance into many departments, each of which has a nominal head. To carry out its many functions each department is divided into bureaus dealing with particular services. for example, an Education Department will have separate bureaus for primary schools, secondary education, universities, teacher training and so forth. In addition, some major functions are usually hived off to other types of agencies, such as the central bank, a health authority or not-forproft or proft-making institutions. When multiple institutions are jointly involved in a policy area, as is normally the case in a federal political system, this creates political and constitutional barriers to any principal controlling all that is done within the state (Piattoni 2010).

Geography is a structural barrier to the ability of political principals to monitor how their local agents follow the rules that they lay down. Social services, such as education and health care, are delivered wherever citizens live and most citizens live a signifcant distance from their national capital. London is only one-eighth of the population of the United Kingdom and Beijing and New Delhi about one percent of their respective national populations. Local government is responsible for many services that must be delivered locally, such as refuse collection. Even if education is nominally under the control of a central government

ministry, classrooms are far away. The traditional claim of a french minister that every teacher will drill pupils daily in accord with instructions from on high invites the sceptical response ‘Perhaps’ or ‘How would the minister know?’

Because of differences in the institutions delivering public policies, governance involves a population of political bodies rather than a single body politic. A politician nominally in charge of government is more like the president of a university than the commander-in-chief of a military force. He or she can proclaim standards and identify goals that must be broad enough to apply in many contexts, such as saving public money, while vague enough to leave a lot of discretion in the hands of their agents. A university lecturer can meet students in classes without ever meeting a university president and a president can announce a new strategy for teaching students without setting foot in a classroom. So too a minister for health will only see how doctors deal with patients when she or he is actually a patient, and doctors hear about what the minister wants them to do through the media or in bulletins from their professional association.

The physiology of governance determines whether public services are delivered by the book or whether hooks are used to get around rules or bribes to break rules. Lower-level public offcials are the lifeblood of implementing policies. Corruption at the grass roots is not due to the absence of bureaucratic rules stipulating the obligations of public employees but to limitations on the application of impersonal rules in a relationship between people. Offcials on the ground can exploit their distance from nominal makers of policy to become principals deciding how they deal with ordinary people who are the recipients of public services.

Even though public employees are expected to behave in accord with bureaucratic rules, most do not see themselves as bureaucrats, following formal rules without regard to the circumstances of the individuals they deal with. They see themselves as people whose job is to apply the professional and technical standards in which they have been trained. Radically different skills are required to teach children how to read, to collect taxes or to be a submarine captain. In a modern system of governance, individuals are appointed to a particular post because they have qualifcations relevant to that service, for example a teaching diploma, an accountancy certifcate or successful completion of training as a pilot. Public servants spend most of their working lives directly engaged in applying these skills as the employee of a local education authority, a government tax accountant or an air force pilot.

Public employees differ in the extent to which they have contact with ordinary people who receive services and thus the opportunity to collect bribes from users. Hospital accountants handle money, but they do so in an offce where contact is confned to other public employees met faceto-face or linked by computer. By contrast, a hospital pharmacist works behind a counter where patients come to get a drug they need. Public employees also differ in the extent to which they have discretion when applying rules. A post offce clerk meets people over a counter but cannot guarantee that paying extra under the counter will result in a parcel being delivered promptly and safely. By contrast, a nurse on a ward makes decisions all the time about which patient to deal with next and what treatment to give them. Police on the beat are classic examples of a ‘street-level bureaucrat’ (Lipsky 2010). A police offcial has the discretion to decide whether an individual is behaving suspiciously or is breaking a law. In the United States, police use their discretion to shoot to kill.

A central concern of principal-agent theories is the extent to which agents tend to use their discretion and distance from principals to act in their own self-interest (Bovens et al. 2014). In a political system in which corruption is widespread, there may be collusion between principals and agents, with unprincipled principals being most involved in taking bribes in return for allocating government contracts worth billions and agents taking money in exchange for delivering retail services at the grass roots (Persson et al. 2013).

In countries in which the pay of grass-roots public employees is low in the absolute sense, they may turn to soliciting bribes to augment their income. Rational choice theory predicts that if the estimated risk of being caught and punished is less than the gain from obtaining a bribe, agents can take advantage of discretion and distance from nominal controllers to solicit bribes. When this happens, a public offcial is no longer a passive agent of good governance but an active promoter of corruption. The power relationship within governance is inverted. The lowlevel employee is a principal determining how a policy is delivered and the government minister responsible for a policy can become a bystander.

The health of the body politic, like that of its citizens, is variable. Like its economic counterpart the perfect market, a model of perfect governance identifes what may be approached but not completely achieved. (Hood 1976). Just as the capacity of the human body has physical limits, the state’s capacity is limited too. This is most obvious in developing countries that lack money and skilled personnel as well as a long history

of bureaucratization. Limits on governance exist in rich modern states too. Whenever an example of bad governance creates a public furore, the government minister nominally accountability for the policy can claim that he or she was not involved and launch an investigation into the activities of nominal subordinates.

3 comParing exPLanaTions of corruPTion

Because of the range of theoretical explanations of the causes of corruption, reviews of the existing literature tend to be lengthy. The path-breaking review of political corruption over time and space edited by Arnold Heidenheimer and Michael Johnston (2002) is 970 pages long. The two volumes on the economics of corruption edited by Susan Rose-Ackerman (2006) and Rose-Ackerman and Tina Soreide (2011) total 1202 pages. The European Commission funded a major programme about the challenges of corruption that involved 20 research groups in 15 countries (www.anticorrp.eu). A leading political science handbook of corruption edited by Paul Heywood (2015) has 24 chapters with more than 300,000 words.

Given the many defnitions of corruption, theories differ in what they try to explain. The majority offer explanations of why corruption, however defned, differs between countries. Many answers focus on attributes of countries as a whole, such as its history or its contemporary institutions. The presence or absence of corrupt behaviour may be explained as a consequence of cultural norms and values; this approach is particularly strong among anthropologists studying villages on non-Western continents. It can also be applied to regions, such as Southern Italy, or loosely applied to whole countries. Within a single country, variations in behaviour between individuals—some pay bribes and some do not—may be explained as refecting differences in socio-economic characteristics and in individual attitudes.

Although corruption is inherently an interdisciplinary problem, social scientists are divided into disciplines with different intellectual frameworks and methods. This results in a plurality of explanations that give priority to the assumptions of a single discipline rather than an integrated explanation. The following paragraphs review six different propositions about major causes of corrupt behaviour differing between countries and between individuals within a country. The need to treat each separately for purposes of exposition does not mean that they are mutually exclusive. from a broad interdisciplinary perspective, a multiplicity

of explanations may be empirically signifcant; however, their impact on corruption can differ substantially in magnitude.

The history of a country is a given, and for better or worse path-dependence institutionalizes informal as well as formal procedures that infuence governance today. This makes it diffcult for reforms to alter established routines of public offcials by the adoption of new laws. When international aid agencies sought to reduce corruption in developing countries by introducing legal and bureaucratic institutions they met resistance from national political elites (LaPalombara 1963; Riggs 1964).

Theories of path-dependence explain the persistence of both good and bad forms of governance (Pierson 2004; Perez-Linan and Mainwaring 2013). The persistence of a low level of corruption in Northern Europe is explained as a consequence of a nineteenth-century history in which structural changes in traditional methods of administration were replaced by bureaucratic institutions. What Alina MungiuPippidi (2013) has called ‘becoming Denmark’, that is, achieving a high standard of governance, was a very lengthy process. Countries that began socializing public offcials into bureaucratic practices long before mass welfare state services were introduced should, therefore, be low in corruption. By contrast, if major social benefts were introduced while traditional customs such as clientelism were still practiced, this can account for a government being deemed corrupt today. Historical differences can thus result in a stable equilibrium that maintains good governance in Scandinavia and corrupt governance in places such as the successor states of the Soviet Union (cf. Hellman 1998).

Theories of political culture explain the presence of good or bad governance as a consequence of the collective norms of a political culture. Each new generation is socialized into a common understanding about how government works and the standards that adults ought to apply in their relations with public offcials. Insofar as this happens, people regard the way in which government works as normal in both the behavioural and normative senses. Since cultural norms develop in a particular national and historical context, what is regarded as normal in South Africa can be different from what is regarded as normal in Sweden. In a country with relatively good governance, people are prepared to wait patiently in a queue for a service or to accept a refusal to provide it as fair, and cases of corruption are seen as exceptions to the rule. By contrast, in a culture where favouritism and bribery are regarded as a fact of life, behaviour that appears corrupt by universalistic standards appears normal (cf. Persson et al. 2013; Manzetti and Wilson 2007).

Institutional theorists reject the idea of classic philosophers that the absence of individual virtue is the primary cause of corruption. When drafting the American Constitution, James Madison assumed that men were not angels and that their tendencies to bad governance should be curbed by a political system of checks and balances. Any tendency of politicians or their agents to practice corruption needs to be checked by institutions such as an independent audit offce and an independent offce for prosecuting those who break formal standards and courts with the power to enforce laws about what public offcials ought and ought not to do. Theories of democratic institutions explain the absence of corruption as due to free elections giving voters the power to decide who governs. If the principals of a democratic government tolerate corruption, voters have an opportunity to vote them out of offce. In anticipation of the threat of losing offce, governors will resist on pragmatic as well as ethical grounds the opportunities to abuse their powers for personal gain (cf. Potter and Tavits 2011).

Sociological theories turn attention from institutions to social status. Who you are and how you are perceived by others affects the way in which you are treated by public offcials. Class differences in individual income and education may result in people of higher social status being more likely to experience good governance and those lower down the social ladder being bullied to pay bribes. People can protect themselves from the effect of corruption in a particular public service by having no contact with it. Individuals without children are not at risk of corruption in education because they have no children in school. However, older people are vulnerable to corruption in the health service because they cannot do without health care.

Social psychologists stress the importance of the expectation that people have about how they will be treated when seeking a public service. Expectations about how government ought to work and perceptions of how public offcials actually behave can cue people to respond in opposing ways. People would like to experience good governance but may perceive political institutions as corrupt. Insofar as this is the case, then they will be readier to catch cues from public offcials asking for bribes as a condition of giving them what they want.

It is an axiom of political economy that economic conditions affect how a country is governed (see e.g. Rose-Ackerman and Soreide 2011). However, this leaves open what specifc features of an economy are important. A high correlation between a country’s Gross Domestic

Product (GDP) per capita and its rating on the Corruption Perceptions’ Index(CPI) (r: − 0.70) is often interpreted to mean that the more prosperous a country is, the lower its level of corruption. However, when GDP per capita is included in a multivariate statistical analysis testing potential determinants of national level corruption, along with various political infuences, it fails to achieve statistical signifcance (Rose and Peiffer 2015: Table 6.2). Moreover, there are good theoretical reasons for interpreting economic prosperity as a consequence rather than a cause of a low level of corruption (cf. Lambsdorff 2007: 72ff). freedom from corruption can boost economic growth by offering businesses the best conditions for investing because they are not harassed by public offcials administering economic regulations in ways that are ineffcient and arbitrary and can only be got around by wasting time and money. Because of the theoretical ambiguity about the relationship between GDP and corruption, we test other economic measures, such as the effects on corruption of a wealth of natural resources or a high level of foreign aid.

Rational-choice economic theories disregard normative assumptions in postulating that individuals are self-interested actors ready to pay for what they want. Where there is a choice between providers, people do not have to wait indefnitely in a queue or pay a bribe to receive what may be an inferior service. Instead, they may turn to an alternative provider, whether not-for-proft or a proft-making enterprise, if they can afford to do so. Since public services are often monopolies, in a system of bad governance the only choice that individuals may have is that of paying a bribe, or going without a service they want. In such circumstances, a simple cost-beneft calculation can determine whether a bribe is paid.

Although there are lots of theories offering explanations of corruption, there is limited statistical testing of the extent to which their hypotheses are supported by empirical analysis (see Treisman 2015). One reason is that many do not specify clear testable links between cause and effect. Relatedly, many forms of corruption are portrayed as part of a complex syndrome of bad governance (Johnston 2014). Case studies of villages by anthropologists and of corrupt behaviour by elites can be insightfully drawn from frst-hand observation. However, narrowly focused case studies are often not ftted into a broader theoretical framework.

In the chapters that follow we offer robust empirical tests of broad explanations of corruption by combining evidence about the infuence of national history and institutions and of individual characteristics. In Chapter 3, the focus is on explaining cross-national variations

in Transparency International’s measure of corruption at the national level. However, national generalizations cannot explain within-country variations between individuals. Subsequent chapters combine evidence from sample surveys of more than 175,000 individual respondents and national context in more than 125 countries. After reviewing empirical differences in contact with services and bribery in Chapter 4, Chapter 5 uses multilevel statistical analysis to test hypotheses about the infuence of national contexts and individual characteristics on paying bribes for a variety of public services. Chapter 6 turns attention to the behaviour of West European politicians that may not be illegal but is judged corrupt by the court of public opinion.

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CHAPTER 3

Exploiting National Government

The best-known measures of political corruption are in the style of macroeconomic statistics: they are indexes that characterize national governments as a whole. The primary concern is the extent to which high-ranking policymakers in the national capital make decisions that produce big-bucks benefts for a small number of people. The primary information used to create corruption indexes consists of expert perceptions of how politicians behave when handling public money and deskbased research evaluating government institutions. The reforms that are advocated to deal with big-bucks corruption are directed at national institutions.

National governments have the authority to take big decisions that involve spending large sums of money to provide the infrastructure of a modern state, such as roads, hospitals and airports. Decisions must be concentrated at the top level of central government because they are lumpy, that is a large sum of money must be invested in a single project. Big infrastructure projects involve one-off commitments by central government to a single contractor or consortium that has the knowledge and capital-intensive technical resources needed to build a dam or manufacture military aircraft. Given this scale, the value of such contracts to those who win them runs into the tens or hundreds of millions or more. Even if public expenditure on health services or education in total is similar to spending on infrastructure projects, the cost of giving education or health care to a single individual is small. Moreover, these services are

© The Author(s) 2019 R. Rose and C. Peiffer, Bad Governance and Corruption, Political Corruption and Governance, https://doi.org/10.1007/978-3-319-92846-3_3 39

delivered at the grass roots by hundreds or thousands of institutions. By contrast, the benefts of contracts for capital-intensive infrastructure projects are concentrated in a few enterprises.

Getting a contract with a national government is capital-intensive, because a company must invest substantial amounts of money, time and effort to obtain a contract and produce what the contract specifes. Before any question of bribery arises, a frm must have invested substantial capital in order to be able to design and cost a complex public project. It must also invest a signifcant amount of time and money to compete for the award of a contract by impersonal bureaucratic procedures. If decisions are made by hook or by crook, more effort is required to fnd out who to infuence and how, and how much money should be paid on the side in consultancy fees and bribes in order to get a big contract. Hundreds of millions or billions of capital are needed to manufacture aircraft, build an airport or drill for oil. Because most big contracts involve activities spread over several years or longer, a company must have suffcient capital to deal with delays by a government that is habitually late in making payments and, if necessary to expedite payment by paying bribes to offcials whose signature is required to release payments due. The amount of capital required to exploit a national government is far beyond the petty bribes that corrupt local offcials may demand to deliver services to ordinary citizens.

If the procurement process for a capital-intensive infrastructure contract follows impersonal bureaucratic standards, its award will be in accord with the formal standards of good governance. However, these standards are often violated. Transparency International (2014: 8) estimates that up to $2 trillion annually is diverted from procurement budgets to beneft public- and private-sector elites rather than invested to improve the infrastructures that are needed for economic development.

1 corruPTion aT The ToP

The size of a country’s gross domestic product (GDP) is a major determinant of public expenditure on capital-intensive projects. Because this refects a country’s population as well as its economy, countries where individual income is low such as India and Brazil have a higher GDP than Sweden and Denmark, where individual income is much higher but the population is much less.

A country’s tax effort is a second major infuence on the money that a government has to spend bureaucratically or corruptly. Tax effort, the percentage of GDP that it collects in tax revenue, tends to be high where the bureaucratic capacity to collect revenue is high; these are also countries that are rated as low in corruption by the Corruption Perceptions Index (CPI). This can be explained by theories of political economy that postulate that the predictability that effective bureaucracy offers promotes economic growth and that citizens will only pay high taxes if the government uses its substantial revenue to deliver social benefts honestly. foreign aid is a signifcant source of money for national governments in low-income and developing countries, since high-income countries and the World Bank provide tens of billions each year to create or modernize capital-intensive economic infrastructure. More than two dozen countries in Africa, the Middle East and Asia each received more than 1 billion dollars in bilateral and multilateral aid in 2014 and Afghanistan, Vietnam and Syria received more than $4bn in foreign aid (https://data. worldbank.org/products/wdi). The economic and political criteria that qualify a country to receive foreign aid rarely give priority to the capacity of the recipient to spend it free of corruption. Often aid is given to countries where there is visible evidence of poor governance patterns, in the hope that aid money may help promote good governance.

If a country has natural resources it can issue licenses that authorize private enterprises to invest their money to exploit its proftable oil, gas or mineral reserves. The licenses can be awarded after a transparent bidding process or by an opaque process in which decision-makers receive bribes. The privatization of state-owned enterprises can similarly be in accord with public legislation and regulations, as happened in Britain under Margaret Thatcher, or through private networks that make those who are well connected rich. In the words of Petr Aven, who was initially part of Boris yeltsin’s Russian government and has since become a billionaire:

To become a millionaire in our country it is not at all necessary to have a good head or specialised knowledge. Often, it is enough to have active support in the government, the parliament, local power structures and law enforcement agencies. One fne day your insignifcant bank is authorised to, for instance, conduct operations with budgetary funds or quotas are generously allotted for the export of oil and gas. In other words, you are appointed a millionaire. (Reddaway and Glinski 2001: 603)

In high-income countries, social services tend to consume the largest share of public expenditure. By contrast, in low-and middle-income countries, both revenue constraints and economic logic make public spending on capital-intensive goods relatively more important; roads, hospitals and new universities are built to provide the infrastructure needed for economic growth. In strife-torn countries, such as Afghanistan and Pakistan, where the government gives a high priority to national security, foreign aid can pay for the import of expensive military equipment and boost spending on internal security services staffed by armed supporters of the government.

In a system with good governance, the public procurement of capital-intensive goods operates transparently in accord with impersonal bureaucratic rules at every stage of a lengthy process. Procedures are designed to encourage competition between bidders for a contract on the assumption that competition will keep prices down and encourage bidders to monitor the actions of public offcials and competitors so that rules are not violated (Transparency International 2014). However, the more complex the project is, the harder it is for opposition politicians, journalists and activists to understand whether a capital-intensive contract represents public value for public money. While watchdogs have a good idea of what it should cost to prepare hospital meals, they lack the technical knowledge to know what is a reasonable cost to build a multi-purpose dam. If high-tech military equipment must be imported, evaluations are even harder to make. Often, the people who can best evaluate whether a winning bid represents value for money are those who beneft from the contract.

The complexity of awarding large capital-intensive contracts creates many opportunities for corruption to occur by hook or by crook (see e.g. Lambsdorff 2007: Chapter 3). Potential bidders can lobby for the inclusion of technical specifcations that favour them and employ a go-between with political connections to include biased specifcations. If foreign aid fnances a contract, the donor country may require conditions favouring frms based in their country while the recipient may favour domestic frms in which politicians have a private interest.

In a political system characterized by bad governance, public decisions giving benefts to businesses are vulnerable to corruption, because it is economically rational for a frm to spend millions in order to gain a beneft that is worth hundreds of millions. A bribe paid in return for a

contract promises a certain return, whereas an equivalent donation to a political party or candidate’s election expenses will secure access to politicians but not guarantee the delivery of what the donor wants. The size of a bribe offered to a public offcial can be ten years or more of their salary. If bribes are spread among offcials, this reduces the risk of accepting money illegally insofar as some of the recipients are of suffciently high rank to prevent investigation and punishment of recipients (RoseAckerman 1999: Chapter 3).

The decision about the award of a capital-intensive contract is often in multiple hands. In the frst instance, an evaluation will be made of the technical and fnancial capability of bidding frms. In developing countries, this often puts less experienced domestic suppliers at a disadvantage in competition with large multinational frms. for example, even if domestic frms can provide many ancillary services relevant to oil exploration, multinational companies are likely to have the experience and capital equipment needed to fnd and exploit potential oil reserves. Domestic frms, however, are much more knowledgeable about the politics and practices appropriate to infuence their government. They may, therefore, combine with a multinational in which their role is to win a contract while the foreign frm is responsible for delivering what the contract requires. European countries that are home to large multinational corporations may avoid corruption in the delivery of public services to their citizens, but tolerate it among national frms that pay capital-intensive bribes to win big contracts from governments where corruption is widespread, in breach of the OECD Anti-Bribery Convention that they have signed (www.oecd.org/corruption/anti-bribery).

Once a decision in principle is made, the drafting of a contract offers further opportunities for the recipients to exploit the public purse by including clauses that will increase what they are paid substantially above their bid price. Costs may be adjusted due to unexpected problems in construction, or changes in the design requested by government offcials. The more complex the contract, for example, building a new airport, the more likely the supplier is to be able to raise charges and profts and the more diffcult it will be for public offcials to evaluate whether the charges are justifed. Where goods are supplied at a fxed price, such as road construction or housing, suppliers may reduce costs by substituting inferior cheaper products and, if their work is monitored on the ground, bribing inspectors to ignore violations (fazekas and Toth 2014).

The corrupt exploitation of government often involves collusion between public offcials and private-sector actors. The allocation of government funds and contracts is in the hands of public offcials, whether elected politicians, short-term appointees to public posts or career civil servants. They are the immediate recipients of material benefts to bend or break laws. The payers of bribes are the managers of private-sector corporations that will reap the benefts of a corrupt decision. In countries where corruption is widespread, these enterprises are unlikely to be long-established organizations with employees trained to follow bureaucratic rules. Instead of having a confict of interest with public policymakers, their heads are more likely to know many politicians and may share a common partisan or ethnic identifcation.

The informal knowledge that political and economic elites have of each other refects structural conditions that face both national politicians and business leaders in a globalizing world. Many prosperous countries manage interdependence without corruptly exploiting national assets. However, where national income is lower and bureaucratic and democratic constraints far weaker, public spending is vulnerable to kleptocracy, that is rule by thieves. Business leaders may use their fnancial and political capital to capture control of government agencies awarding big-bucks contracts (Hellman et al. 2003; Charap and Harm 2002). Material benefts are then secured by hook or crook through collusion among political and economic elites who share in the profts.

2 measuring naTionaL corruPTion

Assessing the scale of national corruption is a challenge, since its illegal nature means that the validity of any measure can be questioned (Donchev and Ujhelyi 2014). The demand of policymakers for quantitative political measures has stimulated the creation of many measures of qualities of governance (see www.qog.pol.gu.se). Measures with global reach are produced by international organizations such as the World Bank and United Nations agencies; by non-governmental organizations independent of the political pressures that affect intergovernmental agencies; and by social scientists for whom quantitative measures are deemed necessary for scientifc research. They are accepted as useful tools because the numbers produced are comparable across nations and continents. Reliability, that is a high degree of statistical agreement between indexes created by different methods, is the standard criterion