fig. A.1 Percentage paying bribe by country

cronies. Truman, whose motto as President was ‘the buck stops here’, had no hesitancy in making a decision. He traded off his offcial obligation to award contracts through value-for-money procedures in order to help people in his district get the paved roads that they needed (https:// www.nps.gov/nr/twhp/wwwlps/lessons/103truman/103facts2.htm).

The challenge of making trade-offs between respect for anti-corruption laws and getting things done is not confned to government departments. Multinational frms engaged in capital-intensive activities in countries with corrupt governance can face demands from public offcials for bribes as a condition of doing business there. Enterprises that have invested large sums in developing economic resources, such as oil and mining companies, have historically traded off the cost of a bribe for the mutual beneft of their frst-world shareholders and corrupt third-world offcials. Within countries where good governance is lacking, individuals face a dilemma. Even if they think services ought to be delivered by the book, if the consequence is to deprive themselves or a family member of prompt hospital treatment, they are prepared to set aside their normative values to get what they want by hook or by crook.

2 TargeTing vuLneraBLe services

The diagnosis of corruption usually focuses on characteristics that are pervasive throughout the body politic as a whole. This approach is encouraged by the indexes of Transparency International and the World Bank rating countries as a whole. Macroeconomists concerned with the effects of corruption on the national economy and professors of public administration who focus on the administration of national government reinforce this tendency. In consequence, prescriptions for reducing corruption normally do not take into account differences between public services.

When individuals and corporations pay bribes they are not paid for public services as a whole; fnancing government in general is done through the payment of taxes. Bribes are paid to obtain a specifc public service and services differ in what is delivered and how their delivery may be vulnerable to corruption. Public services delivered to individuals at the grass roots are vulnerable to bribes being paid far out of sight of policymakers in the national capital. By contrast, capital-intensive services are delivered by decisions about contracts made by high-level policymakers.

Because a bribe is paid for the delivery of a specifc service, it is logical to target anti-corruption measures at those public services that are specially vulnerable to corruption and to change by national government offcials. The imposition of anti-corruption measures is high priority for public offcials whose job situation offers most opportunities to collect bribes. Whether these services are vulnerable to reform by national government is another matter.

Vulnerability of capital-intensive and retail services. Capital-intensive and retail public services differ in fundamental ways. The most obvious is that they differ in scale. Capital-intensive goods such as airports and electricity generating stations are lumpy not only in physical terms but also economically: A large chunk of money is required to construct them. By contrast, retail public services such as a driving licence or passport are literally pocket-sized and cheap to produce. The scale of capital-intensive projects makes it diffcult for outsiders to evaluate whether paying a hundred million or a billion is a fair price or has been infated to cover the cost of bribes that can be hidden behind opaque entries in a lengthy and complex budget. By contrast, the cost of providing labour-intensive retail services can readily be evaluated by auditors making comparisons with private-sector costs or what different public agencies pay for the same services and products. Costs that deviate most from the mean often do so because of corruption (Picci 2011).

The parties engaged in the supply of and demand for retail services are readily identifed individuals. By contrast, capital-intensive contracts are signed by offcials of government organizations and private-sector corporations that have the capacity to produce a bribe if required to win a contract. In the payment of a bribe for a retail service, the claimant bears the cost and the public offcials reap the benefts. By contrast, the individuals who make the decisions that commit their government to pay millions to a private enterprise do not bear the cost. It is met from tax revenue and borrowing from private-sector sources. In developing countries foreign aid can also bear a portion of the cost.

The institutions that award capital-intensive contracts are normally central government departments concerned with such services as transportation, energy and defence. Centralization makes their spending subject to control through the government’s annual budget and the lumpiness of capital-intensive projects makes many visible politically.

The delivery of retail services is in the hands of decentralized authorities acting as agents of the national government, because they must be delivered at the grass roots. The delivery of health care and education is further decentralized to schools and clinics where public employees and claimants of services meet face-to-face and often in private. This facilitates the payment of bribes and obstructs scrutiny by distant policymakers nominally responsible for what is done.

The consequences of capital-intensive and retail corruption differ too. The former affects sums of money running into the billions, whereas retail corruption affects numbers of people running into the billions. When a private enterprise pays a public employee a bribe for a proftable contract, this creates a ‘win-win’ situation. The enterprise makes a proft that more than covers the cost of the bribe, and corrupt public employees receive cash that more than covers the risk of being punished. The effects of shoddy or overpriced infrastructure projects are not always immediately obvious nor are the names and faces of those responsible. By contrast, retail services doubly affect behaviour: An individual must fnd the money to pay a bribe and if politicians promise to improve these services and then renege on their promises, this can reduce trust in politicians and political institutions.

The supply of many capital-intensive goods is globalized, because of the amount of capital and technical skills required to produce such goods as military aircraft or complex computer systems. By contrast, governments can rely on their national population to deliver public services by the book, by hook, or by crook.

When capital-intensive corruption is transnational, this makes it diffcult for a single national government to prevent it. Western governments may adopt laws making it illegal for multinational corporations based in their jurisdiction to pay bribes to foreign government offcials. Corporations determined to win contracts if need be by hook or by crook can pay bribes to foreign bank accounts of consultancy frms or family members acting as agents of corrupt policymakers in other countries. Intergovernmental organizations such as the OECD or the UN promote codes of conduct that stigmatize transnational corruption. But such codes normally lack legal sanctions and any notional reputation loss an enterprise incurs for shadowy dealings is more than offset by the profits from getting big-bucks contracts.