Transparency International Results Troubling for the U.S., China and India

The well-respected international ratings service, Transparency International (TI), just came out with its annual rankings of its Corruption Perceptions Index (CPI).

The CPI ranks 176 countries based on how people in those countries perceive the severity of corruption at all levels of government. It is a composite index, a combination of polls, drawing on corruption-related data collected by a variety of institutions. The CPI reflects the views of observers from around the world, including experts living and working in the countries/territories evaluated.

Corruption is the abuse of entrusted power for private gain. This is the working definition used by TI, applying to both the public and private sectors. The CPI focuses on corruption in the public sector, or corruption which involves public officials, civil servants or politicians. The data sources used to compile the index include questions relating to the abuse of public power and focus on: bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and on questions that probe the strength and effectiveness of anti-corruption efforts in the public sector. As such, it covers both the administrative and political aspects of corruption. In producing the index, the scores of countries/territories for the specific corruption-related questions in the data sources are combined to calculate a single score for each country.

According to Transparency International, corruption generally comprises illegal activities, which mainly come to light only through scandals, investigations or prosecutions. It is thus difficult to assess absolute levels of corruption in countries or territories on the basis of hard empirical data. Possible attempts to do so such as by comparing bribes reported, the number of prosecutions brought or court cases directly linked to corruption cannot be taken as definitive indicators of corruption levels. Rather they show how effective prosecutors, the courts or the media are in investigating and exposing corruption. One reliable method of compiling comparable country data is to capture perceptions of those in a position to offer assessments of public sector corruption in a given country.

The 2011 CPI draws on 17 data sources from 13 institutions. The information used for the 2011 CPI is survey data from these sources gathered between December 2009 and September 2011. The CPI includes only sources that provide a score for a set of countries/territories and which measure perceptions of corruption in the public sector. TI ensures that the sources used are of the highest quality. To qualify, the data collection method must be well-documented and the methodology published to enable an assessment of its reliability.

Here is a listing of the top 25 countries and their scores.

Greece, which is the recipient of aid and loans from Europe and the International Monetary Fund totaling nearly €250 billion ($327 billion), dropped to 94 from 80, and replaced ex-communist Bulgaria at the bottom of the list of 27 EU members. Bulgaria now ranks 75th.

The ranking also shows that Italy, which hasn't received a bailout but has been struggling with high interest rates on its government debt, slipped to 72nd, below Romania, at 66.

Portugal and Ireland, which along with Greece have received euro-zone bailouts, were placed 33rd and 25th, respectively. It is not surprising that many countries in the euro zone are struggling from a corruption point of view given the internal financial pressures that exist.

Denmark, Finland and New Zealand tied for first place, helped by strong access to information about government activity and rules governing the behavior of public officials. Sweden, Singapore and Switzerland ranked fourth, fifth and sixth, respectively. Somalia once again ranked last, behind North Korea, Afghanistan and Sudan.

The report also notes that Egypt, where frustrated citizens overthrew the authoritarian government in last year's Arab Spring, is now perceived as more corrupt than before the revolution. Egypt slipped to 118 from 112.

The United States ranked 19^th, just behind Japan and the United Kingdom. I do not view these results as positive for the U.S. given countries like Chile and Uruguay were almost tied with the U.S. There is no glory in saying we are only four rankings ahead of France, a country known for corruption in government.

China ranked 80th and that should be of concern to a government, already perceived as corrupt, with respect to global economic development and growth. I believe the point will be reached in the future where foreign businesses become more reluctant to do business in China if it doesn’t conform to international norms with respect to anti-corruption and transparency, especially in the financial results of state-owned enterprises.

The news is not much better for India, the other rapidly developing economy, that is ranked 94^th. Corruption is endemic in virtually all aspects of government in India. A culture of bribery has existed for a long time. I wonder whether India will ever achieve all of its promise as an economic powerhouse given the culture of corruption.

On a broader level, I believe the TI CPI results are important because they measure countries against a common standard and provide benchmarks for comparison. They highlight the importance of transparency and echo the concerns expressed by President Obama in his 2009 inaugural address that emphasized the importance of transparency in government practice and its value in holding government accountable for its actions “… And those of us who manage the public's dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.”

I hope the President revisits the issue in his second inauguration on January 21, 2013. He needs to acknowledge that the trust between the public and our government has worsened during the past four years. I do not blame him. I blame mainly Congress – on both sides of the isle – as its members sought out their own narrowly-perceived self-interests to the detriment of what is in the best interests of society and the public good.

Blog posted by Steven Mintz, aka Ethics Sage, on December 28, 2012