Perception of political corruption as a function of legislation

Author:Maria Krambia-Kapardis
Position:School of Management and Economics, Cyprus University of Technology, Limassol, Cyprus
SUMMARY

Purpose – The main aim of the paper is to determine whether countries with enacted legislation on electoral accountability issues (such as conflict of interest, revolving doors, asset disclosure, lobbying, immunity, political party funding and a code of conduct for politicians) have lower corruption perception than countries that do not have legislation on those variables. Design/methodo... (see full summary)

 
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Introduction

Organisational scandals have brought to light discussion on corruption within an organisation ( Nussbaum, 2004 ). Just like no organisation is immune from corruption ( Halter et al., 2009 ), neither is society. There are, however, countries with lower perceptions of corruption than others. Media in recent months covered alleged incidence of corruption involving, former Prime Ministers1, Members of Parliament in Australia2, MPs in Nigeria3, Ministers in Australia4, European MPs and Ministers5, elected officials and members of Royal Family6, Chief Executive Officers7, municipality officials8 all involving elected or appointed individuals whom the public trust. Yet they abuse that trust and their position for a personal gain ( Blackburn and Forgues-Puccio, 2007 ). In this paper the corruption fiche reports of 26 EU countries, as prepared by the EU DG Home appointed experts, have been used in an effort to examine whether there is a correlation between the less perceived corrupt countries and electorate accountability (vis-à-vis conflict of interest, lobbying, revolving doors, immunity, asset disclosure, code of conduct, and legislative against political party financing).

As stated in the Eurobarometer (2012, p. 48) , “national politicians are the only profession whom a majority of Europeans (57%) associate with widespread corruption”. Respondents in Slovenia, Spain and Greece are most likely (83, 78, 78 per cent, respectively) to believe there is widespread corruption among national politicians. The Transparency Cyprus (2013) survey found that 96 per cent of the respondents believe that politicians at national level are linked to corruption. Therefore, politicians are the one group of people the author has decided to concentrate on to explain corruption perception of a country.

Literature review

Whilst Kayes (2006) argued that there is much disagreement on what it means to be corrupt, Levine (2005) defines corruption as an attack on norms since it focuses on deviations from social norms. Halter et al. (2009) identify the conditions needed for corruption (C), namely monopoly (M) plus discretion (D) minus accountability (R), i.e. C=M + D−R. They go on to explain that corruption will occur when a person has a monopoly over goods or services and it is at his/her discretion who and how these will be distributed or received, in the absence of transparency. Jain (2001) argued that corruption requires: discretionary power related to regulations, economic rents linked to power and sufficiently low punishment. One could argue that the two theories are not far apart if it is assumed that where there is lack of transparency there will be perceived low punishment. In the current fragile financial economic situation, the person(s) who has monopoly of power, has also the discretion to use it as he/she sees fit and, if one is referring to politicians or the “archon”, there is nobody to enforce accountability and punishment unless there is electorate accountability.

Voters tend to punish corrupt politicians when information about corrupt practices is publicized ( Ferraz and Finan, 2011 ). New elected politicians from their side refrain from rent-extractions in their first electoral term in order to get re-elected to maximize their future rents ( Persson and Tabellini, 2000 ; Beasley, 2006 ; Banks and Sundaram, 1993 ). Ferraz and Finan (2009) have found a correlation between re-election and corruption. Where a mayor is planning to be re-elected he will revert from rent seeking. Furthermore, politicians in “power for a longer period of time may learn corruption practices and establish networks that enable them to be corrupt” ( Ferraz and Finan, 2009, p. 22 ). However, voters have imperfect information about politicians' actions and consequently the citizens are not in a position to exert influence on elected officials to act in the interests of citizens ( Ashiku, 2011 ).

In times of boom, when money is flowing freely there is little discussion on corruption, illegal acts and fraud. As soon as there is a financial collapse and internal controls need to be in place, financial scandals and corruption surface. Hunt (2007) goes on to state that misfortune increases the risk of corruption. As the salary of employees decreases, the risk of rent seeking increases ( Tanzi, 1998 ). The consequences of corruption are: a devastating effect on economic and political development; no respect for the justice system, property rights or banking and credit ( Klitgaard, 1998 ); reduction in the efficiency of both private and public organizations ( Silva, 1999 ); adverse effect on the daily lives of common citizens ( Halter et al., 2009 ); impacts on democracy ( Silva, 1999 ); it creates an inefficient government system ( Dong et al., 2011 ; Rose-Ackerman, 1999 ); hinders economic growth ( Lambsdorff, 2003 ; Mauro, 1995 ); and, finally, increases business costs ( Kaufmann, 1997 ; Shleifer and Vishny, 1993 ). Regarding the social impact, however, “the higher the levels of perceived corruption in a society, the more citizens see it as justified” ( Dong et al., 2011, p. 610 ).

Halter et al. (2009, p. 373) assert that “ethical leadership can guide employees, setting high standards for the organizational culture and climate, clearly defining limits of correct behaviour, and creating appropriate codes of ethics”. If one asserts that over and above a corporate environment there is the community environment, then the “archon”, the leader of the community, as well as his off-sitters ought to set the “tone at the top”. Blackburn and Forgues-Puccio (2007, p. 1534) reinforce this view by stating that “corrupt practices on the part of politicians, civil servants and legislators can distort resource allocations, exacerbate income inequalities and undermine growth prospects”. Transparency is now demanded by civic society and there is pressure on governments and organisations to implement it ( Halter et al., 2009 ). Whilst some advocates of ethics ( Atkin, 1999 ; Arruda and Navran, 2000 ) claim that there are many advantages to be gained from national and international ethics, transparency does not guarantee ethics ( Bessire, 2005 ) but it relates to information, and nowadays information is power. Strategic political participation “constitutes the condition where trust” (in the broad sense of the word) is required ( Halter et al., 2009, p. 378 ). One of the aims of this paper is to argue that if a society or a country is to minimise corruption, its subjects ought to be provided with information to make decisions such as voting for MPs, electing a president, a mayor, etc. If there is lack of information for one or the other reason, then the citizens will make wrong decisions and perhaps vote for corrupt individuals.

Theoretical framework

In terms of the agency theory, the principle is the public agent and the agent is the politician seeking re-election. Thus, when corrupt individuals are elected, there is a risk that corruption will become endemic in that community. Drawing on the theories of contagion and pro-social behaviour, Dong et al. (2011, p. 610) assert that one's willingness to be corrupt “depends on the corruption level of other individuals in a society”, i.e. on the “pro-social behaviour of other citizens”. Acts of corruption that “might have appeared shocking earlier will begin to look less shocking” and may even be tolerated ( Tanzi, 1998, p. 562 ). Thus, this paper asserts that in countries with low corruption risk, the elected individuals as well as the appointed ministers are transparent in their dealings so as to ensure electoral accountability ( Chowdhury, 2004 ) and a low perceived corruption level is reached. This desire to maintain reputation by the elected individuals is the mechanism that will keep “politicians in check” ( Besley and Case, 1995, p. 769 ).

Using the contagion behaviour approach, as asserted by Dong et al. (2011, p. 611) , an individual is prone to corruptive practices if there are sufficient corrupt individuals around him, thus reinforcing corruption ( Aidt, 2003 ). Furthermore, if there are a large number of corrupt people in an individual's environment or society, the direct cost of engaging in corrupt activity is lower. At the same time, the expected cost of being caught is lower in societies where...

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