Opposing corruption in international forums is easy. Nobody is openly for it, and popular sentiment is strongly against it. Global public opinion surveys show that corruption is a primary concern of citizens all around the world, and a host of public ills can be attributed to it, from economic stagnation, to the global decline of trust in democracy and a range of other societal challenges.
And corruption does play a role in these issues, which is why it makes for such a convenient target. Major leaks exposing corruption have grabbed public attention and inspired a raft of policies aimed at calling out and sanctioning individuals, governments and business that have engaged in bribery, kickbacks, embezzlement, money laundering and a host of other abuses of public and private power.
But is the international community devoting too much attention to corruption, at the expense of other structural and more difficult-to-tackle concerns? Have we oversold the benefits of tackling corruption, even making the wildly optimistic assumption that this global scourge can be eliminated or significantly reduced?
The focus on anti-corruption may be one of the last holdovers of the neoliberal agenda that was pushed by multilateral development banks, bilateral donors and the financial community throughout the 1990s. This agenda, called the Washington Consensus—probably one of the worst attempts at branding ever—encouraged governments to use market incentives, public sector streamlining, privatization, fiscal restraint and, later, accountability and transparency in public management to address three problems: inflation, stagnant growth and inequality. For the first two, Washington Consensus policies worked, at least for a while. But improvements on the latter—inequality—never fully materialized, notwithstanding reductions in poverty in the developing world during the late 1990s and early 2000s, which were more closely tied to a commodities boom.
The causes of economic growth, poverty and inequality were deeply embedded and stubborn in the face of market incentives and state reforms. Similarly, the goals of improving economic development, public trust in institutions, democratic stability and social and economic equality will require more than merely holding corrupt actors accountable through domestic or even international anti-corruption policies.
The obsession with corruption as a modern cause of all evils—and the corollary that addressing it will cure them—has become a convenient distraction from many of the problems that development banks, governments, the financial and business communities and the Davos set are too reluctant to address. Corruption is a symptom, not a cause.
Many of the ills attributed to it really stem from broader structural and often historical issues like the unequal distribution of resources, insufficient social safety nets, regressive taxation, institutionalized ethnic marginalization and racism, and fractured labor markets. These are the real challenges to economic growth, poverty reduction, equality, political stability and peace.
Directing public and financial attention to on-the-books malfeasance is convenient for those who are responsible for—or benefit from—global inequality and democratic decline, and those who would have to make hard choices to reverse those trends. It’s no wonder why so many in elite spaces have joined the anti-corruption chorus.
Economic Inequality
Corruption, officially defined as the use of public office for private gain, is a far cry from a primary cause of inequality in economic development. In the 1990s, the development community focused not on anti-corruption, but on economic growth and poverty alleviation, and by many metrics, they were successful. Before the coronavirus pandemic, modern economies had been growing dramatically for several decades, with global GDP quadrupling between 1990 and 2017, according to the World Bank. As national economies grew, GDP per capita also increased from an average of $6,800 to more than $11,000.
However, this growth actually broadened economic disparities within countries and, in many cases, between developed economies and developing ones. The result has been the most uneven distribution of wealth globally since the 1920s. In his 2017 book “Capital,” Thomas Piketty found that the top 10 percent of incomes accounts for 50 percent of all earnings in the United States. According to the OECD, “The average income of the richest 10 percent of the population is about nine times that of the poorest 10 percent,” compared to “seven times 25 years ago.”
The obsession with corruption as a modern cause of all evils has become a convenient distraction from many of the problems that the Davos set are too reluctant to address.
According to Piketty, this historic concentration of wealth occurred in part because economies were shifting from production to capital accumulation. At the same time, labor markets have also shifted toward work in the informal sector or self-employment. This has only worsened inequality, since formal-sector jobs are generally more lucrative and stable than the informal work of part-time or off-the-books labor. According to the International Labor Organization, in 2020, there were more than 2 billion informal-sector workers—most of them in developing countries, although developed economies also experienced a similar boom in gig workers. The gig economy now accounts for 5 to 14 percent of the workforce in Italy, the United Kingdom and the United States.
This was before the pandemic. COVID-19 has created a windfall for the world’s richest. The top 10 richest men have seen their wealth double in the past two years. Simultaneously, low-income and informal-sector workers have lost the most. According to the World Bank, more than 100 million people globally have fallen into extreme poverty—living on less than $1.90 per day—as a result of the pandemic.
Although this lopsided income growth is rooted in market distortions, labor market trends and the shift toward capital accumulation, any efforts to address it must begin by restoring progressive taxation. According to the Organization for Economic Cooperation and Development, “tax policy has a particularly important role in addressing inequality and boosting economic growth”—important not only in smoothing out income distributions, but also in funding investments in social safety net programs and sectors key to productivity growth, such as education. But in the past four decades, global tax rates have only been declining.
Since 1980, the average global corporate tax rate has fallen from 40 percent to 23.5 percent. Individual tax rates, especially in the United States, have also plummeted. The Council on Foreign Relations notes that as recently as 50 years ago, top earners were paying a 90 percent tax rate on their incomes—a rate that is politically unimaginable today. While a laudable first step, the global minimum corporate tax rate endorsed at the G-20 meeting in October is unfortunately a far cry from what is necessary. The proposed level, a meager 15 percent, is well below the average tax rate that corporations currently pay globally.
All this is conventional wisdom among economists, and yet the global glitterati’s attention has focused on other matters when it comes to what is ailing the global economy and democracy—especially corruption. Just to take one example, at the annual confab of the world’s rich and famous at the World Economic Forum in Davos—admittedly a skewed, but not unrepresentative sample of the global elite and their passions and outrages du jour—there have been panels and discussions on corruption as a global threat in, at a quick count, 2015, 2016, 2017, 2019 and 2020, with titles like “Ending the Corruption Crisis” and “Corruption and Democracy.”
In contrast, the one rare exception when taxation was raised directly was in 2019, when, in an exchange with former Yahoo! CFO Ken Goldman, economist Rutger Bregman criticized the lack of discussion of the topic—though even in this case, the subject raised was tax evasion, not tax rates. “Almost no one raises the real issue of tax avoidance, right?” Bregman said. “It feels like I’m at a firefighters conference and no one’s allowed to speak about water.”
Three years and a global pandemic later, the brightest minds at this year’s Davos chose to highlight vague commitments to stakeholder capitalism, instead of discussing the proven way to decrease soaring inequality: taxation.
Democratic Decline
Similarly, discussions about the weakening of democracy globally—in established and emerging democracies alike—often circle back to corruption. As a result, strengthening the capacity of national and international legal regimes to track, sanction and prosecute corrupt public officials, all in the name of democracy, has become a favorite policy response and discussion point.
But the threats to democracy are multiple, systemic and complicated. Addressing them, whether through international democracy support programs or domestic reforms, is equally complicated and involves taking on not just the obviously corrupt, but also the knottier issues of income distribution, structural racism and institutional capture. And tackling those issues will require challenging vested interests and powerful individuals, beyond the notoriously and universally disliked.
A protester holds a sign with “Resign, Thief” printed over a portrait of Guatemalan President Alejandro Giammattei outside the National Palace in Guatemala City, July 24, 2021 (AP photo by Moises Castillo).
Economic inequality is surely one of the greatest challenges. Growing income gaps and declining social mobility have contributed to the institutional and norm-eroding political polarization that plagues the world today. As Thomas Carothers and Andrew O’Donohue wrote for the Carnegie Endowment for International Peace, polarization is sharpening not only in Western democracies, but in developing and failed democracies further afield, in Bangladesh, Brazil, Colombia, India, Indonesia, Kenya, Poland and Turkey.
As Steven Levitsky and Daniel Ziblatt have explained, whenever politics tips toward the zero-sum, politicians and their parties increasingly trample on the norms that protect democracy, including “mutual toleration”—the acceptance of the opposition as legitimate—and “forbearance,” the respect for established institutional processes and standards. The erosion of these norms reinforces a downward spiral into crippling polarization. Once checks and balances have been eroded, partisans move to capture independent institutions, sideline their political competitors, and, finally, change laws to permit unchecked one-party rule. The result is not just an escalation of political competition both in rhetoric and tactics—veering ultimately toward civil conflict—but also a declining faith in democracy in general, as representation, accountability and the rule of law become attenuated.
According to a 2021 survey by the Pew Research Center, a median of 56 percent of respondents in 17 advanced economies said that their political systems either needed major changes or needed to be completely reformed. Roughly two-thirds or more held this opinion in eight countries: Italy, Spain, the U.S., South Korea, Greece, France, Belgium and Japan. Meanwhile, a large share of respondents in all 27 countries surveyed reported their belief that most of their politicians were corrupt.
That would seem to bolster the claims of the anti-corruption chorus. And yet, drawing on 15 years of survey data, Pew argued that “the strongest predictor of being dissatisfied with a democratic system was being unhappy with the current state of the national economy,” as well as respondents’ pessimism regarding economic opportunity.
On the bright side, large majorities in the survey support democracy, though that has declined over time. Generally speaking, the question of systemic racism and its impact on democracy is also beginning to enter the discussion, though that, too, has become polarized. A median of 67 percent of the Pew Survey’s respondents said that racial or ethnic discrimination is a problem in their countries, even if in the United States, those perceptions were sharply skewed by ideological orientation: In 2020, two-thirds of respondents who identified as being on the political left agreed their countries had a problem with racism, while only 19 percent of those on the right agreed.
The problem of democratic decline isn’t just or even primarily related to corruption, just as corruption is not the primary challenge to economic growth or equality.
Only in recent years have these differences in perception about racism, the legacy of exclusion and their effects on democracy entered broad public debate, though the insidious effects of systemic racism have been evident for centuries. The challenges of ethnic division and interethnic conflict have long been a subject of research for political scientists studying democratization, but the threat posed by long-term systemic racism—and the discrimination and police brutality that springs from it—to the health of developed democracies only grabbed widespread public attention recently. In Latin America, it was only after the 1990s that mainstream academic and policy communities began paying attention to the impact that the exclusion and marginalization of Indigenous and Afro-descendent populations has had on the region’s young democracies.
This lack of attention to the effect of racism on democracy, as the Carnegie Endowment’s Ashley Quarcoo points outs, can be seen in the absence of any measures of racial prejudice within law enforcement in leading democracy indices, such as the Economist Intelligence Unit’s Global Democracy Index or Freedom House’s “Freedom in the World” report. Yet, as Quarcoo writes, pervasive racism in law enforcement and criminal justice systems remains the “soft underbelly of democracy,” eroding the state’s relationship with racial minorities not just in the United States, but also in Canada, Australia, the European Union and the United Kingdom—not to mention in Latin America and other regions.
Difficult Policies
President Joe Biden’s much-anticipated Summit for Democracy in December provided an almost-too-perfect example of this corruption distraction. The event was originally intended to broadcast an honest evaluation of the state of democracy globally, including within the United States. But the main policy initiatives the White House unveiled at the two-day virtual summit focused on the convenient.
Three of these big reveals related to anti-corruption: a new State Department office to coordinate global anti-corruption efforts; a new State Department and Justice Department program to advise and aid partner countries in bringing corrupt officials to justice; and a new project to invest in technological solutions for anti-corruption work. These ventures got top billing in the press release, appearing above six other announcements of initiatives for topics as varied as gender-based online harassment to supporting democratic transitions.
Instead of the anticipated reflection on the United States’ own structural and social democratic fault lines—which many had hoped would set an example that other democrats worldwide would follow—the Biden administration delivered three more tools to attack corruption.
The problem of democratic decline isn’t just or even primarily related to corruption, just as corruption is not the primary challenge to economic growth or equality. Unless the economically and politically powerful are willing to confront endemic, structural problems like systemic racism, distortions in political representation and insufficient tax regimes, railing against corruption in international forums, including by making promises to prosecute the individually corrupt, will only be a palliative—though it sure will make political and business leaders feel good. Ultimately, we cannot address the world’s most persistent ills and injustices without confronting deeper structural dysfunctions, vested interests and economic distortions.
Difficult times require politically difficult policies. The current infrastructure of international forums—whether the G-7, the G-20, the International Monetary Fund and the World Bank—has proven that, at least for now, it is not up to the task. Nor, it seems, was Biden’s Democracy Summit. What comes next?
Gabriella Cook Francis is the Leland Foundation Association of Marshall Scholars transatlantic academy fellow at Chatham House.
Christopher Sabatini is a senior research fellow on Latin America at Chatham House. He is currently completing a book, “Human Rights in a Changing World Order,” to be published in September 2022 by Brookings Institution Press and Chatham House.
