British Prime Minister David Cameron told Queen Elizabeth II this week that Nigeria and Afghanistan were “fantastically corrupt.” Make no mistake, Nigeria and Afghanistan are corrupt. It’s just ironic coming from Cameron, a beneficiary of tax dodging. But beyond Twitter banter, there is a case to be made that it is actually the UK (and other western countries) that are at the center of the global corruption nightmare. Corruption then, much like beauty, seems to lie in the eyes of the beholder. So who’s the most corrupt of them all? We try to figure this out this week. But like beauty it’s complicated.
(1) First up, where in the world did David Cameron get the idea that Nigeria and Afghanistan were some of the most corrupt countries in the world (and by implication the UK was squeaky clean)? Well, having only a few seconds with the Queen, Cameron didn’t go into the finer details of referencing his source. But we think he got this idea from the famous Corruption Perceptions Index (CPI) that’s been reported every year since 1995 by Transparency International. For 2015, the CPI ranked a 167 countries from least corrupt (number 1) to most corrupt (number 167). Nigeria and Afghanistan were ranked 136 and 166 respectively. Cameron’s the UK was ranked 10th.
So going by the CPI Cameron is right, right? Well, what Cameron doesn’t know (or pretends not to know) is that the CPI is riddled with serious methodological problems that raise questions about its usefulness. We cover some of these below.
(2) Much like a beauty pageant with judges subjectively scoring nervous contestants, the CPI is derived by asking “experts” on their “perceptions” of corruption in different countries. And who are these experts, we hear you ask? Alex Cobham of the Tax Justice Network has a useful listing:
[A] group of country economists,” “recognized country experts,” “two experts per country,” “experts based primarily in London (but also in New York, Hong Kong, Beijing and Shanghai) who are supported by a global network of in-country specialists,” “staff and consultants,” “over 100 in-house country specialists, who also draw on the expert opinions of in-country freelancers, clients and other contacts,” “4,200 business executives,” “100 business executives … in each country,” “staff,” “100 business executives from 30 different countries/territories,” “staff (experts),” “100 business executives per country/territory,”…
So the CPI is obtained by aggregating the noise of a tiny set of global elites whose opinions are likely shaped by what they read in elite Western media or those stories brought back home by John from his recent business trip to “Ayngola”.
If you’ve ever been unfortunate enough to attend a cocktail party, then you know that the global elite are not known for having diverse opinions, let alone original ones.
(3) So what happens when the opinions of a global globetrotting elite are stacked up against those of the everyday citizen, the type of citizen the elite are trying to protect from corruption? Well, you get a vastly different picture. Here’s Alex Cobham once more:
Perhaps unsurprisingly, the view changes when the experiences of a group of a country’s citizens are considered instead of restricting the view to elite perceptions only. [University of Minnesota law professor Stuart Vincent] Campbell writes that, in contrast to the CPI ranking which in 2010 put Brazil 69th, behind Italy and Rwanda, “The 2010 Global Corruption Barometer [based on a broader survey of Brazilian citizens] found that only 4 percent of Brazilians had paid a bribe, which is a lower percentage of bribe-givers than the survey found in the United States or any other country in Latin America.
(4) It’s this increasing awareness of the uselessness of perceptions-based measures that’s led the United Nations Economic Commission for Africa (UNECA) to call for a rethinking of how we measure corruption particularly in Africa:
The current predominantly perceptions-based measures of corruption are flawed and fail to provide a credible assessment of the dimensions of the problem in Africa…The present report calls upon African countries and partners to move away from purely perceptions-based measures of corruption and to focus instead on approaches to measuring corruption that are fact-based and built on more objective quantitative criteria.
(5) Back to David Cameron and his gaffe: President Muhammadu Buhari of Nigeria reacted to it by saying he didn’t want an apology from Cameron. All he wanted was a return of stolen Nigerian assets held in British banks, suggesting that Britain was itself a facilitator of corruption. But is Buhari right?
(6) Here’s economist Jeffrey Sachs writing in the Guardian this past week:
The UK and the US are at center of the system of global abuse. Britain created the modern world of global finance in the 19th and early 20th centuries, and Wall Street became co-leader with the City of London after the second world war. In both countries, hundreds of thousands of lawyers, bankers, hedge fund operators, politicians, accountants and regulators have consciously built a system of global tax havens of the rich, by the rich, and for the rich that now hosts more than US$20tn (yes, trillion) of funds hiding from taxes, law authorities, environmental regulation and accountability.
(7) Or according to the Brookings Institution:
For those seeking secret shelters and corporate shells, the mighty U.S. (which unsurprisingly doesn’t feature much in the Panama Papers) is one of the world’s most appealing destinations: Setting up a shell corporation in Delaware, for instance, requires less background information than obtaining a driver’s license… And the U.K. is an important enabler of corruption: It has stood by as its offshore jurisdictions and protectorates operate as safe havens for illicit wealth, which the Panama Papers make clear. The British Virgin Islands, for example, were the favored location for thousands of shell companies set up by Mossack Fonseca.
(8) Friends, no matter how hard you try, those US$5 “gift payments” you made to the police officers at the last checkpoint will never come close to the type of grand-scale corruption detailed in (6) and (7).
(9) And let nobody cheat you that tax havens serve some type of justifiable economic purpose. They don’t. It’s just good old fashioned theft.
(10) Oh, by the way, as we mentioned at the outset, the Honorable David Cameron is himself a beneficiary of tax dodging!
Yes, the whole thing’s a mess. Our heads are also spinning. We best leave it here. Here’s to wishing everybody a corrupt free week.