Grasping the Corruption-Related Reality

The aspects of reality that are important to consider in anti-corruption reforms are many and varied. While in no way claiming to provide an exhaustive analysis, I will focus on five of them in more detail and make some additional comments and remarks.

1. Rent-extracting practices

As a basic level of corrupt reality, we can consider those practices that public officials (and their counterparties) use to profiteer from their position in power. It has been repeatedly noted in the literature that the boundary between legal and illegal practices here is blurred and can shift significantly, especially given that at the national level the definition of this boundary is often in the hands of those who have maximum opportunities to monetize official powers. That is why I am talking here about rent-extracting rather than corrupt practices.

At least two aspects are of huge importance for framing anti-corruption reforms.

1) What methods of rent extraction prevail in a given sphere of activity: e.g., acquisition of property for (unlimited) private use at public expense; direct embezzlement; transfer of resources or a certain set of profitable transactions (e.g., a certain type of contracts) into the hands of relatives or other related persons; selling limited resources and "services" (in the broad sense - including access to a certain market, lucrative jobs, promising contracts, certain permits and licenses, “protection” from inspections or sanctions, etc.)).

2) What techniques are used to create the very possibility of extracting rents (e.g. if the contract price in public procurement is not inflated or the contractor is not “allowed” to supply goods and services of inadequate quality, the contractor will not be able to pay a corrupt remuneration to the customer), to ensure rent extraction, to disguise and/or legalize actions aimed at extracting rents, to transfer illegally obtained benefits and to ensure the possibility of their further use.

There is a growing body of research on corrupt, and more broadly rent-extracting, schemes and practices in various fields and different countries. The source base is also expanding - in addition to the traditional official investigations, audits and court proceedings, we are getting more and more information from whistleblowers, including through thematic whistleblower platforms (see, for example, a recent post ... ). My team and I have also tried to contribute to the process of learning about rent-extracting practices with our catalog of undue techniques in public procurement (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4404233).

However, we are still at the very beginning of the journey. For so many areas of activity, micro-level studies of corruption are very rare (I recall, for example, being surprised a few years ago by the almost complete absence of publications on rent-extracting practices in the highly profitable and corrupt funeral industry). Those catalogs of corrupt schemes and practices that do exist are often insufficiently detailed, partly due to the authors' lack of personal experience in the processes described. We still have very few voices of the rent-seekers themselves, and we are not good at encouraging them to speak out (here, the extremely interesting publication by Jim Ruiz,?Christine Bono ““At What Price a “Freebie?” The Real Cost of Police Gratuity Acceptance” comes to mind - but such publications are still very rare). Finally, we have a lot of work to do on systematization – e.g., one of my yet unrealized dreams has been to create a national and possibly an international electronic library of corrupt practices in various spheres.

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2. Informality

The corruption market is obviously not an open market - one cannot publicly advertise a desire to buy or sell services in a corrupt manner. Therefore, the practices through which one can enter this market - establish and then maintain the necessary relationships - are of particular importance.

Like any other dimension of the corruption-related reality, informal interactions include many aspects: 1) a wide range of practices used to constantly reaffirm one's belonging to a particular informal network; 2) places (restaurants, saunas, golf clubs, etc.) where buyers and sellers of corrupt services spend time, and discuss and conclude deals; 3) specific language used to solicit and offer corrupt payments; 4) a world (or worlds?) of intermediaries and middlemen, etc. These aspects may differ significantly in different spheres, regions and at different levels of government.

Knowledge of informalities is very important from a practical point of view since it is hardly possible to effectively counter corruption without attacking hidden networks. Conversely, failure to understand how relationships in the corruption market are being built can lead anti-corruption reforms to unforeseen negative consequences. For example, in some countries, anti-corruption reforms included mass re-evaluation of law enforcement officers with subsequent dismissal of the most unreliable. There are reasons to believe that, in some cases, these interventions led to a significant increase in the quantity and “quality” of corruption intermediaries armed with insider information and retained close ties with former colleagues.

Informality, including corruption-related informality, has received a lot of attention in recent years. See, for example, the excellent Global Informality Project (https://www.in-formality.com/wiki/index.php?title=Global_Informality_Project) and the Global Encyclopaedia of Informality by Alena Ledeneva . However, many highly relevant aspects are still shrouded in darkness. For example, the world of corrupt middlemen is still discussed mostly in fiction but not in academic literature and awaits its own Sudhir Venkatesh who can infiltrate it and lift the veil of secrecy.

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3. Corruption “macro-reality”

Rent-extracting practices and informal interactions are the micro-reality of corruption, but for reformers, the macro-level - more general and structural characteristics of corruption - is no less important.

One of the most significant aspects here is which levels of the government (in a broad sense) are involved in rent-extracting practices and, if different levels are involved, how the interaction between them is organized. Do high-level officials "control" market access and cash flows above a certain value, while lower levels of the bureaucracy receive less tasty bits, such as facilitation payments and lower-value tenders? Or maybe corruption hierarchies exist where lower-level officials contribute a portion of the proceeds of corruption to those above them, and, if yes, how are such hierarchies structured? How is the distribution of lucrative positions organized, e.g. whether there are fees for them, or whether they are divided among high-ranking patrons, etc?

Of course, lots and lots of other essential macro-level questions can be asked. How widespread is corruption and is it possible to identify some islands without corruption, for example, some types of public procurement where corruption is noticeably less? What prices apply in corrupt markets? How burdensome is corruption and who bears the burden: e.g. how much of the price of a final good is corruption costs, and do the producers' margin have to be reduced because of corruption or do the producers have an option of shifting corruption costs to the consumer or the state??

4. Perceptions and attitudes

So far, I discussed the more or less objective characteristics of the corruption-related reality. However, the socio-psychological dimension is also significant for anti-corruption reforms.

The perception of and attitudes towards various rent-extracting practices should be taken into consideration. It is important to understand what rent-extracting practices are considered unacceptable, acceptable, and possibly even approved by an entire population or different social groups. It could help to 1) predict which interventions are most likely to be supported and by whom, and which are likely to meet with tacit opposition, and 2) later monitor the extent to which reforms change perceptions of right and wrong.

It is also interesting to see how those involved in corrupt practices justify themselves. Much has already been written about self-justification, but my personal experience is that there is still room for interesting findings. For example, I have personally encountered situations - difficult to detect with the help of common research methods, but no less real - when officials who sincerely expressed outrage at rampant corruption and, what is more important, contributed much to the implementation of anti-corruption initiatives, took kickbacks, even within state-sponsored anti-corruption projects. This "identity disorder" needs a separate detailed discussion. But one possible explanation is that officials often do not find it improper to “share profits” if the project is beneficial to society. They consider it fair to earn together with the contractors, not by depriving them, but by inflating the price of contracts and thus getting from the state compensation for their low official remuneration.

Another relevant research object is those social norms that do not directly refer to corruption, but still influence attitudes towards different corrupt practices. In recent years, there has been a growing body of literature on how corruption is influenced by socially imposed obligations to help members of one's family, clan, community, etc. as well as to return to them the investments that enabled the official to start his/her career, or by perceptions of the standard of living that a person occupying a certain position in the government should demonstrate, etc. Basel Institute on Governance and Corruption, Justice and Legitimacy Program have been doing very important work here, as well as a number of individual researchers. Attention to this issue is a welcome development since ignoring the reality of social norms may well be one of the reasons for the failure of anti-corruption reforms.

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5. Processes under reforms

In addition to knowledge about the various aspects directly related to corruption, an understanding of the overall reality of the area of activity targeted for reform, such as health care or public procurement, is highly desirable for effective anti-corruption interventions. This seems self-evident, but this rule is not always followed. Especially given that what is needed is an understanding of the real, not the desired or officially approved, state of things. As with other dimensions, different aspects are at play here.

1) Problems attempted to be solved through corruption. They may be rooted in the reformed processes or be a manifestation of more general challenges (e.g. excessively low pay in the public sector). This aspect is now the focus of a very important and growing literature on corruption functionality.

2) Certain features of the processes under reforms that induce or encourage their participants to engage in undue practices. Sometimes undue techniques are used, at least initially, for good faith purposes. For example, in Russia, public procurement reforms led to an "auction bias" where procurement is done mostly through reverse auctions. Thus, contracts often have to be concluded with the bidder who offered the lowest price, even if it is knowingly unable to deliver goods of proper quality. To overcome this, customers have been using a sophisticated arsenal of techniques to limit competition. However, even the unwilling use of improper practices for bona fide purposes can contribute to corruption. Process participants are increasingly losing psychological barriers to the utilization of improper practices and gaining skills in their use and disguise. The Russian example confirms this: the same undue techniques that are used to ensure that a quality supplier wins are also used in the design of corrupt interactions.

3) Other, not always easily identifiable characteristics of the reformed processes, which make the real state of affairs different from the assumed one and which are important from the anti-corruption point of view. For example, in Russia, public procurement reforms were based on the idea of maintaining and protecting fair competition. Thus, significant efforts were put to limit the discretionary powers of government customers or to create a mechanism for bidder appeals. However, a serious mistake was probably made. By the time the reforms began, there was hardly any competition to maintain and protect in the most profitable sectors - key suppliers were already closely tied to customers. Therefore, a significant proportion of tenders involved only one bidder or fake competition, and the appeal mechanism remained unused.

Grasping the corruption-related reality is not an easy task. First, while there is some progress with the five dimensions noted above, we have only just begun to take the initial steps, and the map we have still has lots of blind spots. I would dare to say that whatever sector and whatever country we take, we do not know more about corruption than we do. Obtaining the necessary knowledge is fraught with methodological difficulties - often so significant that we have no idea how to approach them. It requires inventive and daring methods. And here I must repeat what I said about studying anti-corruption reforms. I believe that the anti-corruption community would benefit from methodological freedom. It will not be possible to penetrate many aspects of corruption reality with scientific, especially quantitative, methods for a long time to come. Finally, our knowledge is currently extremely fragmented. There are almost no attempts to provide a holistic description of corruption in any sphere of activity or any country.

Second, the aspects of reality that are important for anti-corruption reforms should not be reduced to the five dimensions mentioned here. For example, certain general characteristics of the political, economic and social system are no less important: the role of the state in the economy or a particular sector, the state's administrative capacity, the existing system of remuneration in the public sector, the structure of power and the peculiarities of power-sharing, the legal and moral boundaries of conspicuous consumption, and many, many other factors. I believe, it is important for the anti-corruption community to significantly intensify the discussion of what aspects of reality are fundamentally important for the design of anti-corruption reforms. And, of course, we must not forget that the world of anti-corruption is another dimension of reality.

Third, a separate problem is how to translate what we know about the corruption-related reality into the language of anti-corruption policymakers. In conclusion, I would like to elaborate a bit more on this issue, as it has critical practical implications.

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Discussions on tools that can be used to bring together and visualize various aspects of reality relevant for reforms have been going on for a long time, and not without results. For example, one such tool is systems maps. Corruption, Justice and Legitimacy Program has done a lot to promote them in the anti-corruption field. I will not dive here into a discussion of the tool, but rather will draw attention to one aspect that prevents its widespread use, namely its excessive complexity for policymakers. Peter Woodrow himself recently wrote about this (https://www.corruptionjusticeandlegitimacy.org/post/fast-forwarding-to-systems-maps-of-corruption-getting-to-usable-analysis-more-quickly). ?When he tried to teach system mapping to anti-corruption practitioners, first face-to-face in the Democratic Republic of Congo and then online at the International Anti-Corruption Academy, he found that the tool proved to be challenging for his students. This prompted Dr. Woodrow and his colleagues to look for ways to fast-forward system mapping, including through the use of common systems patterns.

When trying to implement anti-corruption reforms in Russia, we faced a similar problem. One of the tasks we tried to solve was to launch a systematic corruption risks assessment in government agencies and major SOEs. After several years of attempts, a methodology was developed and adopted, which assumed that anti-corruption officers would look at key functions and management processes in government agencies through the eyes of a potential corrupt official. They should have tried to understand how unscrupulous employees could extract illegal rents given their authority, which positions were key to potential corruption schemes, and how this related to internal and external control systems. The result was also to be a map - a map of corruption risks.

We failed. The methodology appeared convincing on paper but difficult to apply. It could be used by a handful of experts, but not by the bulk of anti-corruption officers. We started to think about how we could make it more user-friendly. One possible solution, in our opinion, is to create an electronic corruption risk assessment assistant based on catalogs of typical corruption schemes and undue techniques. Thus, we have actually come to the same idea of using common patterns, but with a bit of IT.

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I do believe that inattention to reality is one of the most important factors in the failure of anti-corruption reforms. Therefore, the task of grasping the corruption-related reality remains a critical task. To do so, it is necessary to intensify the debates on which aspects of reality to look at and how to gain knowledge about them. No less important is to develop user-friendly tools for presenting available knowledge to policymakers. The tools that can be used by anti-corruption officers on the ground. Otherwise, our growing knowledge of reality will remain in an academic bubble, and anti-corruption reforms will continue to be carried out based on “common sense”.