The Blame Game

To see the real source of corruption, look in the mirror


A specter is haunting Central Europe — the specter of corruption. Graft, bribery, patronage and cronyism remain among the most significant challenges facing the Czech Republic.

We are widely considered one of the success stories of the transition from communism to capitalism, with consistent GDP growth and generally rising standards of living. But we continue to lag behind in dealing with corruption, which has the potential to undermine the good work that has been done and limit future economic growth and societal progress.

Corruption distorts all sectors of life. In this country, money that could be spent productively is instead used to grease the wheels, to buy access to doctors, to secure places at universities or win public contracts.

As the anti-corruption nonprofit group Transparency International has explained so well, corruption is disproportionate in its effects: It hits the poorest the hardest. So, anyone concerned with social justice should also be concerned about tackling corruption.Successive governments, including the current one, give solemn promises to deal with corruption. Yet the problem persists.

The European Union and the World Bank, among other international institutions, continue to zero in on the Czechs’ apparent inability to deal with this issue. Transparency International, as reported recently in The Prague Post, places the Czech Republic among the European Union’s most corrupt nations, closer in standards to Bosnia than to Denmark.

What is to be done?
Common wisdom is that the best strategy hinges on reducing the role and influence of government.Czech officials have certainly passed laudable initiatives to reduce bureaucratic red tape and simplify legislation, while simultaneously increasing oversight on public officials and bringing in tougher penalties for those caught in the act. And the pending privatization of Czech Airlines (ČSA) and Prague’s Ruzyně Airport, along with massive reforms of the healthcare and pension systems, seem to hold the promise of reducing opportunities for corruption.

This logic underpins anti-corruption efforts around the world. Professor Steve Hanke of Johns Hopkins University and an adviser to the Bosnian government puts it this way: “Shrinking the size of the government down to almost zero … is the only way to get rid of corruption. Have no government officials, and a minimum state.”
It sounds extreme. Yet, particularly in former communist countries, corruption seems endemic to the political process.

Author and activist Naomi Klein talks about this in her meticulously researched book The Shock Doctrine: The Rise of Disaster Capitalism. Klein notes that wherever the transition from communism to capitalism encounters problems, those problems are based on corruption. While countries move toward privatization, deregulation and a free market, economic shock therapists always blame a “culture of corruption” for derailing their reform programs.

It may well be true that there is a historical hangover from the communist period, when the only way to get what you needed was to subvert and bypass the system, effectively creating parallel mechanisms reliant on corruption and favoritism.
But while this may have established a baseline of corruption, transitions in post-communist countries have set new benchmarks.

President Václav Klaus’ “Turnpike,” the much heralded straight road from Husák to Thatcher, was the transition route chosen by Czech elites. They headed directly down this road, ignoring speed limits and exhortations to drive carefully.

This period of “nomenklatura capitalism” and the emergence of a new gilded class of oligarchs gave rise to a series of scandals, with Harvard Capital Consulting and IPB Bank being only the most well-known examples. This way of doing business was actively encouraged at the time, with transition economies attempting to harness what economist Anders Aslund memorably called “the temptations of capitalism.” Klein and others contend that corruption is not an obstacle to this style of capitalism, but has been an inherent part of it, from Russia to Chile, Indonesia to Poland.

But it is not enough to raise our hands, shrug our shoulders and lay the all-encompassing, obfuscatory blanket of corruption over everything that goes wrong. There are other forces at work, unleashed deliberately to pursue particular agendas.
For example, given the private sector’s previous history, we should think twice in the future about transferring assets there. The high frequency of large-scale scandals in the business world in recent years offers ample demonstration that companies will often push as far into grey areas as possible to secure an advantage in the increasingly competitive global market. This means stretching regulatory provisions and disclosure requirements to the limit and, on occasion, flat-out deception and lying.

We have already seen what happened in companies from Enron and Worldcom to Ahold and Deutsche Post. After a scapegoat was identified, a feeding frenzy for the assets of the disgraced company ensued and executives and spokespeople appeared on the nightly news, wringing their hands and promising to do better next time. Backward-looking legislation addressed the scams that were uncovered. But those measures never look ahead, anticipating the ruses that profitability and accelerating growth will require.

Does it have to be like this? Consider the examples of the Nordic countries, which despite having relatively large state sectors and no shortage of money to tempt officials (especially when we consider Norwegian oil wealth), rank among the best performers in Transparency International’s Corruption Perceptions Index.
The difference in the Nordic situation is that the governments responsible for large state sectors are accountable to more engaged populations, and by a media not content to feast on a diet of continual scandal and soap-opera politics. By contrast, in this country it seems that the government is never held to account and forced to deliver on its promises. The public apparently doesn’t want to get involved in politics, and the media drags everything down to a level that can be easily understood on the surface but draws a veil over the real arenas of power.

Ultimately, apathy is the real specter haunting Central Europe, not corruption.
Only by overcoming this ennui can we reverse the corruption that has beset our politics and engineer a return to accountable government. Only by reconstituting our public and political lives can we expect to be able to regain control over the decisions that affect us.

This article was originally published in The Prague Post on 16/07/2008