Buying our way out of corruption: performance-based incentive bonuses for developing country politicians and bureaucrats.

• Author: Skladany, Martin

This Article argues for the establishment of performance-based financial incentive programs in developing countries that would pay politicians and high-level bureaucrats substantial bonuses (ten to twenty times or more of their official yearly salaries) to reduce corruption within their countries. These incentive programs would turn the weapon of greed back on itself by aligning the motivations of politicians and bureaucrats with the stated goals of government and the desires and will of citizens. Paying corrupt public officials to stop stealing may seem distasteful, but the problems that developing countries face and yet cannot overcome because of systemic corruption are staggering and have been largely resistant to other anticorruption strategies. By simply altering the source of funds to public servants, performance-based incentive programs for developing country politicians and high-level bureaucrats can, over the long run, create a culture of clean governance conducive to sustained economic growth and can make all aspects of development, such as improving infrastructure, education, and health care, more manageable.

INTRODUCTION

The trouble with Nigeria is simply and squarely a failure of leadership .... The Nigerian problem is the unwillingness or inability of its leaders to rise to the responsibility, to the challenge of personal example which are the hallmarks of true leadership. (1) While Prime Minister of India in the 1980s, Rajiv Gandhi publicly stated that he believed 85% of government spending on development within India never reached its intended beneficiaries but was instead lost to corruption (2) at every stage along the way. (3) A 2004 survey in Chad showed that 99% of money earmarked for rural health clinics by the Ministry of Finance never reached its destination. (4) In Uganda, a relatively functional African country, "less than 30 percent of the funds dedicated to primary education was actually reaching schools" in 1998. (5) A poll by Gallup International Associations of 50,000 individuals worldwide revealed that "Africans ... are painfully aware of the inadequacy of their leaders: 8 out of 10 said 'political leaders are dishonest'; three-quarters 'deemed them to have too much power and responsibility'; while 7 out of 10 'think politicians behave unethically.'" (6)

As Heineman and Heimann observe, "Although it is difficult to quantify global corruption, there is little question that huge problems exist. For example, the World Bank estimated in 2004 that public officials worldwide receive more than $1 trillion in bribes each year (and that figure does not include embezzlement)." (7) The above sum is staggering and directly harms the poor, but the larger tragedy is that systemic corruption can destroy most incentives to create wealth and can perpetuate a dynamic in which it is "in most people's interest to take action that directly or indirectly damages everyone else" (8):

The rot starts with government but it afflicts the entire society.

There's no point investing in a business because the government will not protect you against thieves. (So, you might as well become a thief.) There's no point in paying your phone bill because nobody can successfully take you to court (so there's no point being a phone company). There's no point getting an education because jobs are not handed out on merit (and in any case, you can't borrow money for school fees because the bank cannot collect on the loan, and the government doesn't provide good schools). There's no point setting up an import business because the customs officers will be the ones to benefit (and so there is little trade, and so the customs office is underfunded and looks even harder for bribes). (9) From an economic perspective, systemic corruption reduces the beneficial effects of competition in the market, the quality of goods produced, (10) foreign direct investment (FDI), (11) government revenue, (12) and bank supervision, (13) while raising the prices that the poor pay for goods, increasing the risk premium that developing countries (LDCs) (14) pay when issuing bonds, (15) and swelling the informal economy. (16) From a political perspective, systemic corruption corrodes the legal system, turns the bureaucracy into a self-seeking entity that disregards the public interest, undermines representational democracy, reduces educational funding, (17) and increases military spending and arms procurement. (18) From a societal perspective, systemic corruption breeds cynicism, rage, despair, and factionalism, exacerbates the emigration of skilled citizens, and promotes individual advancement above ethical concerns. From an environmental perspective, systemic corruption increases pollution. (19) From a foreign aid perspective, systematic pilfering by developing country public officials blocks potentially life-saving assistance from reaching the poor and ultimately discourages foreign generosity, for developed countries (DCs) may become reluctant to contribute aid where the greater portion is stolen and never reaches those in need.

The problems that LDCs face but cannot overcome because of systemic corruption are staggering. Systemic corruption can be a matter of life or death for millions of LDC citizens. There are over 9.5 million deaths annually of children under the age of five in developing countries, two-thirds of which are "entirely preventable" (20) but extremely difficult to prevent because "fragile states, characterized by weak institutions with high levels of corruption, political instability and a shaky rule of law, are often incapable of providing basic services to their citizens." (21) Frustration and anger regarding systemic corruption have even resulted in dramatic outbreaks of violence. In Peru, for example, corrupt public officials were lynched by disillusioned citizens. (22)

Theft by government officials has been largely resistant to anticorruption strategies. Unfortunately, "[t]he energy invested in the anticorruption drive has failed to reduce average levels of graft in government or business in the world's poorest regions, according to World Bank officials and other leading analysts." (23) Given the pervasiveness of corruption and the drastic nature of the problems that result, new policies that properly take into account LDC environments are desperately needed. (24)

For the poorest of poor countries, dramatically reducing corruption (25) is the most significant step that a developing country can take toward successful, sustained development. (26) As Cooper notes, "Imagine a poor country with a well-run legal system but not much else in the way of resources. Someone will somehow find an opportunity to make money. In the end, the country will probably grow rich." (27) This is not to claim that low corruption within a state guarantees sustained development. (28) Many other factors, including education levels, the capacity of health care systems, and intelligent economic policy, play important roles. But these other factors become more manageable when a poor country has clean governance--e.g., most medicines actually reach those who need them; teachers show up to teach and do not steal and resell school materials; and politicians do not pursue economic policies whose sole purpose is to hide corrupt transactions. (29)

For low middle-income countries, substantial reductions in corruption can end the existence of extreme poverty within their borders. Low middle-income countries have little money to help lift the extreme poor within their borders out of poverty, and corruption can worsen the problem by preventing a significant amount of the money allocated for such projects from reaching the extreme poor. Large reductions in corruption would thus enable more money to be on hand for those in need.

Corruption also imposes costs on those public officials who choose to partake in it. (30) It is time-consuming and risky to solicit bribes and siphon off government funds. Plus, it wins no respect from citizens or from the international community. Corruption leads to precarious, unstable positions because public officials cannot rely on their ability and merit to maintain steady employment but instead must satisfy the whims and pleasures of those who are more powerful. (31) By stunting development, politicians and bureaucrats deprive themselves as well as their fellow citizens of clean air, safe streets, health, and longevity.

Given how devastating the effects of corruption are on most LDCs, this Article proposes providing financial incentives (legal bribes or inducements) to government officials in developing countries to stop them from partaking in corruption--from robbing the LDC's treasury, stealing overseas development aid, or soliciting bribes from private citizens, corporations, or other public servants. (32) Performance-based financial incentive programs in developing countries, established by a coalition of DC governments, intergovernmental organizations, or others, would pay LDC politicians and high-level bureaucrats substantial bonuses--ten to twenty times or more of their official yearly salaries--to reduce corruption within their countries. (33) The incentive program would better align the motivations of politicians and bureaucrats with the stated goals of government and the desires and will of citizens. (34) There would be no doubt that the incentive bonuses would be meant to financially substitute for the money that corrupt public servants traditionally steal from the government or take from citizens. In essence, performance-based incentive programs would aim to turn the weapon of greed back on itself by exploiting it as a means of positive change. By simply altering the source of funds to public servants, performance-based incentive programs for LDC politicians and bureaucrats can, over the long run, create a culture of clean governance conducive to sustained economic growth and can make all aspects of...