Corruption has been making bold headlines of late. Corrupt practices have not been invented in the last decade but they have probably reached an unprecedented level of sophistication.
A few decades ago corruption used to largely imply a politician using the power of incumbency to hide a scandal or make some money, and officials asking for bribes to ‘speed up’ convoluted administrative processes. In most western countries, however, this has changed. Technology has streamlined and democratised most dealings of the public with government. Middle-persons have been squeezed out and there’s less possibility of cashing-in on expediency. More importantly, there is a system with inbuilt track records.
As for politicians and people in power, the media has made such inroads into their lives that only the craftiest can get away with it. And as people at the top of the democratic power pyramid tend to be richer to start with, they are unlikely to risk their skin just for a pittance.
As a result, corruption has moved to a grander and a more complex scale than ever before.
The root of all evil?
The unchecked evolution of the financial sector, the explosion of the services industry and increased globalisation have all contributed to creating a new outlet for the dishonest. Diverting funds and laundering money has evolved to take advantage of the new landscape.
By the 2008 crisis, the financial sector had become a murky and complex system of deals, packaging and repackaging. At times only the people who created the meltdown in the first place could be hired to try and undo it. And while since the crisis the European banking and financial sectors have become increasingly regulated, they still remain largely an elitist area which only few people truly understand. Not to mention that such regulation remains circumscribed to Europe.
Meanwhile, the legislation needed to regulate these sectors has become as intricate and is often too complex for most citizens to comprehend. This is further compounded by variations across jurisdictions.
The bottomline is that it has become very difficult for citizens and electorates to determine what is “enough” and how water-tight these sectors are when it comes to corruption. They vote on impressions garnered from the occasional revelation from the financial sector or on incidents related to election funding.
It is clear, however, that not everything is what it seems.
The sum and its parts
A financial expert I interviewed says that when it comes to receiving money from illicit sources things are much tighter today than they were a couple of decades ago. The days when people could physically take suitcases of cash to offshore banks are mostly gone. But while he believes that the cases of corruption haven’t necessarily increased overall, he admits that corruption has indeed ‘scaled up’, both in magnitude and spread of operations.
Those involved in the higher echelons of corruption, nowadays, use expertise in both the financial and legislative domains to create complex international financial setups. The moment a financial expert and someone with legislative power put their heads together with corrupt intent, (or worse, are one and the same person) it becomes increasingly difficult to uncover their deals and, more importantly to prosecute.
The whole setup is often too broad and spread-out to be uncovered in its totality and is often made up of several parts. These complex structures often involve multiple jurisdictions, layered companies, anonymous shareholding and fake loans. And while the overall organisation facilitates the transaction of dirty money, each of the parts may be legal or quasi-legal. Ownership of an anonymous offshore account may be unethical in many instances but is often not illegal and therefore not punishable by law. And even if that ownership is uncovered, it remains difficult to prove that the account exists for tax-avoidance purposes or to receive dirty money coming from another “part” of the layout.
One might argue that in a democracy, a politician discovered to own an offshore account would see his political career melt away. That is not enough to land him or her in jail though. And jail is all you need to avoid when you have a few millions stashed away in an obscure account.
This has been highlighted by the Panama Papers and the Paradise Papers. As far as I know no politically-exposed person named on those lists has been charged or jailed for owning such an account. The worst they suffered has been shame.
‘Gomorrah’ author, Roberto Saviano recently called the UK the most corrupt country in the world on account of funnelling dirty money through its offshore locations. In other words, according to Saviano, it sits at the top of international opaque structures that facilitate corruption. Needless to say, the assumption is that plenty of this laundered money originates from criminal activity.
Bottom-up and trickle-down
It’s not all about pointing finger at politicians and financiers though. When corruption is culturally-embedded it becomes the norm and pushes up through the ranks. So much so that the people on the street no longer recognise corruption even if it taps them on the shoulder. The policeman closing an eye to colleague’s son who was caught drink-driving is simply being kind, the nurse helping someone jump months-long waiting lists is just helping out, the crook dishing out a few millions for charity is bravely doing his bit… and so on and so forth.
The thing is that we all feel the pinch when the a dubious building permit is handed out or when a political favourite is parachuted in a high position. We just don’t make the link that corruption trickles down too and as such we reap what we sow.
When a person in power has something shady to hide, he or she has to keep the people around happy. Eyes are closed and loopholes are opened so that everyone down the food chain can have a share. And for a while many are happy because it is raining money. Society, however, rakes up a bill that has to be paid later or elsewhere.
And it goes beyond that. Corruption undermines social cohesion. The moment people lose faith in the political class and their financial institutions, they lose faith in their country. And if those above are milking the cow, those below see no harm in avoiding taxes and making a bit of money on the side.
In the end, perhaps corruption is more of an ouroboros than a pyramid.
Disclaimer: The views and opinions on this blog belong solely to the author. They do not, in any way, reflect the opinions of employers, associates and dependants, whether past or present.