Monday, 25 April 2016

Economic Power and Corruption

In an aphorism often quoted, Lord Acton remarked that “Power tends to corrupt and absolute power corrupts absolutely”.[1] But what if it turns out that, in the world economy today, the greater the power, the less the corruption, and vice versa? Lord Acton was talking about the exercise of power in particular countries, but the inverse of his aphorism is more accurate today when one takes an international perspective. It should not be seen as a perverse result that richer, more powerful countries often tend to be less corrupt. Instead, it should be seen as a sign that these countries find that the capitalist economy works for them more straightforwardly, rather than their elite groups having to overly depend upon patronage, nepotism, bribery and gangsters. Richer countries also use such methods, but, according to common observation, not so much as the others do so domestically. They are happier to depend upon the laws of the capitalist market that they have made, and from which they benefit, although they are happy to engage in corruption when doing foreign deals.
Of course, power and corruption are difficult things to measure, if this is at all possible. Transparency International (TI), a non-governmental organisation based in Berlin, produces a commonly used index of corruption, a Corruption Perception Index (CPI).[2] While capitalist establishment organisations and companies fund TI, so its ‘independence’ might be questioned, its reports have also embarrassed many. For example, it argues that no country is corruption free and it cites cases where countries that look to be ranked highly in terms of having little corruption domestically are nevertheless the headquarters of corporations that are heavily involved in bribing other countries: “half of all OECD countries are violating their international obligations to crack down on bribery by their companies abroad.”
Research produced by TI suggests that richer countries are the ones least corrupt. Lord Acton was not suggesting that economic wealth or income was an index of (political) power, but there is some common sense logic to there being such a relationship. I have taken figures from the OECD for the median household disposable income in a country as a measure of ‘average’ income. The median level is where half the population are above and half below that measure of income, so the higher the median, the richer the people in the country.[3]
The chart shows a scatter diagram of the relationship between median income levels and TI’s corruption index. In TI’s index, a higher number means less corrupt, a lower number more corrupt, with the range from 0 to 100. Denmark has the highest score in its latest 2015 report, with 91, a decent amount below 100. I have standardised the income measures for 36 countries measured by the OECD in a 2015 report so that the one with the highest median income of $41,355, the US, gets an index number of 100, while Brazil, for example, with barely more than a quarter of that level gets an index number of 28.
For the statistically minded among readers, the correlation coefficient is positive and 71%. In other words, a higher income is very closely linked to a lower level of corruption. Correlation does not necessarily mean causation, but the long-established rich countries have a legal, political and business culture that is often not noticed, or taken for granted. That ‘good’ domestic business culture may not extend to outside dealing. Weaker countries are more easily corrupted by the economic power and influence of the stronger, something that, ironically, will also make the former countries look more corrupt than the richer ones.
This is perhaps a simplistic exercise, one that uses a flawed economic measure of well being against a measure of how corruption is ‘perceived’. This measure of corruption will also pay little attention to the influence and power of money in the media and in election campaigns (don’t mention the US!), and seems to be oriented to how ‘clean’ are the possibilities to engage in capitalist business. Such a perspective leaves out of consideration that a capitalist way of organising the world economy is, how to put it nicely, very far from ideal.

Country Household Income and Levels of Corruption, 2015

Note: 2 letter ISO codes identify the countries shown.
Nevertheless, the pattern of countries being richer and also being less corrupt is clear from the chart. So, Russia (RU), Mexico (MX), Brazil (BR) and Turkey (TR), for example, are not far off the bottom (bad end) of the corruption index and also have among the lowest incomes, or less than half the US level. There are few surprises there, given recent media stories. By comparison, the rich Anglo countries are among the least corrupt, along with other rich Europeans. I have not detailed all countries, but the general pattern is clear and, for countries, contradicts Acton's observation.
Tony Norfield, 25 April 2016

[1] See a fuller quotation at: Also note that it is rarely mentioned, for obvious reasons, that, in this 1887 letter to an Archbishop, Acton said: ‘if what one hears is true’ then Elizabeth I and William III instigated murders and they should have been hanged!
[2] Transparency International Index available at
[3] The median figure is less distorted than the mean by the very high incomes of the very rich. Figures are taken in terms of current US dollars at ‘purchasing power parity’ terms. OECD data are from its Better Life Index, 2015 Edition,

1 comment:

Gordon Ker said...

The richest nation has enemies and potential enemies. Nations dance to the tune of the world's reserve currency, geo-politically all are at it's mercy.