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Corruption and Democracy (Part 4 of 5)

(This article is Part Four of a five-part series on "The Clash of Capitalism and Democracy in East Asia." For an introduction to the series, please see Part One.)

Corruption, unfortunately, is everywhere, but corruption on the Japanese scale is truly outstanding. Last month, Yasuyuki Yoshizawa was arrested for accepting 4.3 million yen (about US$330,000) from various banks. The kicker is that Yoshizawa was a high-ranking official of the Bank of Japan, and thus responsible for overseeing the banks that were spending up to $750 a night entertaining him at high-class restaurants and golf clubs. In the wake of this latest scandal (and the scandals keep piling up in Japan), the Governor of the Bank of Japan, Yasuo Matsushita, has resigned his post in shame.

The manifestations of corruption creep up in all aspects of government. There is big corruption in a big arena, like the Bank of Japan scandal, and there is small corruption in a small arena, like a police officer that accepts a bribe to forget about a traffic violation. Any type of corruption, though, no matter how big or small, is a blow to democracy. In a system that should be ruled by transparent and predictable processes of law, corruption creates favorites, loopholes, and connections-based advantages, and fosters an unpredictable and opaque rule of personality.

Corruption is part and parcel of a capitalist system, where money is good, and more money is better. Certainly, corruption is not endemic to capitalism, nor limited to it. Indonesia, a heavily bureaucratic nation, is among the most corrupt nations in the world, and the former Soviet Union was rife with corruption in the party bureaucracy. Part of corruption, after all, is human nature. Even faceless, soulless government bureaucrats want to live in a nice place, dress well, and feel important, and no governmental system has a shortage of them. But capitalism poses a special, structural problem vis-a-vis corruption. Although virtually all known and tried societal systems value money, capitalism does so more openly and more pointedly than any other. A system that specifically values money so highly creates a moral hazard for people in positions of power to accept money for favors.

Other than just the human drive for a nicer life, which obviously cannot be addressed in any useful way in a democracy without legislating away basic freedoms, there are several factors that contribute to corruption. First and foremost, a problem with government jobs, especially in developing nations, is low pay. From Albania to Indonesia to Mexico to Zimbabwe, low-level government officials, including police officers, are often paid very little, for the basic reason that their developing governments cannot afford very much. Second, corrupt officials in many nations have little chance of being caught. Especially in nations that are just beginning to have a professional civilian police force, hiring additional hands for an Internal Affairs Division seems like a pipe dream when their main police force is often understaffed, and quality officers are rare.

Low salaries and limited enforcement resources, however, are generally a problem for lower-level officials like police. High-level officials in nations with little transparency in the decision making process can get away with corruption that makes a police officer accepting cash in return for forgetting about a speeding violation seem downright angelic. If there is a lack of transparency, few people will ever see, or notice, even the largest bribes. Thus, the lack of transparency is a tremendous contributing factor to corruption.

The last contributing factor to corruption is the incredibly light penalties for those who are caught. For example, several Japanese officials have been caught at corruption, little more than a slight career interruption. In 1974, the incumbent Prime Minister Tanaka Kakuei was forced to step down after accepting millions of dollars in bribes from the Lockheed Corporation. He spent just over 20 days in jail, and was never convicted -- he died before the famously slow Japanese justice system brought him to trial. The current Japanese Prime Minister Ryutaro Hashimoto has admitted he received $760,000 in political donations from two companies that bribed several senior administration officials. Hashimoto claims the donations were received in accordance with the law, and this case looks unlikely to be probed any further.

The underlying reason for the corruption of politicians at such a high level is generally to earn money for re-election campaigns, certainly the case in the United States. But in Japan, where campaign periods are rather short, and spending is strictly governed and limited by law, elections are not as big as an expense as the costs of actually being in office. In 1987, a Diet report estimated that annual expenses for newly elected members of the Diet were five times greater than the average amount provided by the government. These expenses included not only the maintenance of office staff, but "gifts" to supporters and contributors on the occasions of weddings, funerals, and other events, where giving large amounts of cash is a time-honored Japanese custom. The officials, obligated to pay such monies, have to get them from somewhere. So even the regulation of election campaigns may not solve the problem of high-level corruption.

If politicians have a strong incentive to obtain cash, corporations have an even stronger one: their very survival. In a capitalist society, where the strongest (i.e., most profitable) companies survive, there is a greater incentive to make money by any means possible. Naturally, if the likelihood of getting caught is low, and the penalties for being caught are lower, there is little incentive for companies not to behave ethically. As Professor Iwao Taka of Japan's Reitaku University said, "Even the detection of [the Lockheed] scandal was not enough to bring the main concern of Japanese business back to corporate social responsibilities. The reason was simply that of most importance for Japanese corporations was their own survival...thus not even this scandal could bring Japanese business and academia forward to discussions about business ethics."

One method of blending corporate and political corruption that has a long tradition in Asia is known in Japan as "amakudari," which literally means "descent from heaven." A bureaucracy official, forced to retire at the age of 65 (or so), "descends" into a plush private sector job, where his only functions are to schmooze with his old buddies at the ministry, lobby for his company, and collect his fat paycheck. And since his buddies at the ministry are looking forward to their rich amakudari retirement, they are often happy to oblige their private-sector friend with friendly legislation.

Solutions to amakudari are difficult at best. A nation can crack down on this sort of behavior only so much. After all, a democracy should defend the right of the individual to freely associate with employers of his choosing as much as possible. Banning amakudari in Japan would bar individuals from working for companies after they leave government service, which would not only violate their constitutional right to work for whom they choose. It also risks wasting pools of talent, not to mention providing one more reason for the nation's best and brightest to forgo public service in the first place.

So faced with this mountain of corruption, and the Mount Everest of problems in combating it, just how does a nation fight corruption? To start with, a nation attempting to fight corruption should recognize the similarities and the distinctions between low-level and high-level corruption. There are several solutions that can be used to attack both, but some solutions that are effective on one can be ineffective on the other.

To fight low-level corruption, such as the police officer wanting cash instead of justice, several measures that fall into the "easier said than done" category are necessary. First, there must by higher pay for public officials. This measure may not reduce incentive for a policeman to supplement a meager salary through corruption, as any salary can be supplemented no matter how plush. But it can help fight the attitude that a salary must be supplemented due to its meager size. Second, there needs to be better transparency and oversight in the decision making process, in order to make it more difficult for offenders to violate the law. And third, legislatures should enact stricter penalties to serve as a deterrent to corruption.

To fight high-level corruption, all of the above measures are necessary, plus a little more. After all, high-level corruption is generally by its very nature more harmful to a nation, especially a developing nation, because of the essential circumvention of the democratic political process. When a police officer is bribed to forget a ticket, one person escapes justice, and society as a whole is not terribly impacted. But when a Prime Minister accepts money to change national policies, positions of national import may be swayed from the platforms upon which the people elected him.

So to fight high-level corruption, stricter penalties (including being barred from public office), higher transparency, and higher pay are necessary. (And yes, higher pay is necessary -- even US Congressmen earning $100,000 a year could easily make far more in the private sector.) But more action is necessary to fight high-level corruption, including fines which are well above the potential damages, prison time for even purely white-collar actions, full disclosure of campaign funding, and strict limits on campaign finances. Contrary to the opinion of the United States Supreme Court, election financing is not free speech, but the free allowance of the corporate purchase of public officials. If the United States cannot get money out of its politics, how is it supposed to set an example for developing nations with traditions of corruption in public policymaking?

More than mere legislation is necessary, though, for a society to combat corruption truly and effectively. The most important measure that can be taken is to focus on the ethics of corruption at the grass roots level, especially in education. Many Asian countries are rising to this challenge. A 1993 report issued by the University of Pennsylvania's Wharton School of Business indicates that universities in Korea, Singapore, Indonesia, the Philippines, Thailand, and Malaysia have hired business ethicists, and are attempting to focus on ethics in business. The focus of education must seek not only to inform citizens of the concrete harms of corruption, but perhaps even to instill a sense of pride and shame. Doing the right thing for one's country should be taught as its own reward, simply for the good it can do. Doing the wrong thing should be viewed with contempt.

Granted, Japan is a culture where "shame" is still very much alive. Several Finance Ministry officials have hanged themselves over the scandal I mentioned at the outset of this column, yet there is still widespread corruption in Japan. But shame at being caught is no substitute for shame at the act itself. This distinction must be instilled in the citizens of a democratic nation. It is the duty of a bureaucracy to teach its people shame; and it is the duty of the democracy to ensure that the lessons are well learned by the bureaucracy. If a nation wishes to transform itself into a democracy, it must instill democratic values from an early age. A system of campaigning and voting is not democracy, although it can be grafted onto a pre-existing system to make it seem like a democracy. Systems are not normatively democratic; values are.

Of course, there is a giant, glaring hole in all of these grand steps to fight corruption. All of them, from higher salaries to greater oversight to better education, require cash. None of these policy prescriptions can be transformed into workable law without the resources necessary to pursue them. And as discussed before, many nations that desperately need to fight corruption simply do not have the money to take these sorts of steps. How do nations with high democratic ideals, but without the money to back them up, develop a system that is effective both democratically and economically? This question and more, in the conclusion of the series, next week.

Part 1: The Clash of Capitalism and Democracy
Part 2: Big Business and Democracy
Part 3: International Institutions and Democracy
Part 4: Corruption and Democracy
Part 5: Blending Capitalism and Democracy

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