Corruption Rankings

In this lecture, we will examine global corruption rankings in light of The Four Central Questions which are central to our approach:

1. WHY are we doing corruption rankings of countries?
2. What do the numbers mean?
3. How are they calculated?
4. What is the impact of the creation of these corruption rankings?

This lecture is based on Zaman, Asad and Rahim, Faiz, Corruption: Measuring the Unmeasurable Humanomics, Vol. 25, №2, pp. 117–126, June 2009. https://ssrn.com/abstract=1309131

We start by thinking about “ Why we assign NUMBERS to corruption? “ After all, it is qualitative condition of the heart, not subject to measurement. There is a long and complicated story which led to the attempts to measure the unmeasurable, which we summarize very briefly, to explain this:

1. A battle between Science and Religion fought in Europe led to rejection of Christianity, and acceptance of Science as the new religion of the West.
2. It became widely believed that Science is the only source of reliable knowledge. This led to rejection of heart, emotions, subjectivity. Logical positivists introduced the Fact/Value distinction, and said science was about facts, while values were not scientific.
3. Advances in Physics were tied t accuracy of measurement. This led to the misconception known as Lord Kelvin’s Dictum: If you cannot measure it, you don’t know what you are talking about. Numbers = Knowledge. See Lord Kelvin’s Blunder.
4. In the early 20thCentury, Social Sciences were constructed by application of Scientific Method. But the methodology of science was VASTLY misunderstood by Logical Positivists and it was this misunderstanding of science that was used to create methodology for economics, econometrics, and statistics.
5. These developments, where knowledge required measurement, led to attempts to Measure the UnMeasurable throughout the social sciences.

Can Corruption be Measured? Obviously, the internal Qualitative, corruption of hearts, cannot be measured in numbers. BUT External Manifestation, like Bribes, can be measured. It is worthwhile to define BRIBE as the Use of Money for Persuasion towards personally profitable agenda at social cost.

Even if we confine attention to bribes, corruption is multidimensional and cannot be reduced to a single number. To see this, compare two countries. A has 100 corrupt transaction of $ 1M each. B has 1M corrupt transactions of $100. WHICH country is MORE corrupt, A or B? There is NO OBJECTIVE answer to this question. To answer, we need to specify the purpose of making the comparison.

There are situations when it become necessary to try to measure the unmeasurable. In such situations, the following Rules for Measurement are worth remembering.

The simplest case occurs when the Target is ONE-DIMENSIONAL and Quantitative. IN this case ONLY, objective measurement is possible. Much more often we have the case of a qualitative and multidimensional phenomena. In this case, we should explain clearly the subjective choices required to convert qualitative & multidimensional measures into a single number. If we consider a range of options, and also the purpose for which different USERS may find it useful, we will find different numbers for different users. This would be helpful to dispel the image of objectivity created by statistics.

Now, we come to the topic of the lecture. How is the CPI (The Corruption Perception Index) computed by Transparency International? To the best of our knowledge, they poll a group of wealthy businessmen of unknown identity , and ask them to rank countries from 1 to 10 in terms of their perceptions of corruption in a given country. High numbers are high honesty and integrity, while low numbers correspond to high corruption.

As discussed earlier in “What do College Rankings Measure?”, the crucial question is: “How much KNOWLEDGE do they have of global corruption, and of RELATIVE corruption?” Uninformed rankings just report the prejudices of the people who are doing the ranking. There are many reasons to suspect that these rankings are done by foreigners with little knowledge of local culture. Furthermore, it is likely that these businessmen make brief visits to get big jobs done in the fastest way made possible by wealth — they look for corrupt counterparts to avoid the regular process. In any case, it is likely that the perceptions just reflect the prejudices of those doing the ranking, rather than any characteristic of the country.

What do the CPI numbers mean? Statistical analysis in Zaman and Rahim (2009) shows that the CPI has a 98% correlation with log (GNP per capita). In other words, Integrity and Honesty is just another name for wealth. This likely reflects prejudice of the wealthy. In real life, we see that More wealth = more greed & corruption. The Quran also mentions how excess wealth leads to corruption. Remember that Corruption is a two party transaction.The poor accept money to do favors for the rich — the poor get the blame and coverage, while the wealthy escape attracting attention.

If we use the definition of bribe given above, LOBBYING in the USA, is easily seen to be bribery: the use of money to pursue narrow group interests while inflicting huge costs on society. The Global Financial Crisis is one example of how rich financiers got trillions of dollars in bailouts, at the expense of poor mortgagers made homeless by the millions. Another egregious example is the Medicare Prescription Drug Bill passed in 2003 using dirty tactics by Senator Tauzin on behalf of Big Pharma. The bill ensures that the Pharma industry can charge whatever price they like for sales to medicare. The government cannot negotiate, and they cannot import cheaper alternatives from Canada. The bill has been called an $80 billion per annum give-away to the Pharmaceutical Industry. (Despite a campaign promise to do so, Obama was unable to get this bill repealed due to the powerful Big Pharma Lobby.) Afterwards, Senator Tauzin left Congress to take up a $2 million consultancy, and also received more that $11 milion in cash rewards from grateful Big Pharma. But while all of this is documented, none of this is counted as corruption!

Our approach requires us to dig deeper into the historical context and background of the numbers we analyze. Why CPI was developed? The answer is somewhat complex. In the Post WW2 era, there was a competition between Capitalist & Communist models of development. The World Bank offered the Structural Adjustment Program, as a roadmap for development. There is not a single instance of success — no country became developed by following World Bank advice, but many countries, like East Asia, did industrialize by REJECTING World Bank advice (see Choosing our own pathways to progress). This failure of capitalist model widely documented and acknowledged by all parties. In order to maintain credibility, it was necessary for the World Bank to find some scapegoat to blame for the failure of the capitalist model for development. This was done by putting the blame on the poor countries for their own failure — a standard illustration of blaming the victim. It was not bad models created by the World Bank which led to failure, but bad governance and corruption in the poor countries which caused the failure. For more details see the article on Michael Foucault Power/Knowledge which explains how the powerful shape knowledge for their benefit.

The fourth question is: “What is the IMPACT of CPI?:. We could imagine that, theoretically, a country with a high CPI will make efforts to improve in terms of governance and corruption. Practically, it has the opposite effect. Solid research establishes that my behavior is affected by my PERCEPTION of social norms (and not by the REALITY). So If PERCEPTION of high corruption is created, people will act in more corrupt ways. If PERCEPTION of justice and low corruption is created, people act honestly. This means that the strategy of moving towards greater integrity and honesty is the opposite of the one currently being followed all over the developing world. Institutions like NAB and Anti-Corruption drives highlight corruption and cause it to spread. Instead, an effective strategy would highlight honesty and integrity. If a country has 99 incidents of corruption and one of integrity, publicity for the solitary good incident would create an impression of honesty and help to spread it. Thus, attempts to measure corruption via CPI are likely to be counter-productive rather than helpful in combating corruption.

Conclusions: The Colonization of Globe was justified by Racist arguments. White man was infinitely superior to all other races, and had right to rule the world. The colonization process was so extremely brutal and ruthless, that records have been suppressed from history and memory. Today, this process of colonization continues by financial means. Poor countries make billions of dollars of interest payments to the rich. Justification for this exploitation of the poor by the rich and powerful is still needed. This justification is created by the CPI as well as many types of economic theories of development.

POSTSCRIPT: This concludes Lecture 2 — Previous 5 posts discussed how widely used College Rankings are arbitrary. By choosing factors and weights appropriately, we could make the rankings come out in any desired way. Links to this sequence of posts are: Comparing Numbers , Arbitrariness of Rankings , What do College Rankings Measure? , Goodhart’s Law, and Values Embodied in Factors & Weights

Originally published at http://azprojects.wordpress.com on May 16, 2020.