Corrupt Contracting: Partisan Favouritism in Public Procurement. Hungary and the United Kingdom compared.

For politicians seeking to use a clientelist approach to achieve political and private gain, i.e., to prolong their hold on power and maximize personal profit, control of government contracting is a key tool. We theorise that politicians wishing to exploit government contracting for such ends will seek to increase their influence over three stages of public procurement – policy formation, implementation and monitoring – but that their efforts can be constrained by institutional controls and checks. We examine these influence strategies and institutional constraints by comparing one young democracy and one mature democracy, Hungary and the United Kingdom. Developing new procedural and outcome indicators of corruption risk in contracting, we use a change of government as a natural experiment to analyse partisan favouritism in procurement. We find that, in Hungary, where political influence is systematic and far-reaching, 50-60% of the market is dominated by favoured companies, compared to only 10% of the UK market.

Can we really speak about corrupt countries?

Prime Minister Cameron shocked everyone by referring to Afghanistan and Nigeria as possibly some of the most corrupt countries of the world just a few days before this week’s anti-corruption summit in London. Many saw his statement as yet another instance of Western hypocrisy. Given London is famously a playground for the corrupt and Mr. Cameron’s family itself profited from stashing money overseas, it does seem odd that he is the one to point the finger. But is it justified to be politically correct about corruption? The evidence tells us otherwise.

The Panama Papers show that elites in most countries will display a quite shameless (and selfish) appetite for privilege if a loophole presents itself. But while people from countries with a reasonable control of corruption, such as the United Kingdom, have to go to some exotic island with their money, people in countries where corruption is systemic (the majority of places) need not go that far. In those countries public budgets and banks are controlled by ruling elites, who openly flaunt lavish houses, cars and incomes worth far more than their declared earnings.

Countries like these have their very own Virgin Islands within their own borders, and their populations know it. This is how the Global Corruption Barometer assesses whether their officials and indeed their countries as a whole are corrupt. In countries with tighter control over corruption, survey respondents tend to claim their national rulers merely put their private interests first. Both groups are right in identifying corruption, but there is a big difference between the two cases. The summit concentrated on closing offshore havens, but did not touch havens operating within national borders. While this may help clean up less corrupt countries a little more, but it will do nothing for the others.

Another key facet in the politically correct approach to corruption is that money from developed countries is feeding corruption in the developing world. Granted, there is evidence to suggest assistance funds and even EU structural and cohesion funds can turn into a resource for corruption in countries where corruption is systemic. One Afghan leader at the summit aptly pointed out that the flow of Western money into his country was only making things worse. However, what came first was not the flow of foreign money – completely benign when invested or donated in a country with low corruption – but the ruthlessness and unchecked power of governments in recipient countries. They designed the rules to extract as many rents as possible from all public and private resources, be they local taxes or foreign investment.

Unchecked local power is the number one cause of corruption. Without tackling this, pressure on international donors makes little sense. At most, it can lead to investors avoiding countries with corruption and donors organizing aid through non-governmental channels, for example by funding international and local charities or communities. Similarly, repatriating assets makes little sense if future governments continue to act corruptly. This is exactly what happens in over eighty democracies and forty autocracies, where public resources are openly raided by whoever comes to power.

Finally, is it right to say we can only speak of corrupt individuals and not of corrupt countries? The idea was suggested by the Prime Minister of Malta, a country with a reasonable control of corruption. Once again, this is untrue, as survey respondents all over the world have repeatedly shown. Although corruption is universal and human nature tends to give in to temptation all too easily, history shows us countries have constructed constraints on corruption within national borders over time. In a minority of countries the constraints are strong enough to keep an eye on the resources available for corruption.

Once constraints have reached this level – with, for instance, critical and engaged citizens able to sanction rent seekers, as in Iceland, where the Panama tainted PM had to leave immediately – resources for corruption, such as oil, no longer pose a danger. This is still far from the case in “fantastically corrupt” Nigeria, as Cameron called it. We can therefore speak of corrupt countries where the rules of the game normalise government extraction of public resources and where most people in power do just that. Here, payments provide virtually the sole access to public services and careers are forged on the basis of connections and not merit. Inhabitants of such countries know and connect together all these symptoms. Many of the most talented people leave, preventing the creation of a critical mass for reform and strengthening the fate of subdued populations and predatory elites.

When statistically analysing resources and constraints for corruption, we create a ranking system that clearly shows what reforms are needed. Researchers from ANTICORRP have done this in the Index of Public Integrity. It shows Norway leads the world, while Venezuela and Chad are on the bottom rung. By addressing these areas for reform, Nigeria has the potential to progress from ‘corruption as a rule’ to ‘corruption as an exception’. None of this was discussed at the summit. There is a huge knowledge gap between making the world a cleaner place and addressing the issues of individual countries. Future summits can bring further well meant and hopefully still politically incorrect contributions.

Alina Mungiu-Pippidi is Professor at the Hertie School of Governance in Berlin and policy chair of the EU FP7 Projects ANTICORRP, the EU’s largest policy research program on corruption. She is the author of the Quest for Good Governance: How Societies Develop Control of Corruption and recently wrote a report on integrity and trust in the EU for the Dutch EU Presidency, as well as many academic and non-academic contributions.

EU Aid and the Quality of Governance

Using a panel dataset on 103 developing countries, this paper empirically analyzes the impact of the European aid flows on quality of governance in aid recipient countries. The analysis employs aggregated Official Development Data as well as disaggregated project level data. The results show that while bilateral aid from the largest European donors does not show any impact, multilateral financial assistance from the EU Institutions leads to an improvement in governance indicators. These findings thus suggest that European development assistance can help to promote good governance if aid is allocated at the EU supranational level rather than at the national level of the member states.

EU Aid and the Quality of Governance

Using a panel dataset on 103 developing countries, this paper empirically analyzes the impact of the European aid flows on quality of governance in aid recipient countries. The analysis employs aggregated Official Development Data as well as disaggregated project level data. The results show that while bilateral aid from the largest European donors does not show any impact, multilateral financial assistance from the EU Institutions leads to an improvement in governance indicators. These findings thus suggest that European development assistance can help to promote good governance if aid is allocated at the EU supranational level rather than at the national level of the member states.

Cambridge University Computer Lab

The Computer Laboratory is an academic department within the University of Cambridge that encompasses Computer Science, along with many aspects of Engineering, Technology and Mathematics. It consists of 41 academic staff, 29 support staff, 5 research fellows, 81 post-doctoral research workers and 119 PhD students. We have over 300 undergraduates studying for Part I, II and III of the Computer Science Tripos and 36 graduate students studying for the MPhil in Advanced Computer Science.

Cambridge University Sociology Department

Cambridge has a strong and vibrant tradition of teaching and research in sociology. Some of the best-known figures in British sociology – including Anthony Giddens, Michael Mann, John Goldthorpe, David Lockwood, Philip Abrams and Michael Young – were formerly based in Cambridge, and some of the most distinguished names of twentieth-century sociology, from Talcott Parsons and Daniel Bell to Pierre Bourdieu, Jürgen Habermas, Zygmunt Bauman, Ann Oakley, Ulrich Beck and Bruno Latour, have lectured here.

For many years, sociology in Cambridge has been practised and taught in connection with other disciplines – we have particularly strong connections with politics, psychology, anthropology, economics and history. In 1968 the University established a Social and Political Sciences Committee which brought together sociology, politics and social psychology into a single administrative unit.  In 1986 the SPS Committee became a fully-fledged Faculty of Social and Political Sciences which offered a one-year Part I and a two-year Part II. The formal establishment of the Department of Sociology dates from January 2004, when the Faculty was divided into three Departments. In 2012 the Faculty was enlarged to include Archaeology and Anthropology as well as Sociology and Politics; this new, larger Faculty is called the Faculty of Human, Social and Political Science (HSPS).  While Cambridge sociology has always existed within an interdisciplinary context, it has also maintained a distinctive profile as a centre of excellence for outstanding work in social theory and empirical sociological research.

Cambridge offers a unique environment in which to study sociology, either on its own or in combination with other disciplines, and to pursue sociological research at the cutting edge of the discipline.