Crony Capitalism in the European Union: Subjective or Objective?

Long before the Panama leaks, nearly three quarters of Europeans (73%) had already endorsed the belief that bribery and connections are the easiest way to obtain public services in their respective countries. Furthermore, pan-European surveys revealed that nearly 7 out of 10 Europeans agreed that corruption was part of the business culture in their country (66% of respondents) and that favoritism and corruption hampered business competition (68% of respondents). But are such perceptions accurate, or do they reflect the general pessimism in times of austerity, uncertainty and growing inequality? This paper uses survey data to deconstruct perceptions of corruption, but also as a premiere uses fact-based data from new research projects on corruption and procurement to understand how much is real and how much is noise in the growing public perception of crony capitalism in Europe. The paper finds that individual perceptions are not disconnected with reality. Although people whose self-ascription places them in the lower part of a status scale are more inclined to perceive generalized corruption, most of the variance at both national and individual level is explained by fact based variables, for instance the number of non-competitive tenders per country.

This paper will be published in a forthcoming edited volume with Oxford University Press. Please cite as Mungiu-Pippidi, M. and Kukutschka, R. M. B (2018). Can a Civilization know its own institutional decline? A Tale of Indicators. In H. Anheier, M. Haber, and M. Kayser (eds), Governance Indicators: Approaches, Progress, Promise. Oxford: Oxford University Press.

International Anti-corruption Normative Framework: the State of the Art

This paper looks into the main debates in International Relations on norm compliance. It looks at the three causal factors that help us explain the origins of norms in relation to anti-corruption introduced by McCoy and Heckel (2001): (1) post-Cold War era; (2) social process, i.e. interaction among actors and diffusion of information; and (3) internal process where ‘cognitive and motivational processes of individuals’ may contribute to the generation of norms. Using the model developed by Finnemore and Sikkink (1998) on the life cycle of a norm, it shows how international anti-corruption norms took root by tracing the development of various regional and international legal instruments. Finally, the UNCAC is analysed in more detail, as it has been recognised as a reference framework for the fight against corruption, due to which many countries formally adopted ethical universalism as a norm. The paper argues that international actors must put in place such a monitoring mechanism; otherwise implementation of UNCAC could become an end in itself. However, it is not possible to have significant progress without domestic demand for new rules of the game and public participation in a sustainable mechanism which would prevent the eternal reproduction of privilege.

Background report on international and European law against corruption

This report sets the background and the methodology design for the WP10 of the ANTICORRP project. WP10 seeks to explore whether and the extent to which, EU states comply with international anti-corruption norms, as well as their domestic implementation and enforcement. It has four main research objectives: a) to measure state compliance and implementation of international anti-corruption norms in Europe; b) to explore whether international law has an independent causal influence over the anti-corruption laws, policies and practices adopted by EU states; c) to identify patterns of variation of state compliance and implementation, whether cross-national, or across sectors and issue areas; and d) to explore the factors that account for significant variation across sectors or states.This report provides the empirical and analytical groundwork for pursuing the above research objectives and for defining the appropriate methodology to do so. It is divided into five main parts. In the first part, the authors briefly present the origins of how the fight against corruption became an issue of interest for the international community and for European and international organisations from the 1970s onwards, but especially since the 1990s. They then define corruption and its various aspects and forms, they discuss the difficulties in arriving at a commonly agreed definition and review some of the criticisms levelled against the legal approach to fighting corruption, as well as in regard to the domestic influence and effectiveness of international and EU law in this area more broadly. In the last part of this background section, the authors give an overview of the state of corruption in the EU28 on the basis of various indices and assessments compiled by international organisations and non-governmental organisations (NGOs).The second part of this report provides an overview of European and international legal norms and instruments against corruption, which are directly relevant for EU member states. The authors review both soft and hard law, describing their origins and how they emerged, the peer-review and monitoring mechanisms that they put in place, and how they work. The third part of the report is conceptual: it defines and analyses the concepts of compliance with, as well as implementation and effectiveness of international law. Most importantly, it conceptualises their relevance and applicability in regard to anti-corruption norms and conventions, and defines a way of measuring state compliance and implementation in this area. The fourth part of this report delineates four sectors or issue areas, which have been targeted by international and European norms against corruption: international economic transactions, conflict of interest, free speech and whistle-blowers’ protection and political party funding. The final part of the report defines the appropriate research methodology of the group of studies to be conducted within WP10, and identifies the sources of primary and secondary information and documentation to draw from in pursuing the aforementioned objectives.

The Struggle for Effective Change: An Assessment of the APRM’s Achievements

In July 2002 the New Economic Partnership for Africa’s Development (NEPAD) was established. This collective action taken by African Heads of State and Governments demonstrated the willingness to strengthen governance and achieve sustainable economic and political development. The African Peer Review Mechanism (APRM) was set up to monitor the commitment to the NEPAD and thereby increase responsibility and accountability. It was also designed to enable mutual assistance based on the concept of Peer Review, therefore seen as an effective and self-driven tool for enhancing change and strengthening governance throughout Africa. Over the last decade, 34 countries acceded to the APRM. This number demonstrates the want for self-improvement and transformation but cannot be regarded as a measure of performance for the APRM. Indeed only 17 countries have completed the first cycle of the APRM process. Even though the statistical and qualitative analyses performed in this thesis show marginal improvement in favour of the APRM, they do not show that governance has improved. The negligible progress recorded by the evaluation of governance performance from 2003-2012 as a function of the APRM demonstrate the APRM’s ineffectiveness. The results reveal the issues encountered by the APRM’s member states to profit from the APRM. The structure and process are found to be too complex to be adopted adequately by countries, consequently deferring beneficial outcomes. Member states lack commitment and compliance to the process as they do not encounter immediate benefits. To fully exploit the certainly existing potential of the APRM, the author recommends following actions to be taken. Based on (1) a common understanding of the mechanism and (2) its limitations, the APRM process can be simplified by (3) ensuring an efficient and comprehensible monitoring, and (4) incorporating SMART standards for recommendations. (5) Strengthening the existing capacities of the APR Secretariat, (6) conducting independent evaluations of the APRM and (7) clarifying the role of the African Union (AU) will further improve the capabilities and appeal of the APRM. As an efficient and effective tool the APRM is predestined to become the instrument to facilitate sustainable change in Africa.

Tax Simplification and Informal Economy in developing and transitioning countries

Informal economy is present in all countries; however it is in low and middle income countries that it has its deepest roots with some measurements estimating it to average at above 40% of national GDP. This represents a large part of the economy and poses serious problems for economic development and the relationship between state and society. It also means a significant loss in tax revenue, that poor countries need for the provision of public goods, resulting in the undermining of state capacity (Fukuyama, 2004). This leads to a vicious cycle, since without the efficient provision of public goods the incentive for tax compliance further decreases.

As tax structure and bureaucratic burden haven been identified as primary causes for informal economy, in the following we want to analyze whether lower costs of compliance actually lead to lower levels of informal economy.  Given that in recent years some countries have implemented flat tax as tool for tax simplification, the authors explore the question of whether flat taxes have actually lived up to their promise and increased tax revenue or lowered levels of informal economy.

Pedro Obando and  Johannes Wahner are both Master’s of Public Policy candidates at the Hertie School of Governance in Berlin.

Domestic Implementation of Human Rights Judgments in Europe: Legal Infrastructure and Government Effectiveness Matter

Over the past couple of years, international law and international relations scholarship has shifted its focus from the question of whether human rights treaties bring any state-level improvements at all to investigations in the domestic context of the factors and dynamics influencing state compliance. In this direction, and focusing on the European Court of Human Rights, this study inquires into the factors that account for variable patterns of state compliance with its judgments. Why do national authorities in some states adopt a more prompt and responsive attitude in implementing these judgments, in contrast to other states that procrastinate or respond reluctantly? On the basis of a large-N study of the Strasbourg Court’s judgments and a comparison across nine states, this article argues that variation in state implementation performance is closely linked to the overall legal infrastructure capacity and government effectiveness of a state. When such capacity and effectiveness are high and diffused, the adverse judgments of the Strasbourg Court are unlikely to be obstructed or ignored, even when the government, political elites, or other actors are reluctant and not in favour of substantive remedies.

The Transparency Paradox: Why do Corrupt Countries Join EITI?

Rules that require actors to make their finances transparent have become a key part of the anti-corruption toolkit, under the assumption that sunlight is the best disinfectant.  This logic underpinned the creation, in 2002, of the Extractive Industries Transparency Initiative (EITI), an international club aimed at reducing corruption in oil, gas and mining.  The initiative has proved popular, with 16 countries now EITI compliant and 23 others having achieved candidate status.  However, as a soft law standard to which countries voluntarily commit, EITI presents a paradox: why would corrupt governments voluntarily expose themselves to sunlight?  Does its popularity imply that it is meaningless?  The authors argue that governments join because they are concerned about their reputation with international donors and expect to be rewarded by increased aid. David-Barrett and Okamura’s quantitative analysis demonstrates that countries do gain access to increased aid the further they progress through the EITI implementation process.  However, they also find that EITI achieves real results in terms of reducing corruption.  The authors suggest that this is because EITI requires countries to build multi-stakeholder institutions which improve accountability, and provide qualitative evidence about how this has worked in several countries.