February 11, 2014 - 8:42am

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Poverty and Development
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Corruption: Shifting the Focus from Government to Governance

If you were sitting in a traffic jam on the George Washington Bridge in September, you might understand the powerful weight of corruption. The World Bank estimates that the global price tag for corrupt behavior is at least $1 trillion per year, a figure that does not even include embezzlement of public funds or the misuse of public assets, like the ability to close traffic lanes to snub those who don’t support you. Corruption is particularly damaging to developing countries as it increases infant mortality rates, poverty and inequality (see the latest World Bank Research Paper by López Claros for an informative review). In short, corruption is a global traffic jam to human and economic development. 

Why don’t we have a solution to something so obviously destructive? One part of the problem is the common perception that people’s values are to blame. Through my work in Peru researching local government’s provision of basic services to the poor (and the lack thereof), I talked to many people about corruption. An engineer in the south of Peru, who collaborated with the local government to extend electricity to a new settlement, recounted how many of the materials he ordered were missing and those that did arrive were of inferior quality. He believed corruption is rampant because people in charge don’t have values.



In the north of Peru, a community leader told me about their struggle to have clean water to drink. As we stood next to the newly built, but non-functional, water treatment system and the sign announcing the $50,000 the government had spent on it, he told me that to deal with corruption we need to find good leaders.

While leadership and cultural values are important, they leave us at the whim of finding the right person to make change or pining for a day when people act with more virtue. Short of engaging in ethics campaigns, such as this one, waiting for more ethical people to come to power is a disempowering place.

So what can be done about corruption? Answer: fix institutions by leveraging non-state actors.

Too often people point to the importance of strong institutions (also called “good governance”) as the key to fixing corruption but they don’t necessarily provide a road map on how to do this, leaving us with the feeling that institutions are “sticky” and therefore, countries are “stuck” with the corrupt institutions they’ve inherited from the distant past. 

But some innovative research shows we can change these “sticky” institutions — and non-state actors (i.e., NGOs, citizen groups, and businesses) play three essential roles in this process. 

First, they provide access to information. A study by Ritva Reinikka and Jakob Svensson shows how powerful the influence of research and the media can be. Investigating corruption in a government program to support education in Uganda, they found that only 13% of funding actually reached schools. The government responded to the findings by annually giving newspapers information of how much money has been sent to schools. When they repeated their study five years later, 80% of the funding was actually reaching schools and the amounts were greater where newspaper readership was higher. 

Second, non-state actors can convey to government agencies that they are being monitored. Abhijit Banerjee and colleagues implemented an experiment to test various means of improving police performance in Rajasthan, India. They utilized “decoys” to visit police departments to report petty crimes which are typically unsolved cases that police tend to avoid registering. At the end of each decoy visit, the decoy related the true situation. With the first round of decoy visits, only 40% of crimes were registered. Yet, as the police departments learned of the possibility of monitoring, they began to register crimes at a much higher rate (70% were registered by the fourth visit). While this effect is probably likely to fade with time, the point is that monitoring, which can be done by non-state actors, can influence behavior in tangible ways that matter to people — especially the victimized.

Third, non-state actors can make information actionable and understandable. Information or transparency alone is not the magic bullet. For example, in studying corruption in road construction in Indonesia, Ben Olken implemented an experiment on what method curbs corruption more: community monitoring of road construction projects or threats of audits from the central government. He finds that audits from the central government are more effective because community members needed to have a better understanding to call out the misuse of project materials. Put simply, people don’t always know how to interpret information or what to do with it. Stuti hemani highlights how some NGOs have attempted to make information on government performance more meaningful to the poor, creating score cards for politicians and government services and holding informative community meetings. The lesson from Olken and Khemani’s research (as well as others, such as this or this) is that information alone, while powerful, must be comprehensible and actionable to stakeholders in order to create a significant deterrent to corruption.

We tend to think of corruption as a government problem. But it’s a governance problem. Widening the focus on government corruption to consider the interplay of non-state actors and government multiplies the number of tools available to fine-tune institutions.