COVER REDO (1 of 1)-4

Political Corruption and Campaign Finance Reform

In Early May Insight released its fourth issue. Our main stories were a group of pieces examining campaign financing and corresponding legislation in the region. Our feature story by Professor Trevor Munroe was on the correlation between poor legislation for campaign financing and national corruption.

(Professor Trevor Munroe)

What is political corruption? It is, I suggest – the use/misuse of entrusted political power and authority for illicit gains more often than not at the expense of the public interest. This, as you can well imagine, is not only a Caribbean phenomenon and therefore it would be helpful to place our experience in a global context.

What are some of the most recent findings – first of all on the perception of corruption in general and political corruption in particular?

The Global Corruption Barometer Report 2013 which surveyed over 114,000 people in 117 countries found in most countries that the people perceived the political party as the institution most affected by corruption. This was the people’s perception in countries as different as Argentina and Australia, Brazil and Canada, India and Ireland and even, perhaps somewhat surprisingly, the United Kingdom and the United States. This perception is of course shared by the peoples of many Caribbean countries.

In many OECD countries, amongst developed economies, a majority believe that government is run by a few big interests looking out for themselves – Greece 83%, Israel 73%, US 64% and the UK 60%.

The Corruption Perception Index 2012 put out by Transparency International found the vast majority of the world’s states record low scores and is perceived to be more corrupt than clean.

Regrettably, perception in this instance is closely tracked by reality. The United Nations estimated that in 2011 corruption prevented thirty percent of all development assistance from reaching its final destination. This means, in effect, that for every million dollars of aid to build clinics, equip hospitals, provide roads, expand water supplies, and repair damage from hurricanes three hundred thousand dollars is siphoned off into the pockets of corrupt public officials and private individuals. One recent example is in Uganda. There aid to the Office of the Prime Minister to restore war ravaged sections of the country ended up in the pockets of politicians. As a consequence, the Irish Government is reported to have suspended aid to the OPM.

On another level, the World Bank Institute, a few years ago, in 2004 estimated that One Trillion United States Dollars was paid in bribes from private sector to public sector functionaries. From time to time the tip of this iceberg is revealed when prominent companies plead guilty and pay fines for corrupt conduct or arrive at settlements related to questionable behaviour.

For example, the German firm Siemens between 1998 and 2007 paid out US$1.4 billion to influence government officials in Asia, Africa, Europe, the Middle East and the Americas and agreed to pay fines of US$1.6 billion after being found guilty for this corruption. J.P. Morgan, the banking giant, just this week, concluded a US$13 billion settlement with the U.S Department of Justice, including a US$2 billion fine for improper conduct in the 2008 financial crisis. Closer home, the British bridge-building firm, Mabey and Johnson paid a fine of 6.5 million pounds having pleaded guilty in a British court of bribing public officials in Ghana, Iraq and Jamaica.

The impact of political corruption has been well described by former Secretary General of the United Nations, Kofi Annan. He said, “Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish.”

Lest we believe that Kofi Annan was talking about countries in the Caribbean and here I quote again “This evil phenomenon is found in all countries – big and small, rich and poor – but it is in the developing world that its effects are most destructive.” Annan continued. and here I ask you to note these remarks, particularly “Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a Government’s ability to provide basic services, feeding inequality and injustice and discouraging foreign aid and investment.

Corruption is a key element in economic underperformance and a major obstacle to poverty alleviation and development.” So much is this scourge an international one, that the global community came together to develop the United Nations Convention Against Corruption in 2005.

The prevalence of corruption then should be seen, as the evidence suggests, as more than a governance issue but must be seen as a significant hindrance to development. It is the World Bank which estimated the economic cost of corruption by stating “countries that improve or control of corruption and the rule of law can expect on average in the long run, a fourfold increase in income per capita… business growth… on average it can make a difference of about 3% per year in annual growth for the enterprise.

The difference can be between 2-4% per annum in the countries annual growth rate between countries with a different extent of corruption control. One study of foreign direct investment estimates that corruption is equivalent 20% tax to foreign investors. Corruption and bribery is a regressive tax”

So, how does the Caribbean fit into this global context – in the first place, Caribbean people in survey after survey perceived corruption and political corruption in particular, as one of the main things wrong with the Caribbean.

More often than not they have least confidence in political parties and politicians amongst institutions assessed in terms of the levels of the peoples’ trust. Take a look, if you can, at the Latin American Public Opinion Project (LAPOP 2010) which looks at the political culture of democracy across Latin America and the Caribbean – amongst the twenty six countries measured, the people of Trinidad and Tobago and Jamaica perceive their countries to be most corrupt with Guyana not far behind.

The 2012 LAPOP report showed little change in Guyana and Trinidad but noteworthy improvement in Jamaica. In election after election, in the last twenty years across the region, corruption scandals have been significant, governments have been removed largely on the grounds of being corrupt and replaced by the opposition largely on the basis of promises of integrity, only to repeat the cycle subsequently, thereby reconfirming popular concern that the issue of political corruption contributes to growing cynicism. The external perception of Caribbean states is not different from citizens’ views of themselves. Over the last five years only three CARICOM states, Barbados, St. Lucia and St. Vincent score consistently well on Transparency International’s Corruption Perception Index.

There can be no question that across the region, radical reforms are urgently required to build institutional capacity, to strengthen anti-corruption laws, anti-corruption institutions and integrity building activity. The consequences of continued failure in these regards are grave and serious. First of all in regard to economic growth, the increased levels of poverty and in the intensification of the burdens on the backs of the poor who suffer the most when scarce resources are diverted from development into the pockets of the corrupt.

Our peoples’ demand for a better life is therefore also a cry for less corruption.

That demand for a better life is grounded in harsh realities:

Over five percent of the population in Jamaica has to survive on less than two United States Dollars per day, 18 percent in Guyana, 13 percent in Trinidad and Tobago, 40 percent in St. Lucia and over 77 percent in Haiti – according to the latest figures in the 2013 World Development Indicators.

Of the 14 CARICOM states ranked in the 2013 UNDP Human Development Report, not one single country falls in the top quintile rank of the 186 states assessed, not even our best performers, Barbados (38), nor the Bahamas (49).

Raising investments, both foreign and local, is an important ingredient of this process. Yet the Global Competitiveness Report 2012/2013 ranks corruption among the top three most problematic factors for doing business in four of six CARICOM nations surveyed namely Jamaica, Guyana, Suriname and Haiti.

A serious political consequence of continued failure to come to grips with this cancer is the undermining of confidence in institutions like the political party – fundamental to modern democracy and the danger of growth of dissatisfaction with the performance of democracy in the region itself. Urgent measures are required – measures which require the support and assistance of our International Partners – both to have a deeper understanding of the dynamics of corruption across the Caribbean and, alongside this deeper understanding, to design as well as implement practical measures to build integrity and to combat corruption more effectively. One such measure must be the passage and robust enforcement of strong laws governing the funding of political campaigns and political parties.

insight-campaign-financing-and-corruption

A political rally in the Caribbean

Despite consistent recommendations for such a measure from The Organisation of American States (OAS) election observer missions, CARICOM states have yet to step up to the plate. Recall the observation of the OAS electoral commission on the Guyana 2011 elections: “campaign contributions are unregulated, and there is no prohibition against donations by anonymous and/or foreign sources. This system effectively guarantees that all of political party working capital and campaign funds are based on private donations. In, general, the OAS/ EOM considers the lack of regulation on campaign contributions as creating unequal conditions for electoral competition.

The system also opens the door to the use of state resources for electoral purposes… a legal review is necessary to require disclosure of campaign expenditures prior to the elections, determine criteria for private and foreign contributions, and consider instituting public financing for campaigns”. (See OAS Electoral Observation Mission Final Report on the 2011 General and Regional Elections in Guyana: pg. 13)

The plugging of this most serious gap in our legislative anti-corruption framework, maybe assisted by adapting national statutes to deal with political party registration and campaign financing disclosure using the OAS draft model legislation as a template.

The urgency to pass laws and regulations to deal effectively with the relationship between money, political parties and elections cannot be overstated. In Jamaica for example the two Parliamentary political parties made public the fact that between them, they had spent approximately one billion Jamaican Dollars from Party Central (not counting what candidates had spent) in the 2011 Jamaican General Elections. Then, and even today, no one knows who gave how much to each of these parties, whether commercial or criminal interests, and whether were they thereby seeking to buy influence, for example to get tax waivers, development approvals or to buy protection from the law in criminal activity. Is this acceptable?

This is not far-fetched speculation. In April 2012, the Supreme Court of the Turks and Caicos Islands issued a Confiscation Order in which the Court held that David Smith, a convicted financial criminal and money launderer now serving over thirty years in a Florida prison, gave US$5 million to the Jamaica Labour Party and US$2 million to the People’s National Party and tens of thousands to other individual politicians.

The Jamaican people are entitled thereby to ask: Is the fact that Smith was not prosecuted, tried and convicted in Jamaica for fleecing over six thousand Jamaicans and accumulating over US$220 million in stolen assets, but had to be prosecuted in South Florida and Turks and Caicos Islands related to the amount of money given to persons exercising political authority?

The point is that we should not have to speculate but Campaign Finance Law and Regulation should provide for disclosure of which big donors give how much to which party and secondly should ban organisations like OLINT from giving money to political parties and election campaigns. The longer we fail to plug this and similar loopholes is the more our people shall lose confidence in the rule of law, in the justice system and ultimately in democratic governance. Is this a Jamaican phenomenon? Does a similar reality exist in Guyana, in Trinidad, in Barbados?

It cannot be right that any citizen of the Caribbean with a click of the mouse can know that Sheldon Adelson owner of the Las Vegas Sands Casino Empire was the biggest donor to Romney’s 2012 Presidential Campaign and that Jeffrey Katzenberg, Hollywood Film Producer and Chief Executive of DreamWorks Animation was the number one contributor to Obama’s Campaign; that any of us at the click of a mouse can know that one Michael Farmer was the biggest donor to the British Conservative Party in the third quarter of 2012 and the Union and Shop Distributive and Allied Workers was the biggest contributor to the British Labour Party, but none of us can know who is giving how much to the political parties in our own Caribbean countries who exercise power over us. Let me add, we not only need legislation to plug this loophole but we also need enforcement of existing law, for example, against ‘ vote buying’. When last have we heard of an investigation, much less a prosecution for this offence in any of our Caribbean states?

Scientific work across the region is revealing a clear and present danger of popular disillusionment with critical institutions of governance and I refer not only to political parties.

Please look at the findings relating to seven Caribbean countries of the UNDP Citizens Security Survey done in 2010. Across these countries almost fifty percent of the people believe that the justice system is corrupt – from a high of seventy percent in Trinidad and Tobago to a low of thirty four percent in Barbados. Relatedly across these states, fifty two percent of the people believe that politically connected criminals go free and forty seven percent that powerful criminals, with money and contacts, go free.

In all my research and investigation I am finding that the foundation of combating political corruption lies in strengthening public awareness of the costs of corruption to the man in the street, costs in terms of investments lost, more decent jobs not created and economic growth stagnating. I am also finding that there are persons in positions of authority – political and public – with whom like-minded people desirous of change to the existing status quo can speak, lobby and win support for passing legislation and enforcing laws, sometimes against the corrupt in their own ranks.

I am also learning that to advance the struggle against political corruption and to challenge the impunity of the corrupt requires, in addition to building public demand, enhancing professional will and institutional capacity amongst investigators, prosecutors and judges.

This is why I am proud to be a part of the organisation which I lead the National Integrity Action (NIA) in Jamaica. NIA was formed with one mandate; to combat corruption in Jamaica on a non-partisan basis. Since our launch in December 2011 we have seen huge progress but are mindful that the work has just begun. We urge the people of Guyana, in fact the people of the Caribbean to demand an end to corruption in your respective territories. Demand not just the passage but the enforcement of legislation aimed at stemming the tide of corruption. Laws such as campaign finance reform which seeks to ensure that governments act at all times in the interest of the people and not for special interests.

It is a tall order, a difficult task but one we must achieve. I end by sharing with you a simple equation coined and widely shared by NIA in Jamaica; “less corruption = more investment = more jobs”

Prof. Munroe is Executive Director, National Integrity Action and Visiting Honorary Professor at S.A.L.I.S.E.S, UWI, Mona.

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