FAGIN: The key to fighting corruption is economic freedom

BARRY FAGIN Published: February 27, 2014 | 12:00 am 0

What do the raging protest movements in the United States, Venezuela, the Ukraine, and Thailand have in common? They all want an end to corruption. "Occupy Wall Street" railed against the corruption of democracy by moneyed interests. Venezuelans are rallying against a corrupt government and police force.

Thailand is in turmoil at the possible pardoning of exiled relatives of current political figures wanted for corruption and murder charges. The Maidan protest movement in the Ukraine's greatest moment was just a few days ago, when the corrupt President Yanukovich fled the capital and his security forces abandoned his palace. Ordinary Ukrainians toured the grounds and got to see firsthand how the billionaire president lived while plunging his country into economic chaos.

Even Russia's President Putin, who enjoys poll numbers his American colleague can only dream of, knows the danger of perceived corruption. He leads a relatively modest public life, for a world leader, and uses corruption prosecutions as a tool to consolidate his hold on power. He understands corruption is a very powerful social force, both in its temptations and in its potential to provoke revolution.

But what exactly is corruption?

According to Transparency International, a nonprofit organization dedicated to fighting corruption worldwide, corruption is "the abuse of entrusted power for private gain." In light of recent world events, that definition holds up pretty well.

Yanukovich used his entrusted power to enrich himself, his family, and his oligarch billionaire buddies. Corrupt policemen in Venezuela abuse their entrusted public power to enrich themselves privately through bribery and extortion. In every country where corruption is a problem, you see public power used for private gain.

If that definition is right, then the key to fighting corruption is limiting public power. If a government official can't dole out privileges to begin with, he can't extract much private gain from his position. If the activities of a police officer are restricted by a Constitution and the rule of law, the risk of accepting a bribe is greater, and what it can buy is much less.

That's where economic freedom comes in to the picture.

In countries where you don't have to go through a lot of red tape to start a business, to get an import or export license, where the rule of law and property rights are well-established, and where the economy is generating enough wealth that public officials are less tempted by bribes, we ought to see less corruption. What do the data show?

Fortunately, it's possible to track both economic freedom and at least the perception of corruption. The Heritage Foundation publishes an annual ranking of countries' economic freedom. Transparency International just published their terrific "Corruption Perceptions Index" for 2013.

Of the 10 countries with the most economic freedom (America, sadly, is not one of them), six are in the top 10 for the least perceived corruption. Of the top 20 most economically free countries (that includes America, barely), fourteen are in the top 20 on the anti-corruption list. Hmm, interesting.

What about the bottom? Somalia is lowest on Transparency International's list, and its economic freedom is too low to measure. North Korea? Lowest ranked on economic freedom. Afghanistan? No economic freedom ranking. Ditto with Sudan and Libya, fourth and fifth from the bottom of the corruption barrel. Of the bottom 10 countries with the worst perceived corruption by their citizens, only one, Uzbekistan, is not in the bottom ten for economic freedom. Just barely.

Of course, we have to be careful with statistics. There are always outliers, and things can get complicated. (For example, one of the many metrics Heritage uses to calculate economic freedom is freedom from corruption). Nonetheless, the evidence for a root cause of corruption is pretty strong.

Lord Acton was right: Power tends to corrupt, and absolute power corrupts absolutely. If we really want to fight corruption, we don't need nobler politicians, tougher laws, or still more regulations. We need economic freedom.

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Barry Fagin is a Senior Fellow at the Independence Institute in Denver. His views are his alone. Readers may write Dr. Fagin at barry@faginfamily.net.

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