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The term "corruption" was taboo in the 1980s and 1990s - instead, euphemistic terms such as "malfeasance" were used. It is much easier today to discuss the subject openly, thanks to the efforts of various organisations to bring this issue to the forefront of the governance debate. However, the different dimensions of corruption are not always clearly understood or explained. The purpose of this section, therefore, is to create a common understanding of corruption, its nature and scale, and its negative socio-economic impact. It emphasises the fundamental importance of a governance approach to effectively combat corruption.

Understanding Corruption
While there is no universally agreed definition of corruption,(22) Klitgaard, MacLean-Abaroa and Parris provide a useful starting point:

Corruption means the misuse of office for private gain. The office is a position of trust, where one receives authority in order to act on behalf of an institution, be it private, public, or non-profit. (Emphasis added)" (23)

Unlike other formulations which emphasise the misuse of "public office for private gain", this formulation demonstrates that corruption can occur not just in the public sector, but in any of the three major governance pillars - government, the private sector or civil society. This is consistent with the governance approach of the Toolkit, which includes tools designed to build a coalition of stakeholders committed to combating corruption based on the principle that each stakeholder has the responsibility to play its role to the best of its ability.

In addition, the definition is also consistent with the institutional focus of the Toolkit. As mentioned in the introduction, the range of anti-corruption measures at the local level tends to be institutional in nature, rather than legal, parliamentary or constitutional.

Corruption comes in various forms…
As there is no universally accepted definition of corruption, likewise there is no universally valid typology of corruption. All forms of corruption, however, are based on the potential conflict between the individual's professional and personal interests. A summary of the most common forms of corruption is provided in Box 2.

Common Forms of Corruption

Bribery: Probably the most common form of corruption, bribery is the giving of some form of benefit to unduly influence some action or decision on the part of the recipient or beneficiary. Bribery can be initiated by the person soliciting the bribe or the person offering the bribe. The "benefit" may vary from money or other valuables to less tangible benefits such as inside information or employment. Bribes may be paid on a case-by-case basis or as part of an ongoing relationship. The most common strategy for countering bribery is to criminalise it, often with an exclusive focus on cases involving public officials. Embezzlement, theft and fraud: the taking or conversion of money, property or other valuables for personal benefit. Embezzlement and theft involve the taking of property by someone to whom it has been entrusted, whereas fraud consists of the use of misleading information to induce someone to turn over the property voluntarily, for example, by misrepresenting the amount of people in need of a particular service. Extortion: extortion involves coercive incentives such as the use of threat of violence or the exposure or damaging information in order to induce cooperation. Office holders can be either the instigators or the victims of extortion. Abuse of discretion: the abuse of office for private gain, but without external inducement or extortion. Patterns of such abuses are usually associated with bureaucracies in which broad individual discretion is created, few oversights or accountability structures are present, as well as those in which decision-making rules are so complex as to neutralise the effectiveness of such structures even if they exist. Favouritism, nepotism and clientelism: In general, these involve abuse of discretion, however, in these specific cases, the act is governed not by the direct self-interest of the corrupt individual, but by some less tangible affiliation, such as advancing the interest of family (nepotism), a political party, or of an ethnic, religious or other grouping. Improper political contributions: payments made in an attempt to unduly influence present or future activities by a party or its members when they are in office. Distinguishing this from legitimate political contributions is very difficult. Adapted from UNODC Anti-Corruption Toolkit, Volume 1, General Introduction, p. 10.

and varies according to its reach…
Understanding the pervasiveness of corruption in a society is as important as understanding the way in which it is manifested. The scale of corruption is often described as ranging from "petty corruption" to "grand corruption." Petty corruption "can involve the exchange of very small amounts of money or minor favours by those seeking preferential treatment, the employment of friends, etc"(24) , whereas grand corruption "involves the distortion or corruption of central functions of government such as legal, economic or other policy-making [functions], the development and enactment of legislation, or judicial independence."(25) The end result of grand corruption can be the loss of confidence in governance, rule of law and, in extreme examples, political instability.

It is important to note that grand corruption is systemic - it permeates all governance institutions and processes. Accordingly, it requires a systematic response involving a variety of strategies, all of which should be based on a foundation of promoting good governance.

Yet, corruption's impact is invariably negative....
Corruption has a profoundly corrosive effect on local governance and the quality of life in cities. If left unchecked, it will undermine a city's social, economic, environmental and political objectives.

Some would argue that corruption is culturally determined, that is, practices viewed as corrupt in one country may be legitimate business practice in another. Others argue that corruption is beneficial, acting as "grease" to speed up otherwise inefficient institutions. Both arguments, however, are incorrect. All countries, for example, have laws against corruption. And, as Nigerian President Olusegun Obasanjo once observed, "The distinction between gifts and bribes is easily recognisable. A gift can be accepted openly; a bribe has to be kept secret."(26)

The argument that corruption acts as "grease" for an otherwise inefficient economy, is also flawed. It overlooks the fact that bribery provides an incentive for over-regulation and over-bureaucratisation of procedures to enable more people to benefit from graft. The net effect is lost time and a higher cost of doing business. Such a system is profoundly inequitable, as the poor often suffer the most because of corruption.

In short, corruption's negative impacts include the following:

• Undermines economic growth, by diverting resources to inefficient or unproductive sectors or actors; by reducing income tax and other revenue sources; by increasing the cost of doing business; by reducing the quality of contracted works; and ultimately undermines investor confidence and contributes to capital flight.
  

• Undermines poverty reduction efforts, as less resources will be available for social programmes; through poor targeting of beneficiaries, both in terms of the overall effectiveness of services, and making services accessible to more citizens on an equitable basis;
  

• Undermines the safety, environmental health and the sustainability of cities, health and zoning regulations are ignored; and by weak enforcement of environmental protection policies and regulations, may even compromise the needs of future generations;
  

• Threatens political stability, particularly in the case of systemic corruption. The loss of public confidence in the rule of law, justice and governance institutions can lead to political instability and even civil strife.

… particularly for the urban poor

"A state with endemic corruption can be especially brutal to the very poor, who have no resources to compete with those willing to pay bribes."(27)

The cost of bribes relative to their income has a tremendous negative impact on the lives of the poor compared to wealthier segments of the population. Money spent on bribes can reduce resources for shelter, food, water, health and education - the basic rights, and necessities, of urban life. Moreover, when confronted with a choice of paying a bribe or spending time in jail, the poor often have no choice. The result is increased risk of violence and injuries.

As discussed briefly in Section 1.3, poor women are often more severely affected by corruption than men. They usually bear additional financial responsibilities, for example, for the health and education of children, and yet do not have the same earning power as men. Having to bribe, therefore, takes a large bite out of their already limited resources. Moreover, women's livelihoods are often home-based enterprises operating in the informal sector. The discretionary enforcement of regulations on them can force them to pay bribes that eat into their profits. Women are also more vulnerable to threats to their security, including rape, and will more often have to resort to bribes to avoid risk. Finally, corruption usually increases gender inequality, as bribes or nepotism subvert laws promoting equity in the workforce.

When will corruption thrive?
The phenomenon of corruption is very often a result of prevailing socio-economic and governance conditions in a city or country. Factors such as poverty, scarcity, lack of access to basic services, lack of information, overly bureaucratic institutions and low incentives for civil servants come together in various permutations and combinations to give rise to Corruption. Improving governance in general, and enhancing transparency and public participation in particular, can go a long way in tackling the problem of corruption at the local level.

Klitgaard, MacLean-Abaroa and Parris, argue, however, that "corruption is a crime of calculation, not of passion. People will tend to engage in corruption when the risks are low, the penalties mild and the rewards great."(28) Based on this assessment, they propose a simple heuristic formula for analysing the tendency for corruption to exist:

C = M + D - A
Corruption = Monopoly + Discretion - Accountability

In explaining this formula, they state that corruption tends to flourish "where officials have a monopoly power over a good or service, unlimited discretion in deciding who gets that good or service or how much they get, and there is no accountability whereby others can see what that person is deciding."(29) Accordingly, they advocate: improving the positive incentives for municipal officials, including reforming civil service salary structures to make them competitive with their counterparts in the private sector; promoting competition in the public and private sectors, which would include privatisation, contracting out and, where necessary, the elimination of corrupt municipal programmes; simplifying rules and regulations and informing citizens of their rights and the service standards to which they are entitled; enhancing accountability and transparency through clear standards of conduct, openness in bidding and contracting, and institutional reforms.(30)

Klitgaard's formula may be modified somewhat, if we take into account another factor - ethics. As observed by Moor (31) , the missing element from the formula is "the sense of community, of responsibility for the common good and of ethics." If we examine the pattern of existence of corruption in different societies, it might support a modified formula: C = (M+D-A)/E, where the denominator E is the ethical ambience. This Toolkit also argues that promotion of ethical behaviour can play a major role in reducing corruption, enhancing transparency, and improving civic engagement overall (See Section 2C - Tools to Promote Ethics, Professionalism and Integrity).

Sometimes there are entirely different factors at work, however, that impair all formal institutional structures and corrupt all pillars of society - the government, the private sector and the civil society. The "Vladivideos" (32)exposé in Peru is a case in point. It illustrates that corruption can also be the result of deliberate and systematic efforts by powerful political figures to undermine the State and its institutions.As a recent article on the case observes:

In Peru, corruption occurs not due to a lack of bureaucratic controls or to an excessive administrative discretion, but as the result of a political intervention-intentional and systematic-in the State A complex system of exchange of political resources creates networks of organized corruption that exist despite formal regulations or bureaucratic controls. These social networks are the basis of the institutional continuity that diverts reforms and provides impunity to those taking part in corruption.(33)

Nevertheless, Klitgaard's formula and its subsequent arguments are still important for several reasons. First, it suggests that changing the incentives for corruption can have a significant impact on the prevalence of corruption. Steps can be taken, even small steps, that can have a meaningful impact. Second, it highlights the importance of enhancing transparency and accountability at the local level.Finally, the formula suggests that there are a number of activities that must be done by actors at different levels in order to ensure success. The last two points clearly confirm the need for a "governance approach" to transparency.

In recognising the important contribution of all stakeholders to promoting transparency, Transparency International (TI) advocates the creation of "integrity systems" which involve all stakeholders in the fight against corruption. This approach has been largely used at the national level by TI, through National Integrity Systems. This Toolkit advocates for a more focused approach on developing "Local Integrity Systems." As will be discussed below in Section 1.4, such an approach is based on the promotion of transparency and good urban governance not just by local governments but by all key stakeholders.

Notes and references

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