Corruption and National Security: What Has and Has Not Worked

Thursday, April 6, 2017
Mohamed Abd El Ghany/Reuters
Jennifer Fowler
Mary Beth Goodman

Former Special Assistant to the President and Senior Director for Development and Democracy, National Security Council, The White House

Daniel Kaufmann

President and Chief Executive Officer, Natural Resource Governance Institute; Nonresident Senior Fellow, Global Economy and Development, Brookings Institution

Juan Carlos Zarate

Visiting Fellow, Center for a New American Security; International Affairs Fellow, CFR

Experts discuss how corruption affects U.S. national security and global stability, and the measures used by the U.S. government to fight corruption and promote transparency.

BATEMAN: Well, welcome, everyone, to the final session of today’s Council on Foreign Relations symposium on the future of anticorruption in U.S. foreign policy. I hope you’ll temper your disappointment to see me on stage instead of Senator John McCain. (Laughter.) But we’ll have a great discussion with our panelists today.

This session is titled “Corruption and National Security: What Has and Has Not Worked.” I’m Kate Bateman. I’m a visiting fellow at the Center for a New American Security and an international affairs fellow here at CFR.

I’d like to introduce our panelists, each of whom brings, you know, really different, but deep experience and expertise to the corruption challenge. We have Danny Kaufmann, who’s the president of the Natural Resource Governance Institute. He has a distinguished career as an economist, and has been a pioneer in the field of governance and anticorruption. He’s provided high-level policy advice to countries all over the world to formulate and carry out governance reforms. He’s also done extensive research and writing on these issues.

Mary Beth Goodman is the former special assistant to President Obama, and senior director for development and democracy at the National Security Council, where she was responsible for global development, health, democracy, and humanitarian affairs. Prior to that, she served as senior fellow at the Center for American Progress, and also as a senior adviser for the Enough Project, and in other positions at the NSC and Departments of State and Homeland Security.

Well, I think this morning we have heard—we have covered a lot of different angles of the corruption issue and how it impacts U.S. foreign policy, but we’ve not dug as deeply into kind of the discourse around corruption as a security issue. And I think we can—we can think of this both in terms of how corruption contributes to the—to weaker government legitimacy around the world and it undermines the very functioning of governments, and that has an impact on U.S. security interests of course, especially when we’re trying to partner with foreign security forces. But there’s also—there are broader—there are broader issues at play in terms of corruption undermining political stability and economic growth in middle-income countries as well. So I think we’ll be able to dive into these issues in greater detail with our—with our very accomplished panelists.

And so I’d like to turn first to Mary Beth. I’d like to ask you to expand a bit on—through your experience at the center of, you know, interagency policy decision-making, how do you—how do you think the U.S. government sees corruption as a security issue?

GOODMAN: Sure, and thanks very much to the Council for convening this, and for all of you for sticking around and having an interest in the corruption issues.

I think as—I was able to work in the Obama White House for five years, and previously before that was at the Department of State, and I think over the course of my career corruption was an issue that we kept seeing come up in more and more and more discussions. And when the conversations first started, it was very much guised in the we need to do more to help fight corruption. So everything we talked about was in the anticorruption lens, and we saw this plethora of initiatives that sprang up, whether it was the Extractives Industry Transparency Initiative, whether it was GIFF (ph)—there’s a whole alphabet soup of things that you could actually look at. But they were very much geared towards helping countries, and we only talked about them as anticorruption, or transparency.

And over the years, as we saw the impact of corruption hit more and more frequently as the underlying cause for either states having dramatic revolutions in some cases, whether it was the collapse of health institutions in West Africa where Ebola really expanded and became a global threat, more and more often corruption was just at the heart of that. And we really changed the way, within the U.S. government, that we started talking to other governments, and we stopped talking about anticorruption and we started talking about corruption. We actually started saying the C-word.

And that changed the way that we dealt with it a bit, in that you had more and more governments responding to us, asking for more and more assistance on corruption, or wanting to talk about some of the complexities of how corruption was layered through their institutions. And so over time I’m really happy that that conversation has changed. And that may sound a little silly, frankly, but those of you who have been in government and know that, sometimes getting a talking point in a senior principals meeting is one of the hardest battles you can fight in the bureaucracy. So having someone like John Kerry or someone stand up and say that corruption is a serious issue, having President Obama speak at the African Union and talk about that major address, talk about corruption being one the significant threats for the continent, that really changed the way we were able to have that conversation, and it sent a signal throughout the U.S. government that this was an issue that we need to do more work on. And so that permeated itself into having more officers throughout the State Department, throughout USAID, throughout MCC, throughout the Department of Defense, who took on corruption as a part of their portfolio. And so that really did resonate in different ways as we went through this process.

BATEMAN: That’s great. Just before we turn to Danny, could I ask you to follow up on that? You know, are there ever—did you see scenarios where we might go to a partner in another government and say, look, we have—we have this financial information about what is happening in your own country or in your own government? Did you ever—was there—were there efforts to appeal to their self-interest and say let us help you solve this problem so that you do not, you know, risk the same instability or, you know, threats to your own government that we’ve seen elsewhere?

GOODMAN: Sure, sure, that’s a great question. I mean, there are lots of specific country examples that you could look at where our corruption efforts weren’t necessarily successful: Afghanistan, Iraq, just to name two of the most obvious ones. And I think one of the differences between those countries and some of the others where we have had more of an opportunity to be impactful is that we had a difference in political will, if you will. When we found a country that was Ukraine—the Arab Spring countries were sort of an example. But now Nigeria, I think, is a great example where there has been this change among citizens, and they are demanding more integrity from their government. Where the political will is suddenly there with newly elected leaders up and down the system, then we’ve had more of an ability to be impactful and to help them try to do more to fight corruption.

Afghanistan and Iraq are great examples of what happens when we didn’t have that change in political will at the highest levels necessarily, but we suddenly had in our national security interest a reason to do a massive deployment of people and resources in a country that wasn’t able to absorb it. And we just saw the corruption in Afghanistan grow significantly across all the institutions.

And we’re still doing a lot of work to counter that. I think we now have a leader in Afghanistan who, again, with that change in political will is doing a lot to try to combat that corruption. And we’ve seen those institutions be strengthened. And it’s a long process. I mean, this fight against corruption is not something that you’re going to be able to, you know, change instantaneously. It’s—really does require time and consistency in ensuring that we get this right.

BATEMAN: Daniel, I wonder if you could speak on the basis of your really extensive research and looking at causal links and what’s the evidence of—evidence of the links between corruption and insecurity. How does—what does the academic literature say about this?

KAUFMANN: Academic literature and lessons from experience—perhaps starting with such a potent reminder that one, of course, has to look at the overall evidence and all the data and what different researchers have done, including ourselves. But at the very basic level, a major crisis of today around the world is North Korea. And it is no secret about what happened many, many years ago in Pakistan and how nuclear know-how and nuclear technology, thanks to payoffs and corruption, was passed on from the nuclear scientist with the abetting of intelligence services in Pakistan to North Korea.

So here we’re facing a real live world crisis affecting the U.S. Doesn’t require very deep research to have those type of linkages. It’s just a bit of reminder of going back to what happened with Mr. Khan and that whole episode. And we can discuss 10 other such cases where that’s happened, including in Russia and so on. I’m not talking nuclear in this case but other very clear links between terrorist activities and corruption.

But at the same time, I think it’s very important and especially in terms of what you were discussing, Mary Beth, of what needs to be done and the lessons and so on, is to be very frank and challenge sometimes what’s an unhelpful generalization, some unhelpful mythologies. Let’s face it. Let’s be frank. The driver of all security threats and all terrorist threats is not corruption. Corruption plays a very important role, but it’s very important to unpackage when does it make sense. There are different factors driving security threats. And it’s very important to be very, very clear. And they vary from context to context. So that’s one type of unhelpful generalization that doesn’t take us very far. But to understand when and under what conditions it—they play a role and which could be causal. And, of course, in some it does and it is evident on that.

In fact, this evidence—in fact, using the indicators we have worked on for 20-some years, which cover the whole governance gamut all the way from political governance indicators, including voice in democratic accountability to rule of law and corruption, and linking with some causality to the extent to which a country enjoys a better or worse security situation.

So, obviously, there are linkages there, and they seem to be causal in general, but it’s not a one-to-one link, and it’s really important then to get to the second point here beyond this issue of unhelpful generalization. Another unhelpful generalization, by the way, is that just by eradicating corruption—which is impossible in all countries—without any one will solve all the security issues—there are many others—and that one size fits all.

But that’s why it’s very important to unbundle both issues. Corruption—what are we talking about when we talk about corruption in—and particular in this—in this case? Are we talking the day-to-day bribery, including of security service, airport personnel, and so on? Or are we talking also much larger the traditional definition of state capture, which we’ll work on in a—in a country; or more about the role of organized crime with politicians and high-level officials, which is capture at another level; or dealing with corrupt kleptocratic regimes and the role that corruption plays there?

It has very different implications, both in terms of what security threats may happen and also what to do about it. So we need to also unpackage and unbundle that.

And then the last point at this initial stage is the importance of recognizing some key commonalities that make it quite peculiar and quite distinctive to work and try to analyze the issue of corruption in the security field. Let me just mention very quickly three such dimensions.

The first is what I mentioned before, that there is a link between them, but it’s not a one-to-one and totally obvious linear-link case. And there are other factors that matter.

The second is that the stakes are so high on—both on the corruption end and also obviously on the security end. So one has to look at the incentives in each case and whether they are financial, they’re—it’s power-grabbing, ideological objectives, and so on.

And third and not least is both the security sector side and the security issues and security organizations and the corruption thrives and works in opacity. So that makes it also harder to penetrate in terms of understanding well, and the whole issue of transparency takes a life of its own. And we all know corruption thrives in opacity in general. And that has been part and parcel so much of the world driving that, but that’s particularly the case in the realm that we’re interested here now because of the particular considerations in the security field where some lack of transparency in some areas is perfectly understood. And legitimately, the question is, well, how does one protect that while having much more transparency in general?

We can talk more about implications of this as we progress in the session, but obviously this issue of one size not fitting all is extremely important. I’m always reminded by what Mark Twain said over a hundred years ago, the best definition in my view of what an expert is, when he said it’s somebody from out of town, this whole issue of coming into a country or coming to a place and say, this is what needs to be done.

Now, there are new tools to do a very in-depth and clear diagnostic of a country in terms of governance and corruption. We—in my organization we’re doing that in the oil, gas, and mining—resource-rich countries, which—by the way, the interface with security and corruption issues is very major there. So, to have an in-depth sectoral approach, in-depth country approach, having that diagnostic, which will throw out different type of insights and results across countries—of course it will be much more sexier if I say these are the three things that work and that’s the way to go, but there’s no one bible here. There’s no one expert from out of town that can tell you that’s the way it’s going to be done.

BATEMAN: Right, thank you. That exactly gets to, I think, some of the—what has and has not worked, you know, the tools—one tool that is often talked about is improving our political economy assessments of the environments in which we work.

So going to that and following up on Mary Beth’s earlier comment on how the change in our rhetoric has—you know, amplifies the issues and changes gives us greater leverage, what else have you seen work in these challenges, and what has not worked? So I’ll—

GOODMAN: Sure. I don’t know that we’ve seen the full impacts yet on everything that has worked, because some of it is newly formed and we’re just now getting countries to take them seriously enough. And as I said, it’s not a—it’s not a quick win to show some concrete results that you’ve, you know, necessarily stamped out this particular piece of corruption. So I think that we’re still in that process of fully realizing the impact of some of these, but I’ll give two examples that I think were very impactful in terms of some of our U.S. policy.

One was just sending a very clear signal in the national security strategy that corruption was an issue that matters to the United States, and that we took it seriously enough and put it on par with the host of other issues that, you know, rise to that threshold level—whether that is terrorism or, you know, our homeland security. I mean, we put corruption in that strategy. And again, that sent a signal both to other governments that we were looking at this issue much more seriously, but it also sent a signal throughout the U.S. government and it meant that agencies looked at this issue more holistically in a—in a different way. So that was very impactful in some of the ramifications that it had.

But we also included corruption in some of our programmatic support. And one of the best examples of this is with the Millennium Challenge Corporation, which now includes corruption as one of the indicators that they use in determining whether a country qualifies either for a threshold program or a full-fledged compact, as it’s called in the MCC vernacular. And these are—these are significant investments that we make in countries to help them do some very, you know, tangible projects in partnership with that country. So MCC uses a model where they collaborate on the types of investments that should be made in particular sectors. But in order to even start that conversation, they have to be eligible and meet the MCC thresholds, the criteria.

And when corruption became one of those criteria, it meant that we went back and we measured it, and we had to develop metrics for who was qualified and who wasn’t. And there’s a very solid process behind that now. And you know, we would get lobbied all the time by countries, like, I really want to have a new compact or I really want to qualify. You know, can’t you just overlook the fact that we don’t meet particular criteria or, you know, we’re half a point a way, or we’re a point away, whatever, maybe. And the answer was always no. I mean, you either qualify or you don’t. But it was very impactful to have that criteria spelled out and to see countries trying to chip away at some of the recommendations in order to get the evaluation the next time.

BATEMAN: So do you—would you consider that conditionality essentially?

GOODMAN: I mean, that has a loaded term in the development community. And I know there are lots of development experts here. But, you know, we—the MCC model is very different than USAID, right? MCC was created under the Bush administration. It is called the Millennium Challenge Corporation because they want to do more of a blend of development work and private sector analysis. So we call them investments in the MCC. So, I mean, it is just a different model of doing development work in these countries.

BATEMAN: Does it work to—maybe to both of you—does it work to say both we will not give you this assistance until you implement these reforms, or does it also work to say, here, we are giving—we are providing you this assistance. And in the meantime, we want to see you undertake X, Y, Z?

GOODMAN: My personal view is that it’s not that black and white. A lot of U.S. foreign assistance goes to feed the poorest of the poor in these countries. It provides some of the basic lifeline that they need to survive day-to-day in the form of food assistance, educational stipends for their children. I mean, and these are not huge investments, but they are essential for the people who are receiving them. So I do think that there is more that we could do to improve some of the monitoring and evaluation of how some of the aid is dispersed, to make sure that it is reaching its intended partner a bit more. I do think that there is more that certainly countries who are on the receiving end should and could do to help provide some of that monitoring and evaluation as well. But in my mind, it is not a black and white, you know, you either turn it on or you turn it off.

BATEMAN: Just before—briefly, before we turn to the audience, Daniel, could you go back to your mention of Extractive Industries Transparency Initiative, and maybe Section 1504, explain for the audience your views on how transparency in oil, gas, and mining sectors is critical for U.S. national security.

KAUFMANN: I’m sure I’m speaking to a room of the converted. (Laughter.) So I cannot see that that applies. But let me—looking at data, at recent year. The total oil receipts received from exports of Nigeria was twice—twice—the total overseas development assistance, foreign aid for development, from all countries in the world—U.S. and others—to all of Africa, OK? So we are talking here—and this is to compare with what Mary Beth was saying—we’re talking about the question of putting a little bit of additional money from foreign aid, good money after bad money or after good money. And that’s a question that needs to be asked here, how to leverage further reform and progress in government in many of these countries, where you and your colleagues did a lot.

And by the way, the MCC, which was a great initiative, was started under George W. Bush initiative, was very much bipartisan. And there was Senator Cardin and Lugar and all those very important. I was very involved there because they used all our work on governance and corruption data and so on. And that makes a lot of sense. But it’s just a very unique point, and it doesn’t apply not only the U.S. but in others, too—to other things. The question is not so much, as you said, about conditionality, but about how does technical assistance, what we do also—we do is technical assistance, working with a government to leverage better their own resources and improve their institutions. And if some additional resources to Afghanistan and to others can make a difference, that’s great. It gets us to the—your questions of oil, gas and mining.

Resource-rich countries, we all know about the resource curse, which fortunately it’s not historically determined. And there are countries that show that, yes, one can escape it and one can do it right. I’m a proud citizen of one of those countries. I’m from Chile myself. And everybody knows the cases of, of course, Norway and others. Unfortunately, that’s not the norm yet. And there are still too many countries which will fall under the resource curse. Many of them are very fragile state, or even quasi-failed or failed states. And that interfaces very much with the issues of corruption and security we were discussing before, of what’s happening with migration around the world, and terrorism. So the whole focus now of improving governance in natural resources and in those countries which are rich in extractive is one of the greatest pending challenges in development and for security, we believe. And that’s why we’re very vested in that.

The U.S., as Mary Beth has said, has been seen. And I speak both as a proud resident of the United States for a long time, but also as a citizen of the world and of Chile, traveling and working globally, the U.S. has been seen as such a leader on these issues of anticorruption and governance. And essentially the Dodd-Frank provision 1504 was a major initiative forward when it was adopted five years ago, according to the law. Unfortunately, the big oil in the U.S. challenged it again and again in appeals. And it was recently under a very obscure provision, very rarely used, a CRA provision, Congress basically vacated it. And there may or may not be a new ruling, and it may be much weaker or may not happen at all.

The sense out there—and I’ve just come back from a very high-level meeting at the OECD and many others—in many other places, the sense is that the U.S. is at risk of totally abdicating leadership in terms of transparency and anticorruption on these issues. There is a very serious question in terms of the U.S. membership and commitment to the Extractive Industry Transparency Initiative. There are 51 countries now totally committed. Enormous progress on transparency and beneficiary ownership, on governance, that is taking place by many other countries. It’s been called into question. And that has major implications for security issues that we’re discussing here and in other countries. So it’s very pertinent that you are bringing this up. And it’s a serious question.

The silver lining is that other countries are taking up some of these initiatives, and realize that for now they say at least a hiatus or a very serious question mark to invest in the United States. And the Colombias of this world, the Norways, Canada, and a number of European countries, particularly on these issues of mandatory disclosure of all payments by oil companies and mining companies to government, which had started—was the leadership of Dodd-Frank 1504. Now that’s been overtaken. The Europeans are fully implementing that, so is Canada, and other countries are considering that. And under EITI, all other countries will be required to do so. So there’s major progress in other countries in the world, but it would be an enormous loss if the U.S. leadership is no longer there and there is a sense that that abdication of that leadership may happen.

Not to speak about the elephant in the room next, so what would happen FCPA even if it’s not repealed? Would it be weakened in terms of enforcement and so on, which are totally relevant to these issues of security we’re discussing here?

BATEMAN: On that happy note, let’s open the conversation up for members’ questions. If I could just remind you that we are on the record and this is being live webcast. Please state your name and affiliation, and keep your questions to one question. Thank you.

Back here next to Jodi, yes.

Q: Hi, thank you. My name is Monica Medina and I work at the Walton Family Foundation.

And we’re very interested in fisheries, which is a different kind of extractive industry. And I’m just wondering if, Mr. Kaufmann, you’ve thought about fisheries and whether that’s become part of the conversation? It’s a really important topic, not only because of food security and the problems that arise when there’s corruption and criminal activity surrounding fisheries in lots of countries around the world, very similar to mining, but also because fishing vessels are not highly regulated and so they’re also subject to, you know, be used for piracy, for all kinds of criminal activity.

And I know the Obama administration was very interested in oceans and ocean security. It seems like maritime domain awareness is getting sort of a lot of discussion now, particularly with the South China Sea and how many fishing vessels, quote/unquote, “fishing vessels” are in the South China Sea. So I’m just wondering if there’s any effort at greater transparency on fishing and particularly impressing upon the U.S. security establishment and the Congress that fishing isn’t just about fish.

BATEMAN: It’s all you, Danny. (Laughter.)

KAUFMANN: OK. Is there anybody here from Transparency International? I saw Nancy Boswell earlier in the room, if you are still here. She used to be the executive director. There you are, Nancy, yeah.

Anyway, no, the association I had that you were talking about, there’s one person in this world who is a link between EITI and fisheries and that’s Peter Eigen who is the original founder of Transparency International. After many of these efforts came out and he had the vision first about TI, and then after he leaves TI he’s still founder emeritus and so on. He’s the first chair of the board where I serve now, which is the Extractive Industry Transparency Initiative, which is, obviously, I’m biased, I’m there, and also our organization, NRGI, works very closely with them.

But it’s very important to look at these global initiatives, but particularly in today’s world where there are so many different and uncertain bilateral interests, and see how they can promote further many of these governance and transparency initiatives.

In the EITI, they say expanding a very stringent set of requirements, not only about transparency and disclosure throughout the value chain for oil and gas and mining, but also about accountability, about the ability of civil society, the media, and journalists to be able to operate, report, discuss, so to instill a public debate.

Why I am mentioning that? And it will be also relevant in a second for fisheries and other such initiatives. Is that recently you may have seen, and it’s related to the topic here, there was an important report issued by Transparency International on corruption in the military, corruption in the military, which ranks in fact and rates and assesses scores of countries. It’s interesting and I would suggest reading. It’s not the only thing. Nothing is perfect, obviously, but it’s very important reading. And it’s very important to see who comes at the top, and then the red countries which are fragile or, in some cases, they are a failed state. The United States is not at the top. In fact, it gets a B rating, not an A rating like the U.K. and New Zealand, and there are a number of reasons on that.

When I relate those ratings of just corruption in the military with all our independent governance indicators, the main correlation, of course it’s related to corruption in the whole country, but even more so is the extent of voice and democratic accountability in each country. So it goes into this message that I have been involved in for decades. One doesn’t fight corruption by just fighting corruption, one has to look at the broader institutions, and I mentioned the countries. Of course, its rule of law correlates very highly and so on.

After he leaves EITI as chair of the board, one of the things that Peter Eigen has been doing is this insipid initiative that he calls it FITI, which is the Fisheries Industry Transparency Initiative. But the notion here is that there are particular aspects that one has to look at at each sector, and the extractive sector is very particular. And the opacity there was so, so vast and so much corruption, it was needed. But that doesn’t preclude applying similar type of approach to other sectors. The sectoral approach is very important and one needs to look at the particularity of that.

So, yes, that’s one area to look at. And I can help you get in touch with Peter Eigen who is in that phase now, among other things.

BATEMAN: Just quickly on the note of corruption in militaries, Transparency International’s Defense and Security Program, which is based in London, actually has an initiative for global standards in the defense sector and the governance of military power.

KAUFMANN: And they did that report.

BATEMAN: I’m sorry?

KAUFMANN: They did that report, too.

BATEMAN: Oh, they did. Yes, yes.

Another question? The lady in the green dress?

Q: Thanks. Hi, I’m Carolyn Campbell, I’m with an investment manager, and we buy private companies in Africa and we’ve been doing so since 2000, including in Nigeria, including in the oil sector, so over 40 countries there.

I wouldn’t say that we’ve seen a decline in corruption because we didn’t see a lot of corruption to begin with in the private sector. But what I will say we’ve seen is a lot more civic activity, whistle-blowing, demands for accountability, using NGOs, the news, whatever means are accessible to someone to do that. And I was wondering if either of the speakers would comment on the degree to which, because Mary Beth mentioned ground up, and you mentioned the oil sector in particular, the degree to which that all has to do with the corresponding growth in the penetration of education to the population. So when you teach civics and you have more of the population going to K through 12, obviously they know that there is whistle-blowing available, they know what their leaders are supposed to be doing and they can hold them accountable. I’d probably also say that applies in the U.S. in terms of pushing civics down as well. But I’d be interested to hear if you have looked at that.

GOODMAN: I mean, I definitely think there’s a correlation between having, you know, a more educated population, but I would attribute it also just as much to the spread of the internet and the fact that you now have, you know, more and more people who are able to get access to information in real time and who, therefore, are translating that into more demands of their government officials to be more transparent, to provide them feedback on what is happening in their day-to-day lives that they’re paying you with their taxes for or that they’re able to sort of appreciate that that minister might be living in a palace on his $30,000-a-year salary because someone was able to take a picture of it and post it on the internet and they see the disparity a lot more. So I think that has certainly contributed to the uprisings we saw in the Arab Spring countries. You know, it sort of has been the way that people have been notified when protests are happening and you see more and more people joining in.

So the civics, I hope, is going to help us produce generations now that are demanding more of their citizens, but also being educated on what it means to be compliant and to not pay into the petty bribes and all that, because it’s awareness raising at all levels. So I hope that what we’re starting to see also—and there are a lot of campaigns working on this in Africa about just pointing out that some of the petty bribes really are a form of corruption. I mean, in so many countries around the world, so many different languages, you actually have a word for that, whether it’s “wasta” in Arabic, right, they don’t even recognize that it is corruption because it’s just such a part of their day-to-day lives that they grow up in.

So I think all of these things are contributing to that long-term push that we’re seeing to fight back against it. But it is just going to take time.

KAUFMANN: I can—let me make a comment on this because it is so important. Mary Beth, thanks.

Yes, there is evidence. Of course education is really important. But you mentioned something—(inaudible)—is education at what level? Basically, by the time we are 15 years old, well before we leave high school, these sets of values and whether we were taught that or not is already ingrained. It’s my daughter who told me, because I was never taught on which can to use for the trash to be environmentally friendly. I grew up in a different era in Chile where this didn’t exist—(inaudible). By the time we are out there and in the workplace, it’s incentives. This whole notion that one can retrain officials and educate them on this corruption—at the end of the day we have to go much deeper and talk about—and not only talk but reform the whole set of incentives. It’s not a matter of ignorance when corruption is happening at the high level and once we are 25 or over. So I think we need to put that in perspective. Too much money has gone into politically correct technical assistance to do retraining of sorts, and let’s train these people in ethics, and so on. It just—a little bit like anticorruption commissions in many places—(inaudible)—money, so that’s the type of things that have not worked.

And the reverse link, it’s so important, too. There is real evidence, research evidence that countries that are—where—have been highly corrupt and corruption has persisted end up investing less, both publicly and privately in education and health and social. Much more goes to waste, of course, and to corruption, but also to defense and to war and so on. So the link with education is very important, but it’s complex, and it’s in both level, and there are nonlinearities after a certain age.

BATEMAN: Thank you.


Q: My name is Ilya Zaslavsky. I’m from Free Russia Foundation.

My question is to Daniel Kaufmann about due diligence of academic institutions in the West. I’m concerned with money from post-Soviet space for mineral extraction industries, especially from oligarchs who deal with oil and gas, and that they are being accepted in think tanks, academic institutions in the West because of relaxed due diligence processes, really, or inadequate due diligence processes because legal system in post-Soviet spaces pretty much failed and hijacked by corrupt regimes and oligarchs from countries like Russia, Kazakhstan, Azerbaijan. They even engage in reverse due diligence. And there is no adequacy, in my view, in Western due diligence when dealing with that problem. So my question is, do you acknowledge such problem? And if yes, what can be done about it? Thanks.

GOODMAN: Sure, I’ll take a stab. So—

Q: It was to Daniel Kaufmann.

GOODMAN: Oh, it was to Danny Kaufmann. There you go. (Laughter.)

KAUFMANN: 1991, December 21st, I happened to be in Red Square, and I watched one flag, the Soviet flag, going down, and the Russian flag was—at the time I was at the World Bank, and I was part of one of the first-ever missions of the World Bank. In fact, it was requested by Gorbachev. And we had—we created a union which was called a Soviet department, which became the post-Soviet department within weeks. (Laughter.)

And then I lived in Ukraine as the first director there. One of the first pieces of work that we did—and in fact, it was related to corruption. And you mentioned that it was taboo in the past. And in the ’90s, in the early ’90s, we could not even write the whole word corruption in official documents at the World Bank. It was C, dot, dot, dot. Then after that Jim Wolfensohn comes in, and it all changed. But we started doing things very quietly.

And one of the first things we did—(inaudible)—of corruption by—asked by reformists in the government who wanted to understand in the new government better and our help on this. And one of the first insights on that was that there was a totally different type of corruption than in the traditional literature, which was always bureaucratic, administrative, bribery and so on. And that’s what we labeled as state capture, my work with Joel Hellman. And we put very much forefront the role and the very nefarious role that these oligarchs were playing in places like Russia and Ukraine and a few others, in contrast with many others in Central and Eastern Europe, other countries who were traversing to market without being captured in a much more competitive and market sense. So we had an analysis showing the difference there can make one type of capture or another. So obviously, they played a role that was far from conducive to balance the growth, development and particularly nefarious for small-scale and medium-scale competitive enterprise but also had implication for the politics. And many books have been written about. So that’s very, very important.

Us, our organization, National Resource Governance Institute, an international policy think tank, we do not accept one penny from any individual or any business, period, to maintain absolute complete independence. So we don’t—I know that academic institutions, some do. But they, at least according to their charter, they subscribe to very clear rules in terms of the terms by which they would accept it in terms of having complete independence, in terms of what their researchers and what they would do. And we’re not an academic institution, we’re not a university and so on. So it’s a matter for study to see which ones have worked well or not. And others may not have such total independence. And those, obviously, we would—we would not subscribe to.

But maybe you wanted to—

GOODMAN: I think you answered it.

KAUFMANN: I answered it. (Chuckles.)

BATEMAN: There was a question in the back, I think. Somebody—no?

Q: Thanks. My name is Michael Moses. I’m with Global Integrity here in Washington, D.C.

And I think you both hinted at and gotten at the issue—Mr. Kaufmann, you just mentioned it—that power and incentives and the politics in a given context are really essential to understanding, one, how corruption happens, and two, how we might make progress towards addressing corruption.

And I wonder—at Global Integrity, for years now we’ve produced governance assessments. Governance assessments by their very nature are based a best practice model of what sorts of institutions you need in place to, you know, to have good governance, as it were. And so I wonder, Ms. Goodman, you were speaking about MCC in particular, and MCC uses some of our indicators in their assessments. But I’m wondering how we begin as, you know, many of us I think probably play the role of the experts that Mr. Kaufmann was mentioning—as the people from out of town, how do we square the circle between being those experts and in many cases having the resources and, you know, the ability to support progress towards corruption, or towards reducing corruption, rather, in local context on the hand and then, on the other, empowering the people who actually work in those contexts who have the local knowledge and the familiarity and the experience of the power and incentives that are in place to really make progress on solutions that make sense in those contexts instead of perhaps trying to put an anticorruption commission in because that’s what the assessment says, even if that’s not the thing that will actually help in that context?

GOODMAN: It’s actually a really great question. And I think especially here in Washington, there is often no shortage of sort of people who are catapulting in and out of some of these countries as the expert for a particular issue. So it is critically important to figure out how you can sort of best support some of those local efforts in a way that’s a bit more sustainable.

And when we think about corruption—and I have to stop saying we because I’m no longer with the U.S. government—when we were—(laughter)—thinking about corruption within sort of the confines of some of our policy discussions. The tools that we have—and we considered some of you all as researchers and the civil-society groups as part of that mix, frankly—it fell into three buckets. You had tools that applied to prevention. You had tools that applied to detection. And you had tools that applied for enforcement.

And for any country to really make progress on the fight against corruption, there had to be action in all three of those buckets, if you will. And we had to make sure that we were deploying people to be supporting the institutions that were relevant for prevention, detection, and enforcement. We also had to make sure that we had some resources available in all three of those. And we had to find the champions, the reformers, the people who were just as passionate about this inside that government’s bureaucracy, but frankly might be such a low-level bureaucrat they never saw the light of day, if you will, and would get the ability to come meet with a U.S. government delegation that might be visiting or something.

And that, I think, is a big role that some of the researchers and the civil-society organizations can play is that you—when we go in as U.S. government officials, you know, we’re often not able to sort of meet with a huge spectrum of people, because we do go in and out fairly quickly, but recognizing some of that talent and helping them have a platform, both to collaborate, to have some of that expertise shared, but to give them exposure to some of the tools. And that’s another great benefit of the internet now is that there’s a way for them to have more of a platform and to get some cooperation.

I will mention one initiative that I think is incredibly impactful that is starting to really create that platform for some of the change, and which some of the research that you all work on and some of these issues has just been incredibly useful, and that’s the Open Government Partnership. This was an initiative that started under the Obama administration, in partnership with seven other governments, and has now grown to 75 governments that are participating—75 countries that participate.

But what’s unique about OGP is that it is done in collaboration with civil society on the ground. So each country is responsible for developing their own national set of priorities and to collaborate with civil society as part of that process. And then these are the initiatives that they then work on over the course of the next two years.

And so what’s starting to happen is you’ve seen governments that never would have had a meeting with civil society sit down at a table and actually have multiple meetings, working through some very complex issues that truly can have an impact on citizens’ lives in that country. And they’re doing it in a very collaborative way. And then that National Action Plan, the NAP—because every good initiative has to have an acronym—that NAP is then sort of monitored by an outside secretariat that keeps tabs on them and holds those governments accountable for when they’re making progress and when they’re not.

And so what governments like the United States or the United Kingdom and some other leading donors are doing is looking at those National Action Plans and seeing how they can put some support into that to truly help these governments start to make some of the reforms that they themselves are determining as the most essential, not that the outside experts or the World Bank or whoever is telling them they need to do.

And that’s really the game changer in how that process comes together. So that is one to watch. And if you’re not plugged into that process, you should be.

KAUFMANN: Let me—let me add to that and to make a push also on OGP, Open Government Partnership; as Mary Beth said, great, great initiative, and that—where you all took the lead. Absolutely right, it’s multi-stakeholder. And that’s a new game in town, these MSIs, multi-stakeholder initiative. And that’s part of the answer to you.

And there are great examples of what recently happened in terms of an anticorruption program that first started with a multi-stakeholder committee or commission, and it’s spreading out in the case of my country, in Chile. Dominican Republic was involved, too. A great—there are great case studies, and they’re on the Web, of how that was done with very much a broad involvement.

OGP is multi-stakeholder, but there are two stakeholders. Industry is—the private sector is still not there. It’s absolutely crucial. That’s one thing we do have in EITI, is the companies, the producers, as well as investors are there. And at the end of the day, if we’re going to reach progress in the 21st century on these very tough issues, the oil companies and the mining companies, they have to be involved.

And it’s very interesting what’s happening. In the U.S. there’s been this backtracking because of this disapproval of Dodd-Frank 1504, which is extremely unfortunate, and we hope it will be remedied. In EITI we have made progress, including with the companies themselves agreeing. And that is a requirement under EITI. And in great measure thanks to mining companies, as well as oil companies in Europe were seeing the light.

So, by working with many of them, you see that some of these U.S. Exxons and the Chevrons are being isolated. And there are many other companies which are moving forward—(inaudible)—including some of the smaller U.S.-based companies, particularly in mining—(inaudible)—and others. So this whole notion that industry doesn’t want to make progress, it’s not the case at all. It’s very particular to some companies. And we need to engage much more with the private sector, which is happening in a great way. So I hope very soon there will be a way of engaging much more.

Last point, which relates to a previous issue on money given to countries. Sanction is really important. And, of course, it has to apply only in absolutely exceptional circumstances. So I agree with Mary Beth that one has to be engaged in countries in terms of aid and so on, unless in absolutely extreme circumstances. And there is a set of whether five or 10 countries where they’re totally misgoverned and there’s no point in putting a penny there.

In the case of EITI, we recently had to suspend because of the extreme violation of all the rules, particularly regarding an enabling environment for civil society—(inaudible)—the case of Azerbaijan is emblematic, where basically it’s a kleptocracy and how human rights and civil society, and just in the space also of extractives are being—are being attacked. So it’s really important in these initiatives that it has to have some teeth, too, and the ability of giving sanctions. But of not at any point, but to send a very clear signal that if a minimum is not met, there cannot be any success for the initiative.

BATEMAN: Thank you.

Well, unfortunately, we are out of time for questions. But just to close on a positive note, and because it’s 1:17, could you give us just one area where you each see the potential for progress in the next one or two years, despite the political environment right now in the U.S., just whether may be there’s progress by civil-society actors or Congress?

GOODMAN: I’m going to answer in the reverse, because I’m not going to give one or two years. I would like to see progress in the next one or two months from this administration to send a positive signal that corruption is still a priority for the U.S. government and that they are looking at this as an issue, because that matters both globally, but it matters domestically.

And so I don’t want to wait one or two years. I mean, we need to see the signal very soon. We have the G-7 and the G-20 meetings coming up in the next few months. G-7 is in June and G-20 is in July. One of the ways that we have been able to chip away at some of the nuances of the corruption effort over the last few years is through the G-20 Anticorruption Working Group and using that as a platform to set some of the norms and standards that we now are starting to spread beyond the G-20 and put more in some of the other global platforms.

So we need to see, in the next one or two months, some very strong signals from this administration that they are going to prioritize corruption. And if we don’t see it bilaterally in some sort of a statement or some sort of a speech or something, then we all need to be looking at the G-7 and the G-20 to see what comes out of those statements in a serious way.

BATEMAN: Thank you.


KAUFMANN: Well, you said it. I would only add that, in addition to prioritizing by the U.S. on corruption, should be—anticorruption should also be prioritized. (Laughter.) But that goes without saying, and I know that’s what you meant.

I would only add, within the U.S., that I really hope and wish—and we can all help at these type of forum and getting together, it’s commended, and it can help to realize this is not an ideological or partisan issue. At the end of the day, this pays. And we have done studies about the dividend of anticorruption. It pays even in the most—if one country decides to be totally selfish about their own interests, the extent to which there is a payoff in terms of avoiding security threats, failed states and so on, and the implications of not working on those issues, for one country itself—and particularly in this case of the U.S.—are so dire. So it’s aside from one’s own ideology and moral and ethical values about helping the rest of the world. It is such a major imperative in that context.

And the last point, a bit away from the U.S., but also it’s one of partnerships. That’s why I mentioned before these partnerships a la OGP, EITI, and so on. They are very important, particularly in this work. And that’s why we are also working with bodies like OECD and so on. So to help in the context of leadership on these issues, on these multilateral organizations, are important. And last but not least, and of course totally biased, I think the real shining light—not universally, and there are three or four countries in deep trouble—but other than that, Latin America—looking at Latin America and partnering more. They are real shining lights of reform to do this.

And light of the political developments in U.K. and the U.S., a number of leaders in Latin America have told me: This is our opportunity of seizing the initiative, taking the bull by the horns, and showing to everybody, including to our own country, we have to do it ourselves. We’re not going to get it because of help from outside and so on. So to look at that, and also to the north, Canada, but also to other countries, because they are fully aware of what’s happening, including what’s happening here. And many of these leaders are saying: We are going to do it. This is absolutely imperative for our own people. That’s happening in my country and many of our neighboring countries in Latin America, among others.

BATEMAN: That’s a great note to end on. So thank you to our panelists, and the Council, and all of you. (Applause.)


This is an uncorrected transcript.

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