From the blog of the Global Governance unit of the World Bank Institute:
The global financial crisis, triggered by the mortgage and financial derivatives debacle in the US was not just a failure of dogmatic ideology, or of know-how, or of a technical regulation.
As illustrated at the outset, powerful vested interests, at the intersection between politics and business, and corruption, did play a role in shaping the extent and type of oversight, the absence of transparency, the regulations, and their implementation.
Enter now the problematic field of study of corruption, which has many challenges nowadays. One of them is having underplayed for too long the study of misgovernance in the financial sector.
The basics first: the way corruption is defined is flawed…
The interpretation of the traditional definition of “abuse of public office for private gain” is often ‘legally’ biased towards unearthing evidence that an egregious illegal act has been committed, and, further, biased towards pointing a finger at a public official as the main culprit.
I thought this definition was inadequate years ago…
…the focus on corruption needs to move away from exclusive focus on the ‘abuse of public office’ and squarely acknowledge that corruption often involves collusion between the public and private (and at times outright capture by the private potentates).
Further, corruption ought to also encompass some acts that may be legal in a strict narrow sense, but where the rules of the game and the state laws, policies, regulations and institutions have often been shaped in part by undue influence of certain vested interests for their own private benefit (and not for the benefit of the public at large).
I want to focus on one factor that has often been kept under wraps: the regulatory and policy capture by vested interests. This has been years in the making.
A frank and open debate about this issue, grounded on sound analytics and data, is overdue.
Therefore, it makes sense to have a neutral and broader definition of corruption, akin to “the privatization of public policy”.
More here: Why Does Corruption Thrive?
The Bulging Pocket and the Rule of Law…
Corruption acts as an extra tax on citizens.
Corruption leads to lower levels of economic growth and to ineffective government.
Corruption amounts to an attack on the everyday quality of life of everyday people. [summary] [author’s free book]
DanaGarrett at Clipmarks says:
The FBI is conducting more than 530 investigations of corporate fraud amid the financial meltdown; 38 involve fraud directly related to the economic crisis.
“A thinner line than we acknowledge divides “self interest” and fraud. When no one is watching, “self interest” will blur the difference. But when someone is minding the store, self interest can be a engine of innovation and prosperity. That only occurs when the government realizes that its proper role is to get on, not off, the backs of big business.”
Darn near Shakespeare:
“Enter now the problematic field of study of corruption… “A thinner line than we acknowledge divides self interest and fraud…