How to expose the corrupt - Peter Eigen

I'm going to speak about corruption, but I would like to discuss two different things. One is the large global economy, the large globalized economy, and the other one is the small and very limited capacity of our traditional governments and their international institutions to govern, to shape this economy.

Because it is this asymmetry which creates basically failing governance. Failing governance in many areas: in the area of corruption, in the area of destruction of the environment, in the area of rotation of women and children, in the area of climate change, in all the areas in which we really need a capacity to reintroduce the primacy of politics into the economy, which is operating in a worldwide arena.

I think corruption and the fight against corruption and the impact of corruption, it's probably one of the most interesting ways to illustrate what I mean with this failure of governance. Let me talk about my own experience. I used to work as the director of the World Bank office in Nairobi for East Africa. At that time, I noticed that corruption, that grand corruption, that systemic corruption was undermining everything we were trying to do. Therefore, I began to not only try to protect the work of the World Bank, our own projects, our own programs against corruption, but in general, I thought we need a system to protect the people in this part of the world from the ravages of corruption.

As soon as I started this work, I received a memorandum from the World Bank, from the legal department, in which they said, "You are not allowed to do this. You are meddling in the internal affairs of our partner countries. This is forbidden by the charter of the World Bank. So I want you to stop doing this." In the meantime, I was chairing donor meetings, for instance, in which the various donors—and many of them like to be in Nairobi.

It is true; it is one of the unsafest cities in the world, but they like to be there because the other cities are even less comfortable. In these donor meetings, I noticed that many of the worst projects, which were put forward by our clients, by the governments, by promoters—many often representing the suppliers from the North—that the worst projects were realized first.

Let me give you an example: a huge power project, $300 million to be built smack into one of the most vulnerable and one of the most beautiful areas of western Kenya. We all noticed immediately that this project had no economic benefits; it had no clients. Nobody would buy the electricity there; nobody was interested in irrigation projects. To the contrary, we knew that this project would destroy the environment, that it would destroy riparian forests, which were the basis for the survival of nomadic groups, Samburu and the Turkana in this area.

So everybody knew this was a not a useless project; this was an absolutely damaging, a terrible project. Not to speak about the future indebtedness of the country for these hundreds of millions of dollars and the siphoning off of the scarce resources of the economy from much more important activities like schools, like hospitals, and so on.

And yet, we all rejected this project. None of the donors was willing to have their name connected with it, and it was the first project to be implemented. The good projects, which we as the donor community would take under our wings, took years. We had to do many studies, and very often, they didn't succeed.

But these bad projects, which were absolutely damaging for the economy, for many generations, for the environment, for thousands of families who had to be resettled, were suddenly put together by consortia of banks, of supplier agencies, of insurance agencies like in Germany, Aramis, and so on. They came back very, very quickly, driven by an unholy alliance between the powerful elites in those countries and the suppliers from the North.

Now, these suppliers were our big companies. They were the actors of this global market which I mentioned in the beginning. They were the Siemens's of this world, coming from France, from the UK, from Japan, from Canada, from Germany, and they were systematically driven by large-scale corruption.

And you are not talking about fifty thousand dollars here or a hundred thousand dollars there, or over one million dollars there; no, we are talking about ten million, twenty million dollars on Swiss bank accounts, on the bank accounts of Liechtenstein, of the presidents, ministers, the high officials in the parastatal sectors.

This was a reality which I saw—not only one project like that; I saw, I would say, over the years I worked in Africa, hundreds of projects like this. So I became convinced that it is this systemic corruption that is perverting economic policymaking in these countries, which is the main reason for the misery, for the poverty, for the conflicts, for the violence, for the desperation in many of these countries—that we have today more than a billion people.

But we know the absolute poverty line: that we have more than a billion people without proper drinking water in the world. Twice that number—more than two billion people—without sanitation, and so on; the consequent illnesses of mothers and children, still a child mortality of more than ten million people every year, children dying before they are five years old.

The cause of this is, to a large extent, grand corruption. Now, why did the World Bank not let me do this work? I found out afterwards, after I left Nairobi, after I fought the World Bank. The reason was that the members of the World Bank thought that foreign bribery was okay, including Germany. Foreign bribery was allowed; it was even tax-deductible.

No wonder that most of the most important international operators, in Germany but also in France, in the UK, in Scandinavia, everywhere, systematically bribe—not all of them, but most of them. And this is the phenomenon which I call failing governance.

Because when I then came to Germany and started this little NGO here in Berlin, the Villa Bozek, and we were told, "You cannot stop our German exporters from bribing because we will lose our contract. We will lose to the French; we will lose to the Swedes; we will lose to the Japanese." Therefore, there was indeed a prisoner's dilemma which made it very difficult for an individual company, individual exporting country to say, "We are not going to continue this deadly, disastrous habit of large companies to bribe."

So this is what I mean with a failing governance structure. Because even the powerful government, which we have in Germany comparatively, was not able to say, "We will not allow our companies to bribe abroad." They needed help. The large companies themselves faced a dilemma; many of them didn't want to bribe. Many of the German companies, for instance, believed that they are really producing a high-quality product at a good price.

So they are very competitive; they are not as good in bribing as many of their international competitors are. But they were not allowed to show their strengths because the world was eaten up by grand corruption. And this is why I'm telling you this: civil society rose to the occasion.

We had a small NGO, Transparency International. We began to think of an escape route from this prisoner's dilemma. We developed concepts of collective action, basically trying to bring various competitors together around the table, explaining to all of them how much it would be in their interest if they simultaneously would stop bribing.

To make a long story short, we managed to eventually get Germany to sign, together with the other OECD countries and a few other exporters, in 1997, a convention under the auspices of the OECD which obliged everybody to change their laws and criminalize foreign bribery.

Thank you. I mean, it's interesting; in doing this, we had to sit together with the companies we had here in Berlin at the Aspen Institute. We had sessions with about twenty captains of industry, and we discussed with them what to do about international bribery. In the first session—yeah, three sessions there—over the course of two years, and President from Weizsäcker, by the way, chaired one of the sessions, the first one, to take the fear away from the entrepreneurs who were not used to dealing with mental organizations.

In the first session, they all said, "This is not private; what we are doing is customary. This is what these other cultures demand." They even applauded. In fact, Martin Weiser still says this today.

So there are a lot of people who are not convinced that you have to stop bribing. But in the second session, they admitted already that they would never do this, what they are doing in these other countries, here in Germany or in the UK and so on. Cabinet ministers would admit this, and in the final session at the Aspen Institute, we had them all sign an open letter to the core government at the time, requesting that they participate in the OECD convention.

This is, in my opinion, an example of soft power because we were able to convince them that they had to go with us. We had a longer-term time perspective; we had a broader, geographically, much wider constituency we are trying to defend. And that's why the law has changed; that's why Siemens is now in the trouble they are in; and that's why, in some other countries, the OECD Convention is not yet properly enforced.

Again, civil society is breathing down the neck of the establishment in London, for instance, where BAE got away with a huge corruption case which the Serious Fraud Office tried to prosecute—one hundred million British pounds every year for ten years to one particular official of one particular friendly country who then bought forty-four billion pounds of military equipment.

This case—they are not prosecuting it in the UK. Why? Because they consider this as contrary to the security interest of the people of Great Britain. Civil society is pushing. Successful civil societies are trying to get a solution to this problem also in the UK and also in Japan, which is not properly enforcing and so on.

In Germany, we are pushing the ratification of the UN Convention. There is a subsequent Condor. Germany is not ratifying. Why? Because it would make it necessary to criminalize the corruption of deputies in Germany. We have a system where you are not allowed to bribe a civil servant, but you are allowed to bribe the deputy. This is, under German law, allowed.

And the members of our Parliament don't want to change this, and this is why they can't sign the UN Convention against foreign bribery. One of the very, very few countries which is preaching honesty and good governance everywhere in the world is not able to ratify a convention which we managed to get on the books.

This is about 160 countries all over the world. I see my time is ticking. Let me just try to draw some conclusions about what has happened.

I believe that what we managed to achieve in fighting corruption, one can also achieve in other areas of failing governance. By now, the United Nations is totally open on our side. The World Bank has turned from solace to powerless; under Wolfensohn, they became, I would say, the strongest anti-corruption agency in the world. Most of the large companies are now totally convinced that they have to put in place very strong policies against bribery and so on.

And this is possible because civil society joined the companies and joined the government in the analysis of the problem, in the development of remedies, in the implementation of reforms, and then later in the monitoring of the reforms. Of course, if civil society organizations want to play that role, they have to grow into this responsibility. Not all civil society organizations are good; the Ku Klux Klan is an NGO.

So we must be aware that civil society has to shape up itself. They have to have a much more transparent governance; you have to have a much more participatory governance in many civil society organizations. We also need much more competence of civil society leaders. This is why we have set up the Governance School in the Center for Civil Society here in Berlin.

Because we believe most of our educational and research institutions in Germany and continental Europe, in general, do not focus enough yet on empowering civil society, training the leadership of civil society. But what I'm saying from a very practical experience is that if civil society does it right, and enjoying the other actors—in particular, governments and international institutions, but also large international actors, particularly those which have committed themselves to corporate social responsibility—then in this magical triangle between civil society, government, and private sector, there is a tremendous chance for all of us to create better work.

Thank you.