1 Thinking about Corruption in Europe in:

Ina Kubbe

Corruption in Europe, page 21 - 52

Is it all about Democracy?

1. Edition 2015, ISBN print: 978-3-8487-2347-8, ISBN online: 978-3-8452-6451-6,

Series: Comparative Politics - Vergleichende Politikwissenschaft, vol. 6

Bibliographic information
Thinking about Corruption in Europe Relevance of the Study International studies often point to Europe for low levels of corruption. However, frequent scandals in nearly all European states illustrate that corruption is still a problem and continues to be on the rise. In contrast to the previous practice of secrecy and denial (Myrdal, 1968), corruption is, at present, an issue which is seriously discussed in the international press, the scientific community, and on the highest political and executive levels. In the 1990s, when corruption reached increased visibility and salience in many countries in the world, the number of publications and conferences covering this topic1 exploded. Simultaneously, numerous international organizations began to react with plenty of anti-corruption programs and agreements such as the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1999), the Council of Europe's Convention on Corruption (1999), or the United Nations Convention against Corruption (2005). Since that time, organizations’ efforts have included programs to foster free and open trade, promote good governance and transparency in government accounting and contracting, improve government ethics, and expose the bribery of government officials by foreign businesses seeking contracts (Collier, 2002). Previous research has identified what kind of circumstances supported the increased visibility and salience of corruption in the 1990s (Heywood, 2009).2 The most frequently mentioned factors contributing to this are directly related to the end of the Cold War, democratization efforts of certain countries at that time, such as in Central and Eastern Europe, and the progress of neoliberal political and economic reforms. These develop- 1 1.1 1 Particularly notable is the book of Little and Posada Carbó (1996) “Political corruption in Europe and Latin America”, the special issue on political corruption of the Third World Quarterly in 1999, and the works of Rose-Ackerman (1999) and Della Porta and Vannucci (1999). In the German context the book of Alemann (2005) “Dimensionen politischer Korruption. Beiträge zum Stand der internationalen Forschung” gives a great overview of corruption from different research fields. It is one of the best contributions to corruption research. 2 See also Tanzi (1998); Williams (1999); Collier (2002) and Johnston (2001a). 21 ments were followed by the globalization of markets including growth of international trade and business, economic changes such as by the privatizations of public or state enterprises, increased mobility, the growth of global communication technologies, and people’s access to these. At this juncture, the strengthening of civil societies and public awareness campaigns organized by non-governmental organizations (NGO) to mobilize anti-corruption sentiments also fostered the visibility of corruption3 (Tanzi, 1998; Sandholtz and Taagepera, 2005; Arikan, 2008). International organizations such as the World Bank or the well-known NGO Transparency International (TI), which fights corruption and provides information on cross-country corruption, are engaging in open debates about this issue. TI views corruption as ”one of the greatest challenges of the contemporary world. It undermines good government, fundamentally distorts public policy, leads to the misallocation of resources, harms the private sector and private sector development and particularly hurts the poor” (Transparency International, 2015a). Unlike today, previous studies considered corruption as a phenomenon that does not necessarily have negative consequences (Leff, 1964; Nye, 1967; Huntington, 1968).4 Notably, the revisionist approach of the 1960s and 1970s attributed corrupt activities to a certain stage of a country’s development and viewed it as a structural characteristic of early modern societies. Among the revisionists, some scholars, the so called functionalists, viewed corruption as a necessary vehicle for reinforcing efficiency and fostering economic growth by cutting bureaucratic red tape, redistributing resources, improving social welfare and facilitating socioeconomic, and political development in countries as a whole (“efficiency-enhancing-approach”) (Bayley, 1966; van Klaveren, 2009). However, empirical studies could never comprehensively substantiate this claim and with the end of 3 In the following considerations, the terms appearance, emergence, extent, level, salience and occurrence of corruption are used synonymously. 4 His book “Corruption and Development Aid” Cremer (2008, pp. 17–27) gives a thorough overview and discusses certain advantages of corruption as a catalyst for competition, less red tape, incentives for qualified civil servants, illicit income as an essential source of capital accumulation, as a means of protecting minorities, and as a balanced assessment of corruption. See also Friedrich (1972); Lui (1985) and Beck and Maher (1986). 1 Thinking about Corruption in Europe 22 the Cold War which had provided much of the rationale of corruption, the functionalist approach became obsolete (Manzetti and Wilson, 2007).5 Now, it is generally agreed that corruption is detrimental to economic, social and political development (Wolf, 2012; Rothstein, 2014). From an economic perspective, corruption disturbs macroeconomic and fiscal stability, lowers economic growth (Mauro, 1995; Mauro, 1997), raises inflation (Braun and Di Tella, 2004) and promotes social inequality and poverty (Gupta et al., 2002)6. In addition to economic effects7 (Rose-Ackerman, 1999; Méon and Sekkat, 2005), the social and political consequences of corruption have increasingly become major aspects of research (Tavits, 2008; Richey, 2010; Uslaner, 2012; Olsson, 2014). For example, Sandholtz and Taagepera (2005) state that corruption violates the fundamental principles of democracy such as equality, fairness, transparency and accountability and further threatens regime stability.8 Moreover, it can lead to the systematic manipulation of political institutions and law, the rules of procedures and regulations, and to the misallocation of resources. In addition, it influences decision-making processes and frequently leads to institutional decay (Amundsen, 1999). Some studies conclude that high degrees of corruption foster low levels of trust in political institutions and even erode general trust in the whole community (Miller and Listhaug, 1999).9 In turn, this can have perilous consequences for the legitimacy of a 5 Nevertheless, after the collapse of communism, some authors asserted that in countries with ineffective market mechanisms and administrative structures, corruption would be beneficial to avoid regulations and accelerate long bureaucratic procedures. For instance, Holmes (2000) and similarly Cremer (2008) stated that in communist societies certain types of corruption were central for the functioning of the system. However, this argument is contested by numerous researchers (Rose-Ackerman, 1999). 6 See also Klitgaard (1988); Paolo (1997); Tanzi and Davoodi (1997) and Aidt et al. (2008). 7 “Corruption discourages investment, limits economic growth, and alters the composition of government spending, often to the detriment of future economic growth“ (Mauro, 1997, pp. 3–4). Similarly, Rose-Ackerman (1999) refers to some studies which verified a negative correlation between corruption and foreign direct investments; similar Tanzi and Davoodi (1997). In addition corruption leads to a higher risk of financial crises (Wei and Wu, 2001). 8 See also Sandholtz and Koetzle (2000); Anderson and Tverdova (2003); Warren (2006); Basu (2006) and Chang and Chu (2006). 9 Similar Turow (1985); Seligson (1999); Mishler and Rose (2001); Anderson and Tverdova (2003); Davis et al. (2004); Catterberg and Moreno (2005); Chang and 1.1 Relevance of the Study 23 political system, particularly for young democracies (Montinola and Jackman, 2002; Delhey, 2002).10 For instance, in their study of Central and Eastern Europe, (Rose et al., 1998) claim that high levels of corruption negatively affect support for the democratic system and conversely increase the acceptance for authoritarian alternatives. Analyses of Moreno (2002) and Manzetti and Wilson (2007) show similar results. Furthermore, Tavits (2008) finds out that governments can have a significant impact on people’s well-being. Examining the effect of corruption and representation on people’s subjective well-being she demonstrates that people report higher levels of subjective well-being when especially their governments perform well (i.e., are clean rather than corrupt). It has been generally believed that corruption is confined to authoritarian countries or developing countries. Manzetti and Wilson (2007) attribute this to the fact that many scientists believe corruption to be antagonistic to democracy by nature and that when it arises, it is rather an exception than the norm (Elliott, 1997). Yet, a large number of scandals in young as well as well-established liberal democracies illustrates that corruption appears regardless of the regime type. Alatas (1990, p. 11) even observes corruption as “trans-systematic”: “It inheres in all social systems – feudalism, capitalism, communism and socialism. It affects all classes of society; all state organizations, monarchies and republics; all situations, in war and peace; all age groups; both sexes; and all times, ancient, medieval and modern.” In sum, it has been demonstrated, that democracy cannot guarantee clean and transparent governance (Harris-White and White, 1996; Little and Posada Carbó, 1996; Shen and Williamson, 2005; Seldadyo and Haan, 2011).11 Moreover, there are differences in the level of corruption in democratic states. Chu (2006); Richey (2010); Morris and Klesner (2010) and Linde and Erlingsson (2013). 10 See also Rose-Ackerman (1999); Della Porta (2000); Tulchin and Espach (2000); Seligson (2002) and Chang and Chu (2006). However, some authors claim that in particular, low levels of political trust offer an opportunity for democracies’ further development (Norris, 1999; Welzel, 2007). Rosanvallon (2008) argues that citizens are not just voters, but also serve as quality controllers for political systems. 11 Furthermore, Larmour (2007) points out that the two most often mentioned success stories in anti-corruption took place in Singapore and Hong Kong – a one party state in Singapore and a colonial government in Hong Kong. 1 Thinking about Corruption in Europe 24 In 2013, Thorbjørn Jagland, Secretary General of the Council of Europe even claims that “Corruption is the biggest threat to democracy in Europe today” (Council of Europe, 2013). The EU Anti-Corruption report (2014) indicates that corruption costs the European economy about 120 billion Euros a year. Moreover, the report shows that a rising number of EU citizens view corruption as a growing threat and as a result of the deep economic and financial problems in the euro zone brought on by the sovereign debt crisis. It is conspicuous, that although political scientists have generally focused on the effects of corruption, there is still little knowledge about the area-specific factors that determine the extent of corruption. On the one hand, the prevailing research focus is currently dominated by highly aggregated large-n analyses that tend to gloss over significant cross-regional differences and variations within countries (Goel and Nelson, 2010; Littvay and Donica, 2011). On the other hand, researchers concentrate on case-studies that particularly investigate individual cases of corruption and rarely provide generalizable results (Pujas and Rohdes, 2009; Miller et al., 2009; You, 2015). Due to this fact and its negative economic, political, and particularly social effects, corruption needs further investigation. In fact, a middle ground has to be found in order to better understand which area-specific factors are responsible for its occurrence. For studying the causes of corruption, European countries present excellent cases. An initial examination of the patterns of corruption development in European states, clearly demonstrates that Europe exhibits a wide spectrum of corrupt activities and is characterized by large differences as to the extent of corruption across countries and across time (see also Charron, 2015). Particularly, both new and established democracies, in Western and Central and Eastern Europe show varying levels. In addition, an examination of corruption development in Southern Europe also clearly demonstrates a continuous deterioration of corruption scores in countries such as Portugal, Spain, Italy or Greece. For instance, while in 2005, Spain received 7.0 points by Transparency International, ranking countries on a scale from zero (high corruption) to ten (low corruption)12, its corruption score amounted to 5.9 in 2013, with a further declining tendency. The other Southern European countries show very similar developments. Mo- 12 In 2012, Transparency International updated the methodology of the Corruption Perceptions Index implying that it is now presented on a 0-100 scale. For comparative reasons, I divided the years 2012-2013 by 100. 1.1 Relevance of the Study 25 reover, it is striking, that Eastern European states, that originally had considerably worse corruption values than European countries in the South in the 1990s, are now overtaking them. As Transparency International (2015b) reveals, “No country is immune to corruption and the damaging effects it has for citizens and society. Across Europe […] corruption is undermining confidence in national institutions and contributing to a sustained economic crisis. […] Three-fourths of Europeans consider corruption a growing problem in their societies. And gaps in governance continue to plague European countries’ attempts to pull the region out of its ongoing economic crisis.” Due to this pronounced intra-and inter-European variation and increasing corruption values in certain countries such as Greece, Iceland or even the United Kingdom, the following research question arises: “What affects (perceived) corruption in European states over time and across and within countries?” Moreover, the question “Is it all about democracy?” should be answered. Current research shows that the level of democracy strongly influences the extent of corruption (Banuri and Eckel, 2012; Saha et al. 2014; Fjelde and Hegre, 2014). In this study, it will be analyzed if this is also the case for the European states and what are possible mechanisms behind this relationship. Based on economic and sociological approaches, I will, therefore, in particular, focus on macro and micro variables that are linked to a society’s development of democracy such as the degree and duration of democracy, EU-membership, post-communist past, an individual’s interpersonal trust or satisfaction with the financial situation. Corruption has often been framed and measured by certain macro level indices, although it takes place between individuals at the micro level. To shed light on the linkage between macro and micro levels, I consider corruption as a multilevel phenomenon that takes place at the country level (macro level) and is measured by certain indices such as the Corruption Perceptions Index, and at the individual level (micro level), measured by survey data by the World Values Survey. Therefore, to discover the factors that affect corruption from a comparative perspective, I have designed a heuristic model at both levels the micro and macro level, allowing for panel-analyses as well as cross-and within-national comparison in Europe (“bathtub model of corruption”). In this study, I make several contributions to the corruption literature. In contrast to previous research, this study attempts to investigate the extent of corruption in European states in both longitudinal as well as in cross-national sections and at certain levels. Geographically, the study in- 1 Thinking about Corruption in Europe 26 cludes – according to data availability – 37 European countries at the macro level and 20 countries at the micro level. The time span for both analyses (panel and cross-section) encompasses the period from (1995- 2009/2013). From a theoretical perspective, I present an interdisciplinary approach that combines several perspectives on the causes of corruption. Structure of the Study This work is divided into four sections. In order to render the phenomenon of corruption into an analytically useful concept for political science research, I firstly provide an overview of the literature on corruption which includes definitions and characteristics (chapter 1.2). Subsequently, I discuss a range of theoretical approaches and arguments made in the literature that are worth considering for the explanation of corruption (chapter 1.3). After that, I review and evaluate empirical comparative studies on what determines corruption in order to identify the range of relevant indicators (chapter 1.4). Notably, it has become apparent, that theoretical approaches and empirical analyses of corruption research have developed independently from each other. For this reason and the purpose of analysis, I have designed a heuristic model that integrates and helps to explain corruption on different levels and across and within different societies. This model is introduced in the second chapter (2.1), which also comprises case selection (chapter 2.2), the measurement of corruption (chapter 2.3), the operationalization of the variables at the macro and micro levels, and the description of the development of the hypotheses (chapter 2.4). In the third chapter, I provide a detailed description of the conducted panel and multilevel analyses. Subsequently, I discuss the results of the analyses and integrate them in the bathtub model of corruption. In the fourth chapter, I give a summary of the work and draw conclusions based on my presented results. Finally, I take a look at potential policy implications and give an outlook on research prospects in the field of corruption studies. 1.1 Relevance of the Study 27 Definition and Characteristics of Corruption Definition of Corruption The literature on corruption is still diverse and fragmented. Corruption as a complex phenomenon still stands for a multitude of incidences depending, in particular, on how it is perceived by certain societies, the zeitgeist, and the prevailing academic research (Engels, 2006; Graeff, 2012). Sandholtz and Koetzle (2000, p. 33) even assert that “virtually every published work on corruption, from the 1960s to the present, wrestles with the problem of defining it.” In addition, Philp (2006, p. 91) summarizes the research field on corruption as follows: “Corruption is not a field that generates a high level of agreement. There is controversy over the definition of corruption, about how one measures it, how to explain it, whether and in what ways it is important, and how to control it.” This is primarily due to the fact that “the line between what is and is not corrupt can be so fine as to be indiscernible even to those involved.” Yet, some clarity on the term corruption comes from its linguistic origin and historical evolution. The word corruption derives from the Latin word “corrumpere” – com-, “intensive pref.” and rumpere means “to break”. It characterizes actions such as to “spoil, weaken, distort, erode, undermine, bribe, ruin, destroy” and carries connotations of widespread moral deterioration and decay.13 From a historical perspective, corruption once had a much broader moral meaning than today.14 It described proces- 1.2 1.2.1 13 The Oxford Dictionaries (2015) define corruption as follows: Dishonest or fraudulent conduct by those in power, typically involving bribery: the journalist who wants to expose corruption in high places; the action or effect of making someone or something morally depraved. The process by which a word or expression is changed from its original state to one regarded as erroneous or debased: a record of a word's corruption [count noun]: the term ‘hobgoblin’ is thought to be a corruption of ‘Robgoblin’; the process by which a computer database or program becomes debased by alteration or the introduction of errors. Archaic the process of decay; putrefaction. 14 Corruption has been part of human relationships as long as people have been in power. Almost every work of political theory has addressed the topic, such as in works of Aristotle, Cicero, Augustine, Tocqueville, Machiavelli, Montesquieu and Rousseau. In different historical periods the term has assumed different connotations: For example, in 350 BCE, Aristotle indicated, “To protect the treasury from being defrauded, let all money be issued openly in front of the whole city, and let 1 Thinking about Corruption in Europe 28 ses or a state’s condition and referred to the moral health of whole societies rather than to individual actions (Johnston, 2001b; Alemann, 2005). In this context, Friedrich (1972, p. 18) views corruption as “a general disease of the body politic persisted into modern times.” In the 1960s this moral perspective was replaced by a legalistic approach, taking the public positions of officials into account. A review of the current literature makes clear, that defining corruption has become an issue of classifying human behavior that includes the description of individual actions rather than state’s condition or the moral health of whole societies (Moodie, 1980; Johnston, 2001b; Alemann, 2005). So, corruption is most often seen “as an attribute of specific actions by specific individuals: those holding public positions and (by some definitions) those who seek to influence them” (Johnston, 2001a, p. 13). In general, the term is used for a large range of individual, illicit or illegal activities varying according to context. One of the most famous previous approaches of defining corruption is Heidenheimer’s (1978) legal and public-opinion definitions. Legal definitions of corruption adopt positivist approaches and exclusively refer to laws including very straightforward criteria: “if an official’s act is prohibited by laws established by the government, it is corrupt; if it is not prohibited, it is not corrupt even if it is abusive or unethical” (Gardiner, 2009, p. 29). Even if legal definitions are very clear, they concentrate on a particular geographical scope and, therefore, do not include a transnational dimension that can be used in a comparative perspective. Another classification of definitions refers to the public opinion of corruption: Heidenheimer (2004) originally differentiates three categories of corruption according to its social perceptions in the context of several sorts of political systems, its dominant values and traditions. In fact, Heidenheimer’s categories were grounded in regime types, which he interpreted in terms of relationships between leaders and followers and dominant conceptions of power, its jucopies of the accounts be deposited in various wards.” For Machiavelli, corrupt practices means the destruction of citizens’ virtues; for Montesquieu, the transformation of a good political order into an evil one; and for Rousseau, the inevitable consequence of the struggle for power (Della Porta and Vannucci, 1999). From a normative perspective, Noonan (1984) gives a great and very detailed historical overview of corruption in several societies, dating a period from 3000 B.C. until the end of 20th century. The book of Grüne and Slanička (2010), on the other hand, considers corruption from a cultural-historical perspective. 1.2 Definition and Characteristics of Corruption 29 stifications and limits. He differentiates between white, grey and black corruption: White corruption means that corrupt actions is largely tolerated by the society. This is typical for systems usually influenced by family ties as well as in patron-client structures. Grey corruption which is typical for modern constitutional states as well as for countries in transition includes that corruption is tolerated far less. It is regarded as reprehensible according to accepted moral standards, but nevertheless the involved actors are still lacking any sense of doing something wrong. Black corruption is characteristic for societies which are shaped by modern media and means that corruption is generally condemned and punished as a serious violation of moral standards and the law (Heidenheimer, 2004). Later, Heidenheimer modified his “achromatic” view and suggested a “polychromatic” one which includes that corruption can be viewed in manifold ways and that the underlying basic conditions differ as well. He describes the ambiguity of the term corruption in the following words: “It became massively applied in more multi-faceted and polarized ways, so as to overwhelm the metaphorical capacity of a black-grey-white dimension to reflect its variants“ (Heidenheimer, 2004, pp. 99–100). Yet, for further specification and definition of the term corruption I apply to the three behavior-focused definitions developed by Heidenheimer (2009) that are standard in the current corruption and political science literature: market-centered, public-interest-centered and public-office-centered definitions. Although, they are not completely clear-cut, they are intended to provide orientation in the field of corruption and allow researchers to identify its patterns from a comparative point of view (Johnston, 2001b). Market-Centered Definitions From an economic perspective, market-centered definitions (or functionalistic definitions) focus on markets and view corruption as a non-legal instrument used by individuals or collective actors to influence politics and administration. Following a rational-choice logic, corrupt civil servants understand their positions to obtain maximum profits (Leff, 1964; Klitgaard, 1988). A typical market-centered definition is offered by van Klaveren: “A corrupt civil servant regards his public office as a business, the income of which he will […] seek to maximize. The office then becomes a ‘maximizing unit’. The size of his income depends […] upon the market 1 Thinking about Corruption in Europe 30 situation and his talents for finding the point of maximal gain on the public's demand curve” (cited in Heidenheimer, 1978, p. 5; see also Williams, 1999). However, it is criticized and argued that these market-centered definitions rather describe the logic and mechanism of corrupt interactions than the term in its proper sense. For instance, Johnston (2001b, p. 19) argues that this definition “overlooks not only the intangible benefits (prestige, promises of political support) that can flow from the abuse of authority, but also varieties that are not quid pro quo exchanges, such as embezzlement.” Moreover, the basic assumption that individuals are always self-interested and behave rationally to maximize their utility has to be questioned as well (Johnston, 2001b). Public-Interested-Centered Definitions In contrast to market-centered definitions, public-interest-centered definitions address both the nature of corruption and its consequences and allow, thus, for broader interpretations (Johnston, 2001b). They emphasize the moral aspect of corruption and take into account the harm done to the public by corruption. As a result, corruption is seen as an erosion of public interest. These definitions consider any activities of political or administrative officials as improper when they conflict with the public interest, as illustrated by Friedrich’s definition: “The pattern of corruption can be said to exist whenever a power holder who is charged with doing certain things, i.e., who is a responsible functionary or officeholder, is by monetary or other rewards not legally provided for, induced to take actions which favor whoever provides the rewards and thereby does damage to the public and its interests” (Friedrich, 1966, p. 74). Fheiden The shortcoming of these definitions, however, is the lack of a clear definition of public interest that varies from society to society. Also the definition itself and consequences of corruption such as the harm to the public of corruption are different issues and should be analyzed separately (Theobald, 1990; Johnston, 2001b; Gardiner, 2009). Public-Office-Centered Definitions Public-office-centered definitions are based on the bureaucratic ideal types of modern administration of Weber and Parsons (1964) and implies to its 1.2 Definition and Characteristics of Corruption 31 concept of public office. They describe corruption in terms of deviations from the norms to which professional office holders are usually bound (Bayley, 1966; Nye, 1967; Myrdal, 1968). Here the standards defining abuse are the law or regulations that have the force of law. Proponents of these definitions suggest that laws in most countries are more precise and stable than public opinion or conceptions of public interest (Johnston, 2005). In this context, Nye (1967, p. 419) concentrates on formal-legal norms and provides the best-known example of public-office definitions. He describes corruption as “behavior which deviates from the formal duties of a public role (elective or appointive) because of private-regarding (personal, close family, private clique) wealth or status gains: or violates rules against the exercise of certain types of private-regarding influence.”15 Yet, corrupt actions are influenced by norms and values that are, in turn, affected by historical developments and cultural changes (Johnston, 2005; Philp, 2006). Thus, determining where to draw the line between legitimate and illegitimate behavior is one of the greatest difficulties in the effort to formulate a definition of corruption. In this context, the activities that constitute illegal corruption differ depending on the country and jurisdiction. For instance, certain political funding practices that are legal in one country may be illegal in another one. Furthermore, in some cases, government officials have broad or poorly defined powers, which make it difficult to distinguish between legal and illegal actions.16 However, while most behavior-classifying definitions of corruption fall into Heidenheimer's (1978) three definition groups, Williams (1999) correctly points out that all of them ultimately rest upon a conception of public office.17 Similarly, Johnston (2005) claims that if we would take the aspect of conse- 15 In addition, he points out: “In short, while this definition of corruption is not entirely satisfactory in terms of inclusiveness of behavior and the handling of relativity of standards, it has the merit of denoting specific behavior generally called corrupt by Western standards (which are at least partly relevant in most developing countries)” (Nye 1967, p. 419). 16 More precisely, Robinson (1998, p. 3) adds in this context, that there are “differences between the form assumed by corruption in developing countries, and between forms of corruption that are growth-retarding or threaten political stability and those that are more benign and do not undermine the economic or political viability of nation states.”. 17 Williams (1999) mentions that even those who attempt to refrain from giving preference to western-oriented or legalistic conceptions of office still define corruption with reference to some underlying conception of office. 1 Thinking about Corruption in Europe 32 quences from Friedrich's definition, we are essentially left with Nye’s public-office-centered definition. Currently, the public-office-centered definition is standard in comparative political science studies and is used by international organizations such as the World Bank and Transparency International, basically considering corruption as “the abuse of entrusted power for private gain” (Rose-Ackerman, 1999; Treisman, 2000; Sandholtz and Koetzle, 2000; Transparency International, 2015c). This classical definition was already proposed in a similar way by Senturia (1931, p. 448): “the misuse of public power for one’s own personal profit” and is based on the concept of corruption as specific social deviant behavior (Friedrich, 1972). Alemann (2004, p. 29) emphasizes the laconic elegance of the term: “Corruption is the coming together of just three terms – public power, private profit and misuse. Therefore, Senturia’s definition seems to be universally applicable to corruption.”18 Primarily working with data from Transparency International and the World Bank, this work refers to this broader definition of corruption focusing on corruption in the public sector or corruption that involves public officials, civil servants or politicians (Transparency International, 2015c). Yet, in this context, private corruption is not necessarily excluded, because the public sector is often in exchange with the private industry, particularly by the awards of contracts (Amundsen, 1999).19 Moreover, it has to be carefully noted that even though this broader definition is appropriate for comparative purposes, it does not meet the complexity of corruption in its comprehensiveness. So, this definition of corruption neglects important elements of a narrower understanding of corruption implying some other valiant aspects (e.g. exchange, interaction of at least two partners, secrecy, trust).20 Furthermore, it is still unclear by which standards terms such as “abuse”, “entrusted power” or “private 18 See also Collier (2002); Kunicová and Rose-Ackerman (2005) and O'Connor and Fischer (2012). 19 Similarly, Tanzi (1998, p. 564) claims that “sometimes, the abuse of public power is not necessarily for one`s private benefit but for the benefit of one`s party, class, tribe, friends, family and so on. In fact, in many countries some proceeds of corruption go to finance the activities of the political parties.” Likewise authors such as Rose-Ackerman (1978); Rose-Ackerman (1999); Holmes and Roszkowski (1997) or Johnston (2005) rightly stresses that a precise distinction between public and private is almost impossible. 20 See Rabl (2008, pp. 23–25) who gives a good overview of certain other aspects of corruption: 1. Initiative; 2. Exchange; 3. Voluntariness; 4. Secrecy; 5. Reciprocity; 1.2 Definition and Characteristics of Corruption 33 gain”, which are matters of contention and are difficult to operationalize, can be identified. In this context, Johnston (2001a, p. 17) also argues that “Many scholars have sought objective standards, arguing that answers to these questions can be found in the law or other formal regulations, or by making reference to the public interest. Others propose subjective or cultural definitions, pointing out that “the public interest” is vague and contested while laws may enjoy little legitimacy. Public opinion or cultural standards are also promoted as one way to assess the significance of corruption – that is, whether and how a corrupt act matters in a given context. Not surprisingly, no universally applicable standard has been found.” In fact, the meaning of these certain corruption terms often depends on societal culture and varying interpretations (Gardiner, 2009; Rothstein and Torsello, 2013). Additionally, the standard definition of corruption disregards certain differentiation between active versus passive corruption and various forms of corruption such as bribery, fraud, extortion or favoritism that are described in the following chapter. However, Rothstein and Torsello (2013) could recently demonstrate that corruption is a phenomenon that is universally understood in a similar manner across different cultures. Based on a quantitative analysis of ethnographic data from the Human Relations Area Files, they reveal that the variation in how bribery, for instance, is understood in different cultures does not relate to different morale understandings of the problem of corruption, but to how different societies value the difference, convertibility or blurring goods belong to the public and private spheres and also what most people expect that most other people in their society will do when faced with opportunities for bribery. Referring to the term “entrusted power”, there is also an agreement in the scientific community on the fact, that the abuse of trust is viewed as morally reprehensible in all culture groups. Therefore, the term is conceived as an essential and universal element of corruption. Despite some weaknesses, for the purpose of this work the public-office-centered definition, that particularly Transparency International and the World Bank apply to, is the most convincing and eligible one and will thus be used in the following analysis. 6. Violation of norms / deviant behaviour; 7. Corruption as social decline; 8. Abuse of power; 9. Absence of direct victims; 10. Trust. See also Alemann (2004). 1 Thinking about Corruption in Europe 34 Characteristics of Corruption The difficulties in defining corruption also stem from various attempts to devise dichotomies such as public versus private, petty versus grand, or passive versus active corruption or varying forms of corruption such as bribery, fraud, embezzlement, kickbacks, extortion or favoritism.21 However, the dichotomies and various forms of corruption often share common characteristics with each other and help to narrow down a useful and workable definition of corruption. The following two-dimensional distinctions are relevant to the following considerations and assist in defining corruption for the context of this research more clearly. Public versus Private Corruption The differentiation between public and private corruption is fundamental for the definition of corruption. Public corruption appears when a corrupt person holds a public office, regardless of whether the corrupting person is a private or public official. It includes the misuse of a public position, more directly political positions of governance, political authority, legitimacy, and state-society relations. In contrast, private corruption occurs in private organizations such as business companies. In this context, people misuse their position for personal gains and consciously violate the norms 1.2.2 21 Bribery describes a payment in money, services, or other valuables to make things pass smoothly, swiftly or more favorable through private, public, or government bureaucracies. Fraud, in contrast, is an act of misrepresentation or deception. It is an economic crime involving a kind of trickery, swindle or false pretence used by ruling groups to enrich themselves. Embezzlement, is a specific type of fraud, includes the misappropriation of property or public funds legally entrusted to someone in their formal position as an agent, trustee or guardian. Kickbacks or secret commissions, in turn, are a special form of embezzlement (Amundsen, 1999). Extortion involves coercive incentives such as the use or threat of violence or exposure of an individual by revealing damaging information in order to induce cooperation. Favouritism means that power is abused by preferring friends, family, and any-body close and trusted, which results in biased decisions regarding state or company resources. Nepotism, cronyism and patronage are subforms of favouritism (Andvig et al., 2001). A great overview and detailed description of the different forms and typologies are found in Tanzi (1998); Amundsen (1999); Eskeland and Thiele (1999); Andvig et al. (2001) and particularly Argandoña (2005). 1.2 Definition and Characteristics of Corruption 35 of the organization they work for. For instance, private corruption takes place when bribes are demanded or supplied by employees of firms (Williams, 1999; Argandoña, 2005). In the following project, I concentrate on public corruption because corruption usually occurs at the public sector of states (Amundsen, 1999). In addition, Amundsen (1999, p. 2) even claims that almost every definition and concept of corruption concentrates on the state and politics and concludes that “the state is always involved.” She argues that corruption fundamentally implies a particular state-society-relationship. One side of the relationship is the state that includes individuals holding positions of authority to allocate rights over public resources in the name of the state such as civil servants, functionaries, bureaucrats or politicians. The other side is society that is betrayed when these persons misuse the public entrusted power for private benefit by accepting some form of reward. The involvement of the state in corruption is also illustrated in an alternative definition, where corruption is seen as “a form of secret social exchange through which those in power (political or administrative) take personal advantage, of one type or another, of the influence they exercise in virtue of their mandate or their function” (Mény, 1996 quoted in Sardan, 1999, p. 49). Petty versus Grand Corruption Another widely used dichotomy of corruption refers to the distinction between petty and grand corruption. Petty corruption involves facilitating small-time payments that are paid out to clerks and other minor officials. “Low level corruption”, “tea money” (Tilman, 1968, p. 439), “administrative or bureaucratic corruption” (Shah, 2007, p. 235; similar Tanzi, 1998) are often used as synonyms for petty corruption. It refers to minor decisions of officials and can be found in the public administration, in fact, at the implementation end of politics. Petty corruption may include bribes to police-officers at traffic controls or to doctors in the day-to-day performance of their duties (see also Johnston, 1982; Argandoña, 2005). Contrary to petty corruption, grand corruption involves large payments and have large effects to high-level decision makers. “Top level corruption”, “situational or structural corruption” (Höffling, 2002, p. 32) or “outright bribery“ (Tilman, 1968, p. 439) or even “political corruption” (Tanzi, 1998, p. 564) represent other synonymous terms for grand corruption. It mostly describes long-term, consciously planned corruption at the highest 1 Thinking about Corruption in Europe 36 social and political level among the country’s leading elites.22 Langseth (2006) argues that the most critical distinction between petty and grand corruption is, that petty corruption develops and exists within the context of established governance and social frameworks, while grand corruption involves the distortion of the central functions of government. Therefore, especially grand corruption may lead to broad erosion of confidence in good governance and the rule of law (Rose-Ackerman, 2000). Corruption in the public sector can encompass both petty and grand corruption, but often refers to grand corruption (Amundsen, 1999; Jenkins, 2007). The definition of corruption by Transparency International as “the abuse of entrusted power for private gain” includes petty as well as grand corruption. Passive versus Active Corruption The differentiation between passive and active corruption is another important dichotomy. The initiative to corrupt acts can either be passive or active. Passive corruption is demand-driven and implies that the initiative comes from the person who receives the payment. Active corruption means that it is supply-driven and the initiative comes from the person who pays. In fact, active corruption is the offense committed by the person promising or giving the bribe as in contrast to passive corruption, which is the offense committed by the person who receives the bribe. In the terminology of criminal law, the dichotomy is used to differentiate between a corrupt act and an attempted offence. For instance, active corruption does not include cases, where bribes were offered, but not accepted, or solicited, but not paid (Langseth, 2006). Corruption in the public sector can include both active and passive forms of corrupt actions (Argandoña, 2005).23 22 Jain (2001) even distinguishes three types of corruption: Grand corruption that relates to politicians, making decisions motivated by self-interests; bureaucratic corruption that includes activities of bureaucrats with their political leaders or with the public and that is also known as “petty corruption” and legislative corruption that is defined as actions that influence the voting behavior of legislators. 23 Undoubtedly, there are many more typologies of corruption, but those more specifically apply to corruption in the private sector. Examples include positive versus negative corruption (Argandoña, 2005) or market versus parochial corruption (Scott, 1972; Lambsdorff, 2002). 1.2 Definition and Characteristics of Corruption 37 Theoretical Approaches on the Causes of Corruption Due to the complexity of corruption, an overall theory of this multifaceted phenomenon does not exist. Previous research offers different theoreticalconceptual approaches and includes a variety of causal explanations for the extent of corruption – ranging from institutional settings, certain motives, and culturally influenced norms and values affecting corrupt behavior of individuals. In order to build a solid foundation for the analysis and the explanation of the causes of corruption on different levels and across certain countries, I will introduce and discuss certain theoretical perspectives from different disciplines that provide useful concepts for the research of corruption and offer a solid theoretical framework for further empirical studies. These approaches, namely economic (e.g. principal-agent-model) and sociological (e.g. cultural approaches such as sociological, historical institutionalism), can be applied to certain analysis levels. Thus, they form the theoretical ground for the explanation of the extent of corruption in European states and complement each other. Economic Perspectives: The Role of Rational Interests on Corruption Since the early 1970s, economists have made numerous contributions to the analysis of corruption. In compliance with the market-centered approaches by Heidenheimer (chapter 1.2), they are grounded in rational-choice approaches, such as the property rights approach,24 transaction cost analysis25, and particularly the principal-agent theory. These approaches gene- 1.3 1.3.1 24 In the property rights literature decisions by individuals concerning goods are assumed to be affected by the kind of property rights individuals can exercise. “These property rights can be user rights, usufructuary rights and transfer rights. An individual who owns a house will make different decisions about maintenance than an individual who is a tenant. In the property rights literature institutions constitute property rights of individuals, as well as the means for these individuals to defend themselves against infringements of these rights” (Groenendijk, 1997, p. 208). 25 The transaction costs theory emphasizes the importance of transaction costs for the allocation of resources and the structure of economic organization. “Transaction costs depend on the incidence of the transactions, the degree of uncertainty that the 1 Thinking about Corruption in Europe 38 rally include a strong actor-based perspective that I will primarily focus on (Shleifer and Vishny, 1993; Lambsdorff, 2002). Rational-choice approaches are based on the concept of methodological individualism that assumes that social phenomena at the macro level can only be accurately described and explained by showing how they result from the intentional states that motivate individuals at the micro level (Arrow, 1970). As a result, social phenomena such as norms, values or social structures and institutions can also be analyzed through individual actions. From a micro perspective, economic scholars consider human beings generally as narrowly self-interested actors who attempt to maximize their benefits and minimize their costs by making rational judgements toward their subjectively defined ends (homo oeconomicus) (Downs 1957; Becker, 1968; Olson, 1971). Therefore, corruption is considered as individual misbehavior, motivated by material interests, that arises where and when the costs of engaging in corruption do not exceed the gains expected from it. This implies that people commit or refrain from corrupt acts for purely material reasons and that they are not culturally predisposed to bribery, favors, or fraud (Lambsdorff, 2002; Basu, 2006; Kostadinova, 2012). According to principal-agent theories, corruption is often initiated by the interactions between citizens (or voters) acting as principals and politicians (or public officials) who emerge as agents. Citizens have bounded rationality26 and face high transaction costs in acquiring and processing more information. They choose politicians who, in turn, rule the citizens. In general, it is assumed that both parties – citizens and public officials – have conflicting interests or that their interests are not ideally aligned, so that the authority given to politicians creates scope for actions that voters usually dislike (Rose-Ackerman, 1978; Lui, 1986; Groenendijk, 1997; Andvig et al., 2001). Compared to citizens, politicians have usually an informational advantage and may allow themselves to behave opportunistically: “that goes unchecked because of the high transaction costs faced by individuals face, and the “asset specificity”, e.g. the extent to which the good and the transaction concerned are geared to one another” (Groenendijk, 1997, p. 208). 26 The concept of bounded rationality implies that individuals’ decision-making is limited by the information they have, cognitive capacities and inadequate time (Simon, 1991). 1.3 Theoretical Approaches on the Causes of Corruption 39 principals and the lack of adequate countervailing institutions to enforce accountable governance” (Shah, 2007, p. 241).27 Klitgaard (1988) puts such situations in a succinct nut shell. From his public management perspective, corruption is a problem of information and incentives. To understand the conditions under which corruption flourishes, he offers a largely heuristic model consisting of a principal, a corrupt agent and a client and suggests the following equation: “Corruption = Monopoly + Discretion – Accountability” (Klitgaard, 1988, p. 75). This means that illegal behavior is fostered when agents have monopoly power on clients and display great discretion, as well as when accountability of agents to the principal is weak. Consequently, reducing official discretion, increasing control over officials, and limiting state power would lead to a decline of corruption. Nevertheless, Klitgaard (1988) emphasizes that individual behavior is also affected by moral scruples. In a similar vein, Della Porta and Vannucci (1999, p. 20) describe corruption as a structure of corruption exchanges that involve “a simple exchange between two actors, a corrupter and a corrupt agent (or “the corrupted”), who derives some discretional power from his (implicit or explicit) contractual agreement with a principal.” Thus, corrupt actions often involve groups of public administrators and cartels of businessmen. She argues that corrupt transactions are arranged more easily and faster by the intervention of so-called middlemen who establish contacts between the two parties, conduct negotiations, and finally transfer the bribes. Generally, middlemen favor the formations of bonds of trust between the involved actors and allow the corrupt exchange to be brought to a conclusion (for details see Della Porta and Vannucci, 1999, pp. 20–24). At the macro level, rational-choice approaches may help to detect institutional structures that are prone to corruption. They implicitly assume that “systems corrupt people more than people corrupt systems” (Shihata, 2000, p. 206, quoted in Xin and Rudel, 2004, p. 297). Focusing on economic and political markets that attribute the emergence of corruption to a lack of competition in these areas, they assume that the ability to intervene in markets provides public officials with incentives and opportunities to nurture bribes. In this context, one of the first published articles on corruption and economy that has received wide attention in the academic world 27 For further literature see Becker, 1968; Banfield, 1975; Harris-White and White, 1996; Eskeland and Thiele, 1999; Andvig et al., 2001 and Khan, 2009. 1 Thinking about Corruption in Europe 40 was Rose-Ackerman’s “The economics of corruption” (1975), who considered the relationship between market structures and the frequency of acts of corruption in the government contracting process.28 According to this, corrupt actions do not arise due to low morale, but because of a bad arrangement of rules and institutions that cannot prevent unusual and harmful human actions. Thus, it is often argued that competitive democracies as well as markets are necessary conditions for honest governments because its institutions facilitate accountability, transparency and checks and balances (Rose-Ackerman, 1997; Doig and Theobald, 2000; Paldam, 2002). Furthermore, Becker’s (1968) and Becker and Stigler (1974) studies apply rational choice theory to criminal activities such as corruption of law enforcers (e.g. police). They suggest that one solution to reduce corruption is to increase their salaries to improve the quality of their work and make them less vulnerable according bribery. Other solutions are to implement competition among law enforcers, allow private law enforcers to work beside states agent and the implementation of controlling agents such as anticorruption agents who monitor law enforcement agents. In sum, economic-rational-choice approaches claim that institutional structures such as of governmental institutions and political processes that enable corrupt actions highly influence the emergence and the level of corruption (Shleifer and Vishny, 1993; Bobkova and Egbert, 2012). Summing up, economic approaches present one of many theoretical considerations of explaining corruption. However, they can consider only certain aspects of this multifaceted phenomenon. Thus, the underlying assumption of the concept of methodological individualism, which presumes that people always behave goal-oriented, is often questioned by certain scholars (Wüthrich et al., 2001). Moreover, it is often criticized that rational-choice theories disregard the cultural context in their explanations and particularly neglect social relationships that play an important role in corrupt transactions as well as the reciprocal relationship between structures and actors. Thus, social norms such as interpersonal trust and reciprocity also remain unconsidered (Elster, 1989; Green and Shapiro, 1994). Additionally, rational-choice approaches cannot explain why actors behave altruistically under certain conditions and why moral and ethical standards 28 Rose-Ackerman (1999) gives also a very comprehensive survey of the public choice literature on corruption. 1.3 Theoretical Approaches on the Causes of Corruption 41 sometimes become more important than people’s particular interests (Green and Shapiro, 1994; Hindmoor, 2010). In addition, economic approaches are based on a simplistic view of the state that assumes “that state organisations and public officials are solely motivated by self-interest, and leaves little room for active and conscious intervention by state actors in combating corruption, or for uneven patterns of corruption both within and between institutions” (Robinson, 1998, p. 4). Finally, rational-choice assumptions are primarily theory-based and therefore difficult to examine empirically (Green and Shapiro, 1994; Hindmoor, 2010).29 Yet, economic approaches constitute an important analytical instrument to study corruption and cannot be excluded in this research. They are complement for other approaches to analyze the causes of corruption from a comparative perspective. Sociological Perspectives: The Role of Culture on Corruption In addition to economic perspectives, sociology offers a variety of approaches to analyze and explain corruption. Generally, sociological approaches strengthen the focus on actors’ social actions, their operations in communities, institutions and societies. At the same time, they also highlight cultural norms and values. That way, corruption is often conceived as a way of life, as a kind of tradition and as a set of values that belong to a society’s culture and its institutions. While economists, in particular, neglect informal institutions such as cultural norms in their considerations and rather use the term as a somehow residual explanation (Banuri and Eckel, 2012), sociological approaches strongly focus on it. In fact, they allow researchers to identify and explain differences in behavior among groups and societies and enable them to get beyond explanations of social processes that are the mere aggregate of individuals’ actions (Keating, 2008).30 1.3.2 29 In particular, Green and Shapiro (1994, p. 6) argue that the empirical record produced by rational choice approaches is quite poor: “To date, a large proportion of the theoretical conjectures of rational choice theorists have not been tested empirically. Those tests that have been undertaken have either failed on their own terms or garnered theoretical support for propositions that, on reflection, can only be characterised as banal: they do little more than restate existing knowledge in rational choice terminology.”. 30 Among sociological perspectives, a range of additional approaches exist that are often used in the research of corruption. These usually encompass social learning 1 Thinking about Corruption in Europe 42 In general, sociological approaches do not deny that individuals attempt to calculate their interests, but argue that outcomes are the product of the interaction among various groups, interests, ideas, and institutional structures (homo sociologicus) (Thelen, 1999; Dahrendorf and Abels, 2010). Thereby sociological approaches, namely cultural theories, have a great potential to elicit the factors that affect the extent of corruption. In the literature, culture is often described as property of whole societies that consists of attitudes and behaviors. It is essentially observed as a collective concept, applicable to social groups, composed of shared meanings and interpretations (Geertz, 1973; Hofstede, 1997). For instance, Hofstede (2001, p. 9) defines culture as "collective programming of the mind which distinguishes the members of one category of people from another."31 Welzel (2013, p. 64) even claims that “Like its biological basis, culture is a system of inheritance – programmed to accumulate, to store, and to transmit tried-and-tested knowledge of how to manage reality.” Generally, it is assumed that culture interacts with corruption through two channels, formal institutions and informal institutions such as values and social norms, and that both can differ across and within countries (Elster, 1989; Banuri and Eckel, 2012). Formal institutions are usually observed as formal rules that govern individual behavior and that are also influenced by values and attitudes (Harrison and Huntington, 2000). They are particularly considered by new institutional approaches32 that are often used by sociologists to analyze corruption by particularly stressing the role of institutions actors operate in. Thus, it is assumed that the relationship theory (Bandura, 1977; Vaughan et al., 2005), anomie theory (Durkheim, 1983; Merton, 1968), the theory of structuration (Giddens, 1984; Grieger, 2005), or social exchange theory (Emerson, 1976; Molm, 1994). Based on the research focus, each theory is applied differently when analysing corruption. However, these approaches either examine corruption in the private sector or strongly focus on the micro level and neglect the analysis of the macro level. 31 Additionally, Kroeber and Kluckhohn (1952, p. 357) give a broader definition of the term: “Culture consists of pattern, explicit and implicit, of and for behavior acquired and transmitted by symbols, constituting the distinctive achievements of human groups, including their embodiments in artifacts; the essential core of culture consists of traditional (i.e. historically derived and selected) ideas and especially their attached values; culture systems may, on the one hand, be considered as products of action, and on the other as conditioning elements of further action.”. 32 On the variety of institutional approaches see Lowndes (2010). 1.3 Theoretical Approaches on the Causes of Corruption 43 between institutions and actors are reciprocal and cyclical (Groenendijk, 1997; Scharpf, 2006). Previous institutional theories such as rationalchoice institutionalism33 or historical institutionalism hold that institutions cause individuals within institutions to maximize benefits (regulative institutions) or to act out of duty or an awareness of what one is ought to behave (normative institutions) (Ikenberry, 1994; Thelen, 1999). Contrary to this, proponents of sociological institutionalism consider institutions more widely as social constructs and focus on the way they create meanings for and affect individuals and society within a given context (DiMaggio and Powell, 1983; March and Olsen, 1989; Hall and Taylor, 1996). Sociological institutionalism has particularly emerged in the early 1980s as a variant of new institutionalism and as a reaction to the “undersocialized” character of dominant approaches such as the rational-choice theory or behaviorism that had dismissed institutions as no more than an aggregation of individual preferences (Lowndes, 2010). In contrast to older institutional theories, not only formal but also informal institutions such as socially and culturally influenced norms and values and conventions are also taken into analytical considerations. Thus, institutions explicitly affect the preferences and actions of individuals through rules, norms or other social frameworks (March and Olsen, 1989; Hall and Taylor, 1996). Therefore, the development of institutions also depends of “larger 'macro level' variables such as society and culture” (Koelble, 1995, p. 232) and not in the institutions or organizations themselves (see also Lowndes, 2010). The link between formal institutions and culture is discussed in particular by Harrison and Huntington (2000) and North (1990b) who claim that in the long term, culture influences the evolution of institutions. Moreover, assuming that institutional evolution is path-dependent, historical institutionalists suggest that the historical development of institutions can affect the extent of corruption in a society. In fact, to historical institutionalists, institutions play a determinant role since they shape the actions of individuals but are at times affected by collective and individual 33 Although rational choice institutionalism refers to rational choice theory, it is not identical. Generally, rational choice institutionalists observe institutions as systems of rules and incentives that influence individual behavior by affecting the context in which individuals select strategies to maximize their goals (Lowndes, 2010). They generally deny that institutional factors 'produce behavior' or shape individuals’ preferences, which they view as endogenously determined and relatively stable (North, 1990a; Weingast, 1995; Weingast, 1996). 1 Thinking about Corruption in Europe 44 choices. In this way, they look at how choices made about the institutional design of government systems influence the future decision-making if individuals. This approach does not deny that individuals attempt to calculate their interests, but argues that outcomes are the product of the interaction among various groups, interests, ideas, and institutional structures. Preferences are formed by the institutional context within which they emerge and ought not be treated as fixed and in-institutional arrangements cannot be understood in isolation from the political and social setting in which they are embedded. Historical institutionalism explains continuity over time through path dependence, whereby decisions taken at one time affect those taken at a later stage (Thelen, 1999). Therefore, historical institutionalism provides, in addition to the sociological institutionalism, a further perspective for the analysis of the causes of corruption. Furthermore, the review of the theoretical literature suggests that the relationship between culture and corruption can be examined by the analysis of informal institutions such as social norms that are usually defined as informal rules, driven by values and believes that are constitutive elements of personal identities and govern interaction, and are both shared and sustained by group members (Posner, 2002).34 Social norms can include forms of trust such as interpersonal trust, reputation and reciprocity. As a result, people’s actions are partly intentional and values constitute a central element in people’s intentions. They are a powerful motivator of action and can be a moral resource from societies can profit (Welzel, 2013). People exhibit and signal their norms and values through communication and other forms of social interaction (Rose-Ackerman, 1999; Banuri and Eckel, 2012). In this context, it is claimed that corruption norms are a specific form of social norms and dictate the extent to which individuals engage in, and expect others to engage in corruption (Sandholtz and Taagepera, 2005; Banuri and Eckel, 2012). They work as an informal institution generating incentives and constraints for actors and also shape institutional outcomes (Fjelde and Hegre, 2014). However, while formal institutions are directly observable, informal institutions are more difficult to capture empirically and to isolate from other influences. Nevertheless, they play a central role in explaining corruption and require particular considerations in the following analyses. 34 In a similar vein, Welzel (2013, p. 186) claims that “To assume an impact of values on actions is plausible when one acknowledges that human actions are at least partly intentional and that values shape intentions.” 1.3 Theoretical Approaches on the Causes of Corruption 45 In a summary, sociological perspectives, especially those which include institutional and culture approaches, provide a connection between individual decisions and the behavior of society as a whole. Thereby, they offer an appropriate theoretical complement to economic explanations and an important instrument to analyze and explain causes of corrupt actions. Evaluation of Theoretical Corruption Research The review of theoretical approaches demonstrates that an overall theory of corruption does not exist. Therefore, it is essential to combine certain theoretical perspectives from different disciplines to build a solid foundation for analyzing the causes of corruption on different levels and across and within certain countries. Considering corruption as multilevel phenomenon, that takes place between individuals at the micro level, but is usually measured at the macro level, the economic and in particular sociological approaches offer solid theoretical frameworks for further empirical analyses. Due to weaknesses in their theoretical assumptions and empirical evidences, they are not mutually exclusive but complement each other. In sum, economic approaches, such as principal-agent theory, consider human beings as self-interested actors who attempt to maximize their benefits and minimize their costs (Downs, 1957; Olson, 1971). Thus, corruption is regarded as individual misbehavior, motivated by material interests, that arises where and when the costs of behaving corruptly do not exceed the gains that are expected from it. Assuming that corruption does primarily arise due to a bad arrangement of rules and institutions that cannot prevent unusual and harmful human actions, rational-choice approaches can assist to detect the structures that are prone to corruption. However, as suggested, economic approaches can consider only certain aspects of corruption. They disregard the cultural context in their explanations and particularly neglect social norms and relationships that play an important role in corrupt transactions as well as the reciprocal relationship between structures and actors (Elster, 1989). Moreover, they are primarily based on theory and are difficult to examine empirically (Green and Shapiro, 1994; Hindmoor, 2010). Therefore, rational-choice approaches can only be used as one of several approaches to explain corruption. They should necessary be complemented by sociological approaches, such as institutional and cultural approaches, that focus on individual’s social behavior and highlighting social norms and values. That way, corruption is often conceived 1.3.3 1 Thinking about Corruption in Europe 46 as a way of life, as a kind of tradition and as a set of values that belong to a society’s culture and its institutions. In fact, they allow researchers to identify and explain differences in behavior among groups and societies and enable them to get beyond explanations of social processes that are the mere aggregate of individuals’ actions (Keating, 2008). Thereby sociological approaches, namely institutional and cultural approaches, have a great potential to elicit the factors that affect corruption. Referring to historical institutionalism that particularly assumes that institutional evolution is path-dependent, it is also assumed that corruption evolves over time and has its roots in the past determined by certain traditions and values. Therefore, corrupt actions are not only caused by rational interests and lacks of competition and transparency in economic and political areas but also by certain contexts such as culture, traditions, informal conventions and historical developments that, in turn, influence institutions and organizations people operate in (March and Olsen, 1989; March and Olsen, 2006). However, neither economic nor sociological approaches by themselves can completely analyze the complex phenomenon of corruption and its causes. They can explain some aspects of the extent of corrupt actions, but cannot cover the entire width of possible explanations. Overall, it is assumed in this project that different motives such as rational interests or certain norms and values can lead to individual actions of corruption in the public sector. According to corrupt actions of civil servants, for instance Tanzi (1998, p. 572) notes that "some public officials will be corrupt perhaps because of their own psychological or moral makeup […] realistically not all officials respond the same way to the same incentives […] agents are heterogeneous.” For these reasons, both, economic-rational considerations based on private profit and sociological considerations referring to social motives, cultural and history, play a fundamental role and cannot be regarded separately in the explanation of the extent of corruption. Both theoretical approaches are to be found in the selection of the independent variables and hypotheses. Empirical Studies of the Causes of Corruption The empirical search for the causes of corruption has led researchers from different disciplines to consider a broad spectrum of variables based on various methodological avenues. Overall, the literature review indicates 1.4 1.4 Empirical Studies of the Causes of Corruption 47 that the majority of the empirical studies of corruption have either consisted of qualitative case studies that particularly investigate individual cases of corruption, or of quantitative studies that focus on aggregated large-n analyses. By using case studies, Médard (2009), for instance, examines corruption in Sub-Saharan Africa, Lodge (2009) in South Africa, Kpundeh (2009) analyze the institutional framework for corruption control in Uganda, and Sindzingre (2009) compares African and East Asian corruption. Khan (2009), Hutchcroft (2009), Quah (2009), and Hao and Johnston (2009) focus on corruption in Asian societies, while Schlesinger and Meier (2009), Burke (2009), and Anechiarico and Jacobs (2009) study corruption in American states. Furthermore, Whitehead (2009) examines corruption levels in Latin America or You (2015) compares “Democracy, Inequality and Corruption” in Korea, Taiwan and the Philippines. However, in the European context, only a few scholars have concentrated on the research of corruption (Tänzler et al., 2012). For instance, Della Porta and Vannucci (2009) focus in their article on corruption in the Italian party system and describe explicitly the involvement of certain political parties in the organization of corrupt practices, while Pujas and Rohdes (2009) compares party finance and political scandals in Italy, Spain and France. They particularly conclude that the emergence and expansion of corrupt forms of political finance are primarily related to “’political opportunity structures’ rather than a ‘cultural’ predisposition towards corruption” (Pujas and Rohdes, 2009, pp. 739–749). Additionally, Angermund (2009) undertakes a historical study of corruption under German National Socialism and depicts corruption as a structural and propping element of the Nazi Regime and its politics. Furthermore, Miller et al. (2009) deal with corruption in post-communist Eastern Europe. Via focus group discussions they investigate the interaction between post-communist officials and citizens from the Ukraine, Czech Republic, Slovakia and Bulgaria. They particularly conclude that: “There is no […] deep cultural attachment to corruption as a systematic virtue in postcommunist circumstances as it arguably may have been under communism” (Miller et al., 2009, p. 578). In sum, most of these primarily qualitative studies are less focused on the causes of corruption and cannot provide generalizable results. They are strongly case-related and less comparative, so that eligible indicators for an overall analysis model that explains the extent of corruption cannot systematically be classified and generalized. For these reasons and in order to 1 Thinking about Corruption in Europe 48 identify the factors that affect the extent of corruption, I additionally draw on the existing quantitative empirical literature from a comparative perspective and present the most important analyses in this realm of research chronologically. To avoid redundancy, I briefly summarize and evaluate the most important studies and provide a systematic overview of the reviewed studies on corruption, including its dependent and independent variables, levels of analysis, major findings and limitations (see Appendix A). I also highlight research gaps in the field of explaining corruption. Additionally, I will discuss some of these studies in greater detail when I describe the development of the hypotheses in chapter 2.4. Evaluation of Empirical Corruption Research The review of the quantitative empirical literature particularly indicates that the majority of these studies concentrate on the analysis of the macro level (country level) by almost exclusively using macro level indices as dependent variables such as the Corruption Perceptions Index. Some authors attempt to analyze corruption on the micro level (individual level) as they use alternative sources for measuring corruption (see for example Alt and Lassen, 2003; Atkinson and Seiferling, 2006; Glaeser and Saks, 2006; Mocan, 2008). However, all of these studies show that certain economic, political-institutional, historical, cultural and socio-demographic factors might matter as causal explanation of the extent of corruption. However, they partly produce contradictory results. These imply, for instance, controversies referring to the direction of causality and the weighting of causal relationships between certain variables. All in all, most studies refer to these variables as indicators of corruption: the level of economic development (Husted, 1999; Shabbir and Anwar, 2007; Littvay and Donica, 2011), a country’s rate of inflation (Paldam, 2002), level of income (Sandholtz and Koetzle, 2000; Montinola and Jackman, 2002), unemployment rate (Mocan, 2008), economic freedom (Sandholtz and Koetzle, 2000; Shen and Williamson, 2005), a country’s integration in the world economy (Montinola and Jackman, 2002), size of government (Alt and Lassen, 2003; O'Connor and Fischer, 2012), the degree of democracy (Treisman, 2000; Sandholtz and Koetzle, 2000), federalism (Treisman, 2000), the level of education (Glaeser and Saks, 2006; Mocan, 2008), a society’s religion (Seldadyo and Haan, 2006), historical experiences (Xin and Rudel, 2004; 1.4.1 1.4 Empirical Studies of the Causes of Corruption 49 Littvay and Donica, 2011), individual values (Husted, 1999; O'Connor and Fischer, 2012), a country’s degree of ethno-linguistic fractionalization (Shen and Williamson, 2005; Glaeser and Saks, 2006) or an actors’ gender (Seldadyo and Haan, 2006). However, the analysis also clarifies that almost all studies struggle with similar problems, especially from theoretical as well as methodological deficiencies. In sum, there are five areas most of these studies suffer from. Firstly, they provide, to some extent, a weak theoretical framework. This implies that the variables used in the empirical analyses have scarcely theoretical background or underlying models to explain the extent of corruption from a comparative perspective. It is striking that empirical explanations of corruption seem to have generally developed separately from theoretical approaches, respectively there are only little theoretical references and backgrounds. Yet, if approaches or theories are used, then scholars usually apply to rational-choice approaches (Alt and Lassen, 2003), but neglect sociological explanations. This means that corruption is often conceived as rational behavior of individuals who attempt to maximize their benefits and minimize their costs, but a society’s culture, its norms and values are particularly not included in the analysis of corrupt actions. However, studies that only focus on economic explanations of corruption are too biased and cannot analyze this multifaceted phenomenon entirely. Thereby, the review of empirical studies again confirms that an overall theory offering a guideline for the analysis of corruption does not exist yet and is still needed. In addition, all of the analyses, except for two recent studies of Littvay and Donica (2011) and O'Connor and Fischer (2012), suffer from certain methodological weaknesses that are often generated a result of bad corruption data availability. For instance, most of them have examined corruption only by cross-national analyses and often struggle with missing data. Actually, the results produced by cross-section analyses are sensitive to the particular time of observation. They can describe and make inferences about possible relationships between certain variables, but they cannot provide any information to the dynamic development of corruption. In this context, panel analyses can accomplish that by taking multiple measures over an extended period of time. Furthermore, the studies often use smalln-sample such as of the analyses of Shabbir and Anwar (2007) or of Mocan (2008). Moreover, scholars concentrate only either on the individual or the country level to examine the causes of corruption. Studies that attempt to 1 Thinking about Corruption in Europe 50 combine both levels are still rare (Atkinson and Seiferling, 2006; Mocan, 2008; Littvay and Donica, 2011; O'Connor and Fischer, 2012). For instance, O'Connor and Fischer (2012) measure corruption at the macro level by the Corruption Perceptions Index and use independent variables of the micro level such as self-expression and rational values. Atkinson and Seiferling (2006) measure corruption at the micro level by an item of the World Values Survey35 and examine the influence of variables of the macro level such as national economic variables or religion. Finally, the reviewed studies tend to concentrate on countries world-wide and neglect relevant cross-regional differences and variations within specific areas and regions that are extremely important for the explanation of corruption. The perception of corruption varies from society to society and depends on several factors such as historical developments of countries. For instance, Zim (2005) argues that even in the most established democracies of the world people are still faced with problems of campaign financing, lobbies and conflict of interest, which in some cultural contexts would be considered corrupt but in others are legalized avenues of influence. Therefore, it is necessary to find a middle ground between case-studies and highly aggregated analyses that often gloss over significant differences and variations within and between countries and bring a greater focus on individual regions than on world-wide samples. In this context, studies examining only European states comparatively are still not on hand.36 Overall, these certain objections again underlines that an all-embracing model that concentrates on certain levels of analysis and based on data of European countries from a comparative perspective is still needed. Moreover, the analysis of the empirical studies results in the summary of variables that I categorize into economic, political, socio-cultural, and historical variables that are examined at the macro level, and socio-demographic factors, values, norms, and attitudes that are studied at the micro level and my analysis is primarily based on (Figure 1). It is also striking that all the mentioned variables are finally linked to a country’s development of democracy. By also focusing on the question “Is it all democracy?”, in the following considerations this aspect is taken into account. Furthermore, 35 They use the item: “How widespread do you think bribe taking and corruption is in this country?” from the third wave of World Values Survey (1995-1998) for 38.063 observations within 33 countries. 36 This point is taken up again in chapter 3.2 (Corruption in European states). 1.4 Empirical Studies of the Causes of Corruption 51 these variables are integrated in the analysis model of this project (“bathtub model of corruption”) that is introduced in chapter 2.1. Dependent and Independent Variables Soure: Kubbe (2013, p. 35) Figure 1: 1 Thinking about Corruption in Europe 52

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International studies often point to Europe for low levels of corruption. However, recent scandals in nearly all European states illustrate that corruption continues to be on the rise. The author investigates the causes of corruption in Europe. The analysis indicates that a country’s contextual conditions such as the economic development, the degree and duration of democracy or historical factors like the post-communist past strongly influence Europe’s level of corruption. Furthermore, corruption is likely experienced differently depending on interpersonal trust and the justification of bribery. The findings reveal that a bundle of factors adding up to a specific “democratic culture” hinders the growth of corruption by generating strong democratic institutions and fostering citizen norms and values aimed at monitoring and sanctioning corrupt actors. As a result, democracy promotion is the best remedy against corruption spread in Europe.


Auch wenn europäische Staaten vergleichsweise geringe Korruptionswerte aufzeigen, verdeutlichen Skandale immer wieder, dass Korruption ein großes Problem darstellt, mit dem auch Europa stark zu kämpfen hat. Die Autorin untersucht daher die Ursachen von Korruption auf dem europäischen Kontinent. Verschiedene Analysen zeigen, dass Kontextfaktoren eines Landes wie dessen ökonomischer Entwicklungsstand, der Demokratisierungsgrad und die jeweilige Dauer oder historische Faktoren wie die kommunistische Vergangenheit das Auftreten von Korruption stark beeinflussen.

Darüber hinaus spielen interpersonales Vertrauen und die Rechtfertigung von Bestechungszahlungen eine erhebliche Rolle in der Wahrnehmung von Korruption. Insgesamt zeigen die Befunde, dass letztendlich eine „demokratische Kultur“ der Schlüssel im Kampf gegen Korruption in Europa ist. Diese fördert demokratische Institutionen sowie Normen und Werte, die darauf abzielen, korrupte Akteure zu kontrollieren und sanktionieren.