A Strategic Approach to Building Integrity and Reducing Corruption in Defence

[Author of box 2.4 is Todor Tagarev]

The crippling costs of corruption, discussed in chapter 1, can be reduced significantly through the application of proven principles, mechanisms and practices of good governance. Governments have a wide spectrum of choices in their efforts to minimize corruption. These can be distilled into three main categories:

• Building integrity;

• Increasing transparency; and

• Improving accountability.

  A simple strategic framework offers an illustration and serves as a guide to shape government investments to counter corruption. This framework combines a philosophical view of corruption with an economic perspective. It couples views on ethics of the great German Enlightenment figure, Emmanuel Kant, with the utilitarian perspective attributed to the 19^th century English philosopher, John Stuart Mill.

  Mill’s utilitarian perspective reappears in a contemporary economic model of crime developed by Nobel Prize winner Gary Becker entitled Crime and Punishment: An Economic Approach. The theory of rational crime proposed by Becker requires that we place ourselves in the shoes of a public employee, bureaucrat or elected government official. According to Becker, any individual with an opportunity to be corrupt evaluates the potential (marginal) benefits of their actions against the expected (marginal) costs if detected and punished. Becker conjectures “… individuals become criminals because of the financial and other rewards from crime compared to legal work, taking account of the likelihood of apprehension and conviction, and the severity of punishment.” His framework was later extended to include the ethical costs of crime.

  According to this approach, two major factors help deter the corruption of elected officials, civilian and military government employees, defence contractors and others in the defence sector. The first is a culturally determined ethical or “moral burden” – if individuals recognize corrupt actions as immoral and unethical, this deters corruption. The second major factor is the “Expected Punishment” – if individuals recognize their actions are illegal, and that they may be discovered and imprisoned, this deters corruption. From this perspective, when evaluating whether or not to engage in corrupt practices, individuals often implicitly consider two costs: 1) the ethical or moral burden of committing an illegal act; and 2) the probability of being arrested and punished. These costs are then compared to potential rewards.

  Assuming diminishing marginal benefits of corrupt actions and increasing marginal costs (see Figure 2.1) an opportunistic official would be tempted to engage in corruption as long as their perceived marginal benefits exceed their expected marginal costs, up to the point where marginal benefits equal marginal costs. Aggregating individual returns over all those engaged in corruption offers a lower bound on the costs of corruption. The total costs of corruption must also capture damage to the moral fabric of society and distortions in the economy that raise the cost of public services and reduce overall economic growth. In this framework, the two ways to decrease corruption are to reduce perceived marginal benefits or to increase the expected marginal costs of engaging in corrupt behaviour.

 ... For the full text of this chapter see the accompanying file below.