Big Government, Small Government and Corruption: an European Perspective. Alina Mungiu-Pippidi Hertie School of Governance

Transcription

1 Big Government, Small Government and Corruption: an European Perspective Alina Mungiu-Pippidi Hertie School of Governance

2 Outline of this talk What is corruption in Europe? Big govt versus small govt impact Some illustrative national examples: Hungary and Romania Consequences of corruption on public spending and EU funds What lessons learned?

3 What is corruption? Abuse of PUBLIC authority resulting in undue PRIVATE profit Any favoritism of public resources allocation (other than by law for special categories) from the part of a public authority is corrupt as it infringes the norm of equal treatment and entails the discrimination of somebody (UNCAC) Any discretionary spending with the goal to bring advantage to companies, parties or individuals in the virtue of particular ties to government should be ranked as corrupt

4 Frequency of bribing map= Source: QOG, Goteborg, ANTICORRP project 4 BCE Korrupciókutató-központ

5 Finland Ireland Denmark Netherlands UK Sweden Turkey Germany Spain Austria Belgium Italy Portugal France Poland Bulgaria Czech Republic Hungary Kosovo Romania Slovakia Serbia Croatia Greece Ukraine mean country response (0-10) Perceived grand corruption= Source: QOG, Goteborg, ANTICORRP project 5 BCE Korrupciókutató-központ

6 Sweden Denmark Netherlands Finland Luxembourg Germany United Kingdom Austria Belgium Estonia France Cyprus Ireland EU27 Malta Poland Lithuania Spain Portugal Slovenia Bulgaria Czech Republic Greece Hungary Latvia Italy Romania Slovakia Favoritism in decisions of government officials (!= always biased; 7= always neutral) Government favoritism (World Economic Forum Expert opinion) To what extent do government officials in your country show favoritism to well-connected firms and individuals when deciding upon policies and contracts? [1 = always show favoritism; 7 = never show favoritism]

7 Sweden Denmark Finland Luxembourg Netherlands United Kingdom Germany Austria Ireland France Belgium Cyprus Estonia Malta EU 27 Poland Portugal Spain Slovenia Lithuania Italy Latvia Romania Greece Hungary Bulgaria Czech Republic Slovakia Diversion of public funds (1= very common; 7=never occurs) Diversion of Public Funds Due to Corruption (World Economic Forum)

8 You are personally affected by corruption in your daily life eb_corr_daily Q 1.8: each of the following statements, could you please tell me whether you totally agree, tend to agree, tend to disagree or totally disagree with it: You are personally affected by corruption in your daily life 1= Totally agree 2= Tend to agree 3 =Tend to disagree 4 =Totally Disagree 5 =DK Romania Greece Cyprus Slovakia Lithuania Portugal Italy Bulgaria Spain Malta Ireland Czech Republic Poland Latvia Hungary Slovenia Mean 2010 Estonia United Kingdom Austria Finland Belgium Germany France Sweden Netherlands Luxembourg Denmark Croatia

9 Big discretionary spending Gov. investment in capital formation (% of GDP) and Control of Corruption ROM BGR POL LTU CZE LVA HUN GRC SVK ITA EST CYP ESP PRT MLT BEL GBR IRL AUT SWE FIN DNK Control of Corruption (1-10 best)

10 So low social investment (health spending) Gov. expenditure on health (% of GDP) and Control of Corruption BGR ROM CZE ITA GRC SVK LTU HUN POL LVA SVN PRT ESP MLT EST CYP GBR FRA BEL IRL AUT DEU NLD FIN SWE LUX DNK Control of Corruption (recoded 1-10 best)

11 If EU member states would all manage to control corruption at the Danish level, tax collection in Europe would bring in yearly about 323 billion more, so the double of current EU budget for Tax collection and Control of Corruption ROM BGR ITA HUN GRC CZE POL SVK LVA LTU SVN PRT MLTCYP EST ESP BEL FRA GBR DEU AUT IRL LUX NLD SWE FIN DNK Control of Corruption (recoded 1-10 best)

12 Deficits and corruption Gov. budget balance and Control of Corruption EST DEU 0 LUX FIN SWE DNK MLT AUT -5 BGR ITA SVK HUN CZE SVN CYP FRA BEL NLD POL ROM GRC LVA LTU PRT ESP GBR IRL Control of Corruption (recoded 1-10 best)

13 Other negative consequences : brain drain Brain-drain and Control of Corruption BGR ROM CZE POL ITA LVA GRC HUN LTU SVK CYP MLT SVN ESP EST PRT BEL FRA GBR IRL DEUAUT LUX NLD SWE FIN DNK Control of Corruption estimate (recoded 1-10 best)

14 EU funds absorption and corruption EU funds absorbed and control of corruption BGR ROM LTU POL LVA GRC HUN SVK CZE ITA EST MLT PRT ESP SVN CYP BEL FRA GBR IRL DEU AUT LUX NLD SWE FIN DNK Control of Corruption estimate (recoded 1-10 best)

15 Discretionary public resource allocation RO Electoral years 2004 (Social Democrats) 2008 (Liberals) 2010 (Liberal Democrats) 2012 (Social Liberal Union) Proportion allocation to government party (%) Votes obtained in local elections (%) Clientelism score

16 HU: Political cycles and market structure Change in market shares of large companies (EU funded construction, ) elections Source: MaKAB, Note: market share=total value of contracts won / total value of contracts won in EU funded construction in time t At least 25-30% of EU funded construction spending is likely to be driven directly by politics This pattern reappears on the whole public procurement market too, albeit it is especially strong for EU funded projects

17 What explains variation across EU countries? Our model OPPORTUNITIES Administrative discretion + Material resources CONSTRAINTS Legal + Normative Corruption Control of corruption Control of corruption= capacity of a society to keep corruption the exception =

18 Our model OPPORTUNITIES Red tape Lack of transparency Large pool of public jobs Large amounts of discretionary funds = govt investment, natural resources CONSTRAINTS Well-performing judiciary Good audit Independent media Active civil society Demanding voters Corruption Control of corruption

19 What is not significant and should not be expected to in the medium term Uniformity: Control of corruption in Europe is achieved in a variety of ways and we should not aim for institutional uniformity Silver bullets: Countries which have adopted Judicial Councils, anticorruption agencies, restrictive party financing have not progressed more as yet Judicial anticorruption where rule of law is weak Unenforced legislation; current huge implementation Gap (between legislation and practice) has gone thru the roof in Bulgaria, Romania, Macedonia, Serbia and Kosovo Global Integrity Report (30-60%) enforcement rather than new legislation is needed, monitoring, etc

20 Constraints Corruption risk in the EU High Low Opportunities Low High Austria Ireland Cyprus Belgium Luxembourg Estonia Denmark Malta Hungary Finland Netherlands Lithuania France Sweden Germany UK Italy Portugal Slovakia Slovenia Spain Bulgaria Czech R Greece Latvia Poland Romania

21 What to do: reduce resources and opportunities - What kind of austerity? - Cut red tape to reduce administrative discretion (time to import, export, pay taxes and so on) - Streamline regulation to reduce informality - Increase electronic access to all public services and foster more Internet access, usage - Increase transparency, especially fiscal transparency (online expense tracking systems become fast best practice) - Far more transparency needed for EU funds - Publish all affiliations, relations (lobby registers) accounts of officials to prevent conflict of interest, fiscal evasion and corruption Cyprus Estonia Hungary Lithuania Bulgaria Czech Republic Greece Latvia Poland Italy Romania

22 What to do: Increase constraints, but not just legal constraints Italy Portugal Slovakia Slovenia Spain Bulgaria Czech Republic Greece Latvia Poland Romania - Protect media from capture (transparency of ownership, govt advertising) - Protect and encourage civil society and Internet media watchdogs - Adopt social accountability designs to protect EU funds (involve local stakeholders and consumers in the planning and monitoring of EU funds) - Monitor judicial capacity - Develop further audit and monitoring capacity

23 THANK YOU

24 Our instruments Source and description Correlation with the others Comparison across countries Comparison across time Aggregate of expert scores- World Bank TI- CPI Expert and business survey World Economic Forum -GCR Public opinion surveys- Gallup CB Eurobarometer Quality of government expert scores- ICRG, QOG survey Very high with independent sources Yes Possible with limitations Yes No High Yes Yes High on national, regional, local estimates Yes Limited High Yes Limited

25 WGI Control of Corruption Opportunities- Red tape Ease of doing business Ease of doing business and control of corruption 10 DNK SWE FIN NLD LUX 8 6 IRL GBR DEU AUT BEL FRA EST PRT SVN CYP ESP 4 2 LTU LVA HUN SVK POL BGR CZE ITA GRC Ease of doing business rank (1-183 worst)

26 WGI Control of Corruption Opportunities- transparency: Online availability of 20 basic public services Online availability of public services for citizens and control of corruption 10 LUX DNK FIN SWE NLD 8 6 BEL FRA DEU IRL AUT GBR 4 CYP ESP EST PRT MLT SVN 2 GRC SVK ROM CZE BGR LTU POL HUN LVA ITA % of basic public services for citizens fully available online

27 WGI Control of Corruption Constraints: Freedom of the press Press freedom and control of corruption 10 DNK SWE FIN LUX NLD 8 6 BEL IRL DEU GBR AUT FRA PRT EST CYP MLT ESP SVN 4 2 CZE LTU POL HUN SVK LVA GRC ITA BGR ROM Press freedom (1-100 worst)

28 WGI Control of Corruption Constraints: critical citizens Internet users and control of corruption 10 FIN DNK SWE NLD LUX 8 6 IRL AUT BEL DEU FRA GBR PRT CYP ESP MLT SVN EST 4 2 ROM GRC BGR ITA POL LTU HUN CZE LVA SVK Internet users (% of population)

29 WGI control of corruption Constraints: Civil society Voluntary work and control of corruption 10 LUX FIN DNK SWE NLD 8 IRL DEU AUT GBR BEL FRA 6 PRT CYP ESP MLT EST SVN 4 2 LTU POL HUN LVA CZE SVK GRC BGR ROM ITA % of respondents doing voluntary work for at least one organization