2022 - STRATEGIC AND ECONOMIC CHALLENGES POSED BY CORRUPTION

Harriett BALDWIN (United Kingdom) - PRELIMINARY DRAFT GENERAL REPORT

27 April 2022

Corruption undermines institutions that are critical to administering states. It enables terrorist and criminal networks both by providing vehicles for these groups to finance their operations and by weakening the hand of the states that they oppose. Corruption forges links between political elites and organised criminal groups − some of which may be tied to terrorist groups engaged in drug, arms and human trafficking. Corruption weakens societies by undermining economic potential. It is, almost by definition, a misallocation of private and public resources; yet it is difficult to gauge its toll. How does one, for example, attach a figure to investments never made because pervasive corruption essentially raises risk premia and eviscerates the potential for earning returns? Corruption also renders state regulation of the market irrational and ponderous. It undercuts state finances by making fair tax assessment and collection all but impossible. It insidiously rewards the well-connected and untalented while penalising society’s more skilful, productive and virtuous actors who are denied opportunities as channels of influence become distorted by venality. It erodes national financial systems when those systems are flooded with the revenues from corruption. 

Corruption undermines democratic governance, election integrity and civil society participation in the life of the state. This is particularly problematic in countries where democracy is weak, but this malignant force also threatens stronger democracies. Freedom House, for example ranks corruption along with ever more powerful anti-liberal political movements, election subversion, and the breakdown of the rule of the law as among the drivers of a global retreat from democracy. When corruption is institutionalised, it becomes a means by which ruling parties and elites consolidate their hold over the state and the electoral process itself. State capture describes a condition in which well-connected elites state actors use corruption to shape national policies and laws to benefit their own private interests. It allows the corrupt to maintain their power, obtain riches from the state and avoid legal consequences for their theft. 

Russia illustrates the phenomenon clearly. Its leaders, many hailing from the intelligence apparatus, have essentially seized both public and private assets and deployed these to enrich themselves, to maintain their hold on power and to ensure that their narrow interests are advanced globally. Russian corruption has dramatically constrained the emergence of a dynamic private sector and an autonomous and vibrant civil society. 

Given its capacity to weaken the institutional and societal underpinnings of the state, corruption is also a powerful tool of hybrid warfare and national security policy. It is, for example, an instrument frequently deployed by Russia’s security apparatus not simply to purchase compliance, but also to foster weakness and servility. The Kremlin has combined its use of corruption as a policy tool. It deploys its control over important oil and gas industries and corrupt practices to create political and economic dependencies, while sowing distrust, confusion and weakness. Putin’s Kremlin has used this tool not only in countries like Ukraine, but also throughout much of the Western Balkans and in Western countries. 

Both China and Russia have used large investment projects to subvert democratic resilience, foster dependence and weaken the capacity of recipient societies to counter the agenda of authoritarian competitors both domestically and internationally. 

Bribing decision makers responsible for signing large infrastructure contracts both creates vulnerabilities and provides these authoritarian states with “shills” prepared to do their bidding both because they have been paid to do so and because they are vulnerable to blackmail − or worse.

For these and other reasons, the question of how to reduce purposeful and incidental complicity in corruption, particularly where it poses a strategic threat, has moved to the centre of the international agenda. The introduction of comprehensive sanctions against Russia following its invasion of Ukraine marks a sea change not only in international relations, but in how Allied governments intend to address the problem of international corruption and its security implications. 
 


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