Blog on Bribery

The latest allegations of bribery have been leveled at Walmart’s Mart’s Mexican operations, charging it with covering up illegal proceedings, thus embroiling the company in scandal. More recently, reports circulated that

Walmart, a committee member of the U.S. Chamber of Commerce, had been lobbying the government to amend the Foreign Corrupt Practices Act to reduce liability for companies that bribe foreign officials and exempt companies, such as Walmart itself, that have their own compliance programs. On this last point, lobbyists argue that if internal rules exist, no matter how insubstantial, company executives are off the hook should bribery be uncovered on their watch.

Corruption corrodes the political system and involves a massive transfer of wealth from poor to rich corporations and venal politicians. It also adds an unseen tax, as officials cream their take from major infrastructure projects or privatizations. The World Bank estimates that bribery is a trillion dollar business.

The most lucrative sources of bribes are large capital programs—big dams, big highways, new power stations, massive building programs, and so on —because they provide ample opportunities to inflate prices, with plump commissions flowing back into the pockets of politicians and bureaucrats. As a result, many struggling countries are burdened with expensive white elephants and debts that will cripple its economy for decades to come. In

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New Globalists

© Harry Blutstein 2012

It robs them of contracts they would have otherwise won by tendering the lowest quote. bribes were treated as normal business expense and allowed to be claimed as tax deductions. like electricity and water. Corporations involved in bribery are the big winners. or subsidiaries located in Third World countries. ruthless corporations thrive while good ones struggle or even go under.the end. Globalization has made bribery easier to get away with. For example. shelf companies. Page 2 New Globalists © Harry Blutstein 2012 . Consequently. where deals are done and crimes are committed with every expectation that they will go undetected. These intermediaries can be agents. just as competitors who play by the rules are the big losers. Politicians in developing countries are no less complicit. which invariably translate into “commissions” for helpful bureaucrats and politicians amenable to showing the way through the legislative morass. bribery was not just tolerated by governments but also rewarded. making tracking money transfers difficult. Here we glimpse the sordid back-alleys of globalization. the poor pays through increased taxes they can ill afford and inflated prices for basic services. Bribes are often disguised as commissions to intermediaries who hand over the cash or transfer the funds into Swiss bank accounts where corrupt politicians can keep their identities secret. They create impenetrable rules for businesses that can only be navigated if corporate executives are willing to oil the wheels. Until recently.

the OECD adopted an anti-bribery treaty. Disappointingly. In 1997. even though these two major treaties are now on the books. and in 2005. albeit reluctantly. They know that if they crib. With military equipment. To understand why these treaties have failed. In 2009. Rather than being able to report progress. they can give “their” corporations a competitive advantage. As much as countries accept the evil of bribery.Mainly through the efforts of the US. and aerospace industries fighting for billion dollar contracts. the international community was shamed into taking action to outlaw bribery. we need to look at how the political dynamics play out. as it has in the case of Walmart. Transparency International concluded that the global financial crisis had increased the “risk of backsliding. Cover-ups are usually the order of the day. and relatively few prosecutions have trickled through the courts. there is a strong temptation to game the system. There is a lot of money at stake. the account ended Page 3 New Globalists © Harry Blutstein 2012 . construction. the United Nations followed suit with its Convention against Corruption.” as “competition for decreasing numbers of orders” intensifies. Implementing these conventions by creating local regulations is far from straightforward. the situation has not noticeably improved. unless the scandal hits the newspapers. adding a few millions in kickbacks is awfully tempting.

Behind the scenes. Maybe. to hold its corporations to a higher standard of integrity than the French or Chinese outfits they compete against when trying to win business abroad. lobbyists were at work. What are these prosecutors accomplishing? Maybe they are fighting for truth and justice. which has been at the forefront pursuing strong international bribery laws. ultimately getting Forbes magazine to take up their cause. In a 2010 article. Page 4 New Globalists © Harry Blutstein 2012 . One can only hope that this lobbying will cease in the face of the Walmart revelations.” And they were right. the author argued that the only beneficiaries of the government's crusade seemed to be white-collar defense lawyers. What the Walmart case reveals is that the US speculating that there was a distinct probability that enforcement of the Convention could “go into reverse. I suspect it will renew the efforts of business lobbyists to ensure that it is harder to uncover and prosecute bribery in the future. is being stoutly lobbied to dilute its bribery laws. that is. it makes sense for the U. Sadly.

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