Corruption: An insider's account

The following article is reproduced here in full because it’s such a rarity – an insider’s frank and revealing account of a corrupt system.

In this morning’s Irish Times, Michael Casey, former chief economist with the Central Bank of Ireland provides a fascinating insight into how the rotten Irish system operates. His final paragraph is as damning as it is depressing.

The many ways of corruption

According to the OECD, bribery and corruption have serious negative effects on economies. The most important of these are the distortion of market signals and competitive forces, the inflation of spending on public procurement, the undermining of productive investment, growth and employment.writes Michael Casey .

As far as Ireland is concerned, it would seem that the bribery and corruption of the 70s and 80s was one of the factors which postponed the arrival of the Celtic Tiger. Back then, “pulling a stroke” was seen as preferable to genuine entrepreneurial activity.

The most clear form of bribery is where a favour is promised or granted by a politician, say, to a benefactor in return for money or benefit in kind. It can take other forms such as nepotism, cronyism, graft, patronage, insider trading etc. Even in the most clear-cut form of bribery, where money changes hands and a favour is given, it is extremely difficult for the legal system to “prove” anything.

Bribery is the rock that the tribunals will founder on. A tribunal could sit for 20 years and still not be able to stand up a charge of bribery. This is certainly true where money is given in cash form and there is no paper trail.

Even though the law is not much help in weeding out bribery it can at least name and shame – although it is not immediately obvious that the recipients have much sense of shame. However, there are several ways in which the favours given in return for the bribe can be fudged to such an extent that all taints of bribery are expunged.

One method is the “name-dropping” one, where the businessman gives money to the politician – usually a very senior one – because it gives him credibility among his business colleagues. It confers name-dropping rights and, of course, all-important access to the corridors of power. Over the years, many businessmen have indulged in this limited form of bribery and it is hard to imagine that their business dealings did not prosper as a result – even in cases where the recipient politician provided no direct or explicit favours. It can also be used to get a quicker or more favourable decision from parts of the public sector.

There is also the “inclusion” method, whereby the politician ensures the benefactor’s company is included on all relevant lists for tendering and public-procurement purposes. The politician may distance himself from this practice by asking his aides to draw up the lists.

If the politician decides to go further and interfere in the tendering process, this can be done in complete safety by, for example, informing the benefactor company about the quotes of competitor companies. This can be done in complete safety since there is no paper trail whatsoever: a one-minute phone call will usually suffice. Another method is “gentle pressure”. A politician may only need to let his aides know what his preferred outcome is. Some aides will read the situation correctly and do their best to deliver the result required.

The benefit can be a benefit in kind. It need not even accrue to the politician but to a friend of his or to a member of his family. This “distancing” technique adds another layer of safety. An even safer version is where the benefit is not given until retirement, when the politician (or aide) will be invited onto a board as a director or consultant.

The provision of inside information (verbally, of course) is yet another foolproof way of doing favours. When an area of a city or town is designated for tax purposes it is a very easy matter to put one’s benefactors in the know so that they can be first in to buy the properties and thereby capture the price rises.

There is absolutely nothing in law or ethical codes to stop any politician from bringing in policies to help his chances of re-election and which do little for the public good. Our history is littered with cases of politicians providing infrastructure and other public goods and services in their own constituencies without any regard for the national interest, formulating fiscal policy without any regard to the needs of the economy, and so on. There are no sanctions whatsoever to prevent or even limit such practices. This is true also of political appointments to quangos and State boards.

New methods of safe bribery are being thought up every week. No code of conduct can keep up with the ingenuity employed in circumventing it. Tribunals won’t make much difference and will ultimately represent bad value for money where the hard-pressed taxpayer is concerned. And it is disappointing to note that the proposed corruption assets bureau has somehow managed to slip off the agenda, just as the authorities have rowed back on freedom of information.

The reality seems to be that as a community we don’t really want to put in the required effort to clean out the Augean stables for once and for all. We’re just not prepared to go that far – maybe because the most likely losers would tend to be the people who make the law.

Michael Casey is a former chief economist with the Central Bank of Ireland