Finance, corruption and fake old masters
"our museums are stuffed with fake old masters because the people who authenticated paintings for the Mellons and Morgans of this world were paid a percentage of the price for the authentication. If they said it was no good, they got a few hundred bucks. If they said it was great, they got $100,000."
What has this got to do with finance and offshore? Well, the blog continues, on the subject of credit ratings agencies:
"Issuers will would pay more money for a good rating than a bad one, and issuers are very clear what kind of ratings they want. This is a straight-forward way to pay bribes without ever violating the law."
And this helps expose the World Bank's definition of corruption:
"the abuse of public office for private gain"
as thoroughly mistaken. The corruption of financial markets that nearly brought the global economy to its knees cannot usefully be captured in the form of "abuse of public office." This is thoroughly private sector corruption. (In defence of Transparency International, they will be bringing out a report on private sector corruption before too long.) This leads us to something else, which we pointed out not so very long ago:
"It helps to use the noun “corruption” sparingly and instead to emphasize the verb “to corrupt.” Using the verb shifts our focus away from situations, people, isolated acts and finger-wagging, and toward examining underlying systems, relationships and processes. Markets and governments are built on trust, and the undermining of trust is arguably the greatest danger that confronts global markets today."
A better basic definition of corruption might go something like this:
Something is corrupting if it abuses the public interest and undermines public confidence in the integrity of rules, systems and institutions that are supposed to promote the public interest."
This can encompass the public and private sectors, and focuses on processes, not just narrow acts like bribery that the traditional analyses of corruption focus so heavily on. And if you want to understand why the offshore system is central to the debate, click here.