Corruption – a question of perceptions

 A few recent headlines: “Denmark, New Zealand and Singapore top list of least corrupt countries” , “The 10 Most (and 10 Least) Corrupt Countries in the World”, “Israel stalls in rot ranking” . In case you’re wondering, the stories were all about Transparency International, which ranks countries on a scale from zero to ten. Low scores, for example Somalia’s 1.1, indicate severe corruption; high scores, such as Denmark or Singapore’s 9.3, suggest public and commercial life are squeaky clean.

Now 15 years old, the Transparency International (TI) index is probably regarded as the leading tool for measuring corruption worldwide. Which is interesting, because it doesn’t actually measure corruption. Instead, it measures perceptions of corruption. The distinction is crystal clear in the name of the index – it’s the Corruption Perceptions Index, not the Corruption Index – but it’s often blurred in media coverage. Does it matter? In some ways, not really.

Corruption is, by its nature, secretive and can’t be measured directly. (Even detecting it is difficult, not least for tax officials.) So, instead, corruption has to be “measured” through surveys. These usually involves asking businesspeople, international officials and others questions, such as the extent to which they’ve encountered corrupt practices. TI pulls together 13 of the most reputable surveys from around the world, does a lot of number crunching, and produces its index. But, in other ways, the tendency of the media and investors to ignore the “Perceptions” bit of the Corruptions Perceptions Index may matter a great deal.

At the very least, we need to ask whose perceptions are being measured. In many cases, “it’s ‘experts’ or business managers, many of whom live outside the countries they are rating”, argue Charles Oman and Christiane Arndt in a new paper  from the OECD Development Centre . By contrast, it’s rare to hear of the experiences of the man or woman in the street, in part because compiling such data is expensive and time consuming. The paper argues that there are other issues, too, that need to kept in mind when it comes to “governance” indicators, such as the Corruption Perceptions Index and the World Governance Indicators . One is the use of a single “point score”, e.g., Somalia’s corruption rating of 1.1. What does that number actually represent? First, it reflects realities – or at least perceived realities – on the ground. But, of course, reality is complex, and can’t always be represented by a single number.

Nevertheless, says the paper, because of “the well documented tendency of people to believe that numbers are facts” the number can come to be seen as the reality, and may shape important decisions on a country’s future, such as foreign investment. Second, the number represents the output from some tricky statistical calculations. Like most such outputs, it comes with a health warning – in this case a “confidence interval”. In effect, that’s a statistician’s way of indicating that the difference between, say, Somalia’s 1.1 and Myanmar’s 1.4 may – or may not – be significant.

Like any reputable agency, TI clearly indicates the survey’s confidence indicators. However, journalists and investors may be less discriminating: As Oman and Arndt write, “Users tend widely to use countries’ governance scores as if they were accurate to a degree they are not.” So, should we ignore Corruption Perceptions Index? Not at all, but like any survey it has limits. Understanding these can ensure it’s not misused, and so ultimately make it more useful.

Useful links:

Measuring Governance, by Charles P. Oman and Christiane Arndt

Policy Brief No. 39 from the OECD Development Centre

Brian Keeley

3 comments to “Corruption – a question of perceptions”

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  1. Baye Kambui - 29/10/2010 Reply

    Meanwhile, the same businessperson who “perceives” corruption in Equatorial Guinea has no problem with “legally” tossing mounds of money to political campaigns and lobbyists in America to garner legislation that favors the person’s company.

    So, what’s the difference the payoff to the President of Equatorial Guinea is perceived as direct, while the payoff to legislators is done through an intermediary?

    [scratching my head]

  2. Harvey Jackson - 30/10/2010 Reply

    @ Baye Kambui: Of course now with the Citizen’s United SCOTUS ruling we are going to perceive even less corruption here in the US, now that outside private interests can spend unlimited money to influence elections without any reporting or transparency requirements. How can it be corruption when it has been made explicitly legal?

    • Baye Kambui - 30/10/2010 Reply

      Great question, Harvey. Is defining “corruption” a legal or moral framework? I view corruption through a moral lens. Regardless of what I think, many businesses today will do many things where the social costs are prohibitively high, but their actions are blessed by the courts or some codified set of rules from regulators.

      Unfortunately, you are correct. The recent Supreme Court ruling turns the moral argument on its head and may make some business owners feel good about sleeping at night since the interpretation of the law makes the perception of corruption not look so bad. (Laughing) Maybe the sleep thing was never a problem.

      Through my lens, anyone who stifles balanced social and economic growth (we don’t need a zero-sum game here), and pays for the right to do so is a party involved in a corrupt act…

      song currently stuck in my head: “fables of faubus (live at cornell university)” – charles mingus

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