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New thinking needed in corruption war

The World Bank likes to conduct a little test. Imagine you are the last person to leave work late in the evening. You approach your vehicle in the secluded car park. You see a white envelope lying on the floor. You pick it up and find that it contains twenty $100 notes. No one is around, and you know there are no surveillance cameras in the car park.

What do you do?

Participants in this test are given three options: (a) Take the money; (b) Take it for now and think about the best course of action later; (c) Seek out people in authority immediately and give the envelope to them.

In tests conducted across the world, the results are usually quite similar: 17% of people would take the money; 50% would take it and think about it; and 33% would try to give it to the authorities.

Now a twist: what if you knew there was a chance that you were being observed? The results change dramatically. Now, only 4% of respondents would take the money; just 22% would take it home to think about it; and a whopping 74% would hand it in immediately.

Daniel Kaufmann of the World Bank Institute (WBI) was in Nairobi last week and recounted these results. His point? People behave better when they’re under scrutiny. If we put the morality of what we should or shouldn’t do aside for a moment, the ‘white envelope’ test suggests that we do the right thing more often when we’re being watched. And this gives us an important insight into how we should be tackling corruption.

Before we explore what that might be, let us look more closely at what Mr. Kaufmann was here to tell us. He is a great believer in metrics: “If you cannot measure it, you cannot improve it”, in the words of Lord Kelvin. Mr. Kaufmann is a disciple of the measurement method, and spends a great deal of time studying the data he and his team have gathered over the past decade. They now have a set of aggregate governance indicators that cover more than 200 countries.

What is this empirical research telling us? Emphatically, that good governance matters. The WBI refers to a “development dividend” from better governance – a country that improves its governance from a relatively low level to an average level could almost triple the income per capita of its population in the long term. In other words, we could haul many more of our people out of poverty simply by focusing on improving our governance.
Corruption is serious, because it acts as an unnatural tax on investors and households. It is consistently cited as the major impediment to doing business in Africa; and it forces poor households to pay a significant proportion of their income in bribes. Where governance is poor, other development drivers like macroeconomic policies are also compromised.

If corruption matters so much, what should we do about it? This is where it gets interesting. Citing the ‘white envelope’ test, the WBI suggests that much of the current war on corruption – supported by governments and development partners – is actually misguided. National campaigns, the setting up of commissions and ethics agencies, and the drafting of new laws and codes appear to have little impact worldwide. Yet these are exactly the things we in Kenya are focusing on.

We might do better to enforce more transparency in our affairs. The old adage – “sunlight is the best disinfectant” – is a valuable one. The citizen’s right to know and to have access to information has been highlighted by Nobel laureates such as Amartya Sen and Joseph Stiglitz as a key driver of development. So what does a transparency strategy entail?

It involves full public disclosure: of the assets and incomes of politicians and public officials; of parliamentary votes; and of political campaign contributions. It requires an attack on, and full disclosure of, conflicts of interest. It demands financial transparency of local and central budgets; and openly conducted competitive procurement.

Yet it would be folly to imagine that a transparency strategy applies to the public sector alone. As we know very well in Kenya, powerful private interests can have a huge influence on national outcomes, and must be subjected to the same disinfectant as public institutions. Transparency in the private sector might involve things like public blacklisting of firms involved in bribery; a requirement to disclose certain pay scales; and open scrutiny of ownership structures of firms over a certain size.

Transparency is one key element; the intelligent use of incentives is another. Here, the private sector may have much to teach us about tackling corruption. East African Breweries Limited, now a billion-dollar company, was run like a government department not so long ago. Fraud and misappropriation were rife at all levels. What changed? If you talk to CEO Gerald Mahinda, he will tell you a simple fact: the average senior manager used to be fifty-plus years in age; today’s top team is a bunch of thirty-somethings.

Quite apart from the fresh thinking and modern worldview that this generational difference brings to EABL, there is another important impact. Mr. Mahinda will confirm that it is a very long time since he had to fire anyone for fraud or corruption. Why? Because of the power of incentives. Today’s young executive, who feels part of a top corporation, whose contribution is measured and rewarded, who is paid for performance rather than occupying an office, and who has a rewarding career to protect – that person would be indeed foolish to jeopardise his or her career by engaging in the wrong things. There’s simply too much to lose.

So modern business practice has much to contribute to the war on corruption. A younger, incentivised, performance-focused cadre of civil servants could do wonders. Singapore is a great model for this – a career in its elite government organs is on a par with top private jobs.

Transparency and incentives – these are the watchwords of fresh thinking on good governance. Fresh thinking is what we seem to lack in Kenya, stuck as we are in the paradigms of yesteryear. We have yet to encounter a problem for which a commission, a committee or an agency is not a solution. But the real solutions may involve a more essential understanding of human nature.

We should throw open the curtains and allow the sun to shine in. Transparency is the searchlight of good governance. Much of human wrongdoing can be prevented simply because it is being observed. Let us open up our practices and our processes for all to see. And let our top corporations lead the way. If we have confidence in our decisions and ways of working, let us open them up to scrutiny.

The key organ when it comes to scrutiny is, of course, a vibrant and independent media sector. Today, the media in Kenya are under serious attack. This, more than anything, may undermine our drive to growth and development. But that is a subject in itself, to be explored here next week.

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