It was the odd uniformity of the suitcase's contents that tipped off the baggage inspector: six thick, identical rectangles. They could have been books, but then again, they could have been six bundles of cocaine. And in August 2007, security was tight at the airport in Buenos Aires; the country was in the midst of a presidential election. It was worth taking a closer look. The suitcase's owner, a Venezuelan businessman just in from Caracas, hesitated briefly when asked to open his suspicious luggage. Out tumbled $800,000 in cash. It was, according to U.S. investigators, an illegal campaign contribution from Venezuelan President Hugo Chávez intended for Cristina Fernández de Kirchner, wife of Argentina's former president and a candidate for the presidency herself. What better to grease the countries' friendship, investigators alleged, than a suitcase full of cash?
Such tales of bribery and corruption are as old as politics. Try as we might to rid officialdom of crooks, however, extorting senators, vote-buying presidents, and judges for sale remain all too common. Whether it's the $90,000 in cold cash that turned up a few years ago in a U.S. congressman's freezer, the "Versailles in the jungle" built with the billions embezzled by Zaire's Mobutu Sese Seko, or the bank balances of oil autocrats in Central Asia, venality and excess remain the scourge of modern global politics.
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But corruption is not simply a moral concern, warranting a collective finger wagging at political leaders. It's blamed -- perhaps rightly -- for many of the world's ills. Corruption is widely accused of being an endemic barrier to economic development, responsible for Africa's lasting poverty and Latin America's perennial stagnation. It is, says the conventional wisdom, what makes poor countries poor. It undermines the rule of law, distorts trade, and confers economic advantages on a privileged few. It prevents aid money from reaching disaster victims, topples buildings thanks to shoddy construction, and strangles business with the constant burden of bribes and payoffs.
Yet the truth is that we have very little idea about how corruption works or how pervasive it is. We have anecdotes about rotten individuals -- a Ferdinand Marcos, a Robert Mugabe, or a Charles Taylor -- but the thievery of a few thuggish rulers tells us almost nothing about the breadth and depth of global corruption. After all, when bribery and embezzlement is done right, it's invisible. Economists haven't even resolved if and when corruption is really a problem: East Asian economies have boomed in recent decades under reputedly corrupt regimes.
What little systematic evidence we do have about corruption comes from surveys administered by groups such as the World Bank and Transparency International. But we economists are skeptical of what people say about corruption (and most everything else, for that matter). It's called "cheap talk" for a reason. And we're especially suspicious of what people say when surveyed on sensitive topics such as bribery and embezzlement. There are obvious reasons to believe that responses to the question, "How much did you receive or pay last year in bribes?" are of questionable accuracy. And if we can't measure something, it's hard to know where it's really thriving, let alone figure out what to do about it.
But all is not lost. The hidden underworld of corruption often reveals itself in unexpected ways -- and in situations that allow us not only to measure actual corruption but to test different methods of preventing it. All that's required, it turns out, is a little economics and a dash of ingenuity. To truly understand corruption, we must watch what people do, rather than just listen to what they say. And as we'll see, damning evidence, like cash-filled suitcases, often leaves footprints in the data for those who know where to look.
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