Democracy Lab

Corrupting Perceptions

Why Transparency International’s flagship corruption index falls short.

For nearly 20 years, Transparency International has published a Corruption Perceptions Index that ranks countries (176 last year) according to how corrupt they are perceived to be by a small group of individuals. This approach was chosen in light of the difficulty of measuring actual corruption and the expense of running broad surveys. Transparency International does some great work, pushing issues of transparency and accountability up on the agenda, and there are very many serious and deeply committed people involved. The problem with the Index, however, can be found in the name. Perceptions are not facts, and in this case they may be an unhelpfully distorted reflection of the truth. 

Imagine a situation in which lawmakers in a lower-income country end up shutting major business figures out of a commodity deal. Suspicions of corruption are raised -- but, importantly, with zero evidence. There may have been foul play, but then again, there may not have been. As we all know, stuff happens and it's only natural to want to find someone to blame. But now, with the perception that corporate dealings aren't exactly kosher, that particular country, regardless of the absence of evidence, will be affected in its CPI ranking. 

Then let's say journalists pick up the original story ("Major companies shut out of commodity deal"). It could be due to crony capitalism, or it could just be what happened. To find out more, to whom do they turn to confirm their suspicions? The Index of course! A narrative then begins to develop. "Country X, which is identified by TI's Corruption Perceptions Index as one of the most corrupt countries on earth...." 

This in turn supports a much wider perception of Country X as corrupt. That consequently worsens country X's score in the next round of surveys. And so on. And so on. 

That is, until, a new government decides to rebuild relations with major corporate players. Not necessarily out of any commitment to fighting corruption, and not necessarily with any effect on actual corruption, but out of a fierce desire to stop scoring so badly on that damned index which gets so widely reported. 

What's missing from this vicious cycle is not only evidence of actual corruption in Country X, but any information about how corruption is or isn't affecting the citizens of Country X. 

You'd imagine that many of the staff and chapters of an organization producing such an index would protest internally; and I'm told they do. You'd imagine that even the original creator of the index, Johann Graf Lambsdorff, would call for an end to it -- and indeed he did, four years ago:

"In 1995 I invented the Corruption Perceptions Index and have orchestrated it ever since, putting TI on the spotlight of international attention. In August 2009 I have informed Cobus de Swardt, Managing Director of TI, that I am no longer available for doing the Corruption Perceptions Index."

The underreporting of Prof Lambsdorff's withdrawal from the Index -- though perhaps fostered by the absence of a detailed explanation for the decision -- stands in stark contrast to the ongoing coverage of the Index itself. 

The Corruption Perceptions Index (CPI) is derived by aggregating 13 different perception surveys. There is a striking commonality in the people whose perceptions are actually assessed: "a group of country economists," "recognized country experts," "two experts per country," "experts based primarily in London (but also in New York, Hong Kong, Beijing and Shanghai) who are supported by a global network of in-country specialists," "staff and consultants," "over 100 in-house country specialists, who also draw on the expert opinions of in-country freelancers, clients and other contacts," "4,200 business executives," "100 business executives ... in each country," "staff," "100 business executives from 30 different countries/territories," "staff (experts)," "100 business executives per country/territory," and finally "over 2,000 experts and 66,000 other individuals from around the world have participated [to date]." 

The point here is not that any of these underlying sources are bad, or wrong, or anything other than what they claim. The point is that in aggregating them, the result lacks any sense of diversity. The correlations between the various components run between 80 and 100 percent, because overwhelmingly the same kinds of people are being asked for their perceptions. Now clearly the opinions of an internationally focused elite, typically from a corporate background and perhaps a similar education, may be particular informative in certain circumstances; one or more of the component surveys might be a very useful source for a company considering setting up in business in a new jurisdiction. But do these sources, when aggregated, produce a broader truth about the public's experience of corruption in a given country? 

Earlier this year, University of Minnesota law professor Stuart Vincent Campbell made a number of criticisms about CPI as a tool, even for companies considering their duties under the Foreign Corrupt Practices Act. He gives the interesting example of Brazil, judged by the Corruption Perceptions Index as having a serious corruption problem. 

Perhaps unsurprisingly, the view changes when the experiences of a group of a country's citizens are considered instead of restricting the view to elite perceptions only. Campbell writes that, in contrast to the CPI ranking which in 2010 put Brazil 69th, behind Italy and Rwanda, "The 2010 Global Corruption Barometer [based on a broader survey of Brazilian citizens] found that only 4 percent of Brazilians had paid a bribe, which is a lower percentage of bribe-givers than the survey found in the United States or any other country in Latin America." Interestingly, the Barometer is published by one of my favorite anti-corruption organizations: yes, Transparency International. 

Now, the Global Corruption Barometer isn't perfect. Questions have been raised over the quality (and low cost) of some of the underlying national surveys, with only around 1,000 respondents per country. The most recent release attracted attention because of the absence of a score for China, leading the organization to explain that they had been unable to find a national survey partner to work on this sensitive issue. However, Pew had surveyed more than 3,000 Chinese citizens on attitudes to corruption, among other things, in 2012 (and in 2008).  

On the whole, however, the Barometer is a much more appealing approach than the CPI -- down to the name, which suggests an attempt to get a sense of the corruption climate, rather than the hard ranking the term "index" implies. The Barometer may not be perfect; but what it does is to take a more broadly representative group of citizens in order to try to understand better the actual experience of corruption in different countries. 

When the Corruption Perceptions Index was launched in 1995, there were legitimate arguments for its construction. The cost, back then, of broad citizen surveys was probably prohibitive -- and certainly for an organization of TI's size then. Corruption is, almost by definition, hidden -- so perhaps impossible to measure with great accuracy. It's easy to see how the argument could have been made for using imperfect and narrow expert perception surveys to put some numbers on an important but under-reported phenomenon, and attract media attention to the issue. 

But the world is different now. Transparency International is a global force, and has no shortage of media attention; in general the media emphasis on corruption in lower-income countries is, if anything disproportionate. The media can't be criticized too much for preferring simpler rankings and narratives -- and non-governmental organizations play on this. (Just to be on the safe side, I should note that one of the reasons I worked with the Tax Justice Network to create the Financial Secrecy Index of tax havens was to make the point that some major drivers of corruption begin at home, and to do so in a way that would help the story be reported.) But with the Global Corruption Barometer, TI has already created what looks to be -- or with greater investment, is capable of becoming -- a superior alternative to the Corruption Perceptions Index. This can do more than drive media profile; it can help to focus policy effort where it is most needed. 

The CPI embeds a powerful and misleading elite bias in popular perceptions of corruption, potentially contributing to a vicious cycle and at the same time incentivizing inappropriate policy responses. The index corrupts perceptions to the extent that it's hard to see a justification for its continuing publication. For the good of the organization, its important aims and the many people committed to its success, Transparency International should drop the Corruption Perceptions Index.



Headed South

Why Egypt could turn out looking like Sudan. And that's not good news.

As Egypt's military takeover unfolded this month, comparisons to Turkey's recent history of military meddling were almost inevitable. The Supreme Council of the Armed Forces' (SCAF's) 48-hour ultimatum before ousting Islamist President Mohamed Morsy, the country's first popularly elected leader, prompted easy comparisons to Turkey's 1971 "coup by memorandum." Other observers called attention to the parallels with Turkey's 1960 and 1997 coups, among others. In all three cases, the Turkish military returned power to civilian authorities after intervening, just as the SCAF did following Hosni Mubarak's ouster and as it has recently pledged to do again. Given the current tumult in Egypt, a Turkey-esque transition to civilian rule -- despite its own considerable drawbacks -- would arguably be one of the least bad outcomes resulting from the coup.

There is, however, another, far uglier precedent for Egypt's political trajectory: that of its poverty-stricken, authoritarian southern neighbor, Sudan. Egypt's recent history -- from the overthrow of Mubarak to the election of Morsy to this month's military putsch -- parallels the developments in Sudan in the mid-1980s with remarkable accuracy. Sudan's story from this period, moreover, serves as a potent reminder that coups almost always represent a detour, not a shortcut, toward stable, durable democracy.

On May 25, 1969, Gaafar Nimeiry, a young colonel inspired by the Arab nationalist ideology of Egypt's Gamal Abdel Nasser, seized power in Khartoum, the capital, in a military coup. For the next 16 years, he ruled Sudan in much the same way as Mubarak ruled Egypt beginning in 1981 -- heavy-handed but secular, and accommodating to his Western backers. And just as such tendencies pitted Mubarak against the Muslim Brotherhood in Egypt, Nimeiry faced openly hostile relations with Sudan's Islamist Umma Party. (Those tensions came to a head in 1970 when Nimeiry ordered an attack -- with air support from Egyptian bombers coordinated by Mubarak, an air force officer at the time -- that killed some 12,000 Umma militants and supporters at the party's spiritual base on Aba Island.)

Political repression, however, contributed less to Nimeiry's eventual downfall than systematic mismanagement of the Sudanese economy. During his tenure, rising inflation, high unemployment, and lackluster foreign investment plunged the economy into a tailspin. By 1979, Sudan's GDP was contracting by more than 5 percent annually. As it finally started growing again a few years later, crippling inflation took hold, reaching roughly 40 percent in 1985. When in March of that year Nimeiry announced a rollback of food and oil subsidies in order to repay foreign lenders, including the IMF, protests erupted in Khartoum shortly thereafter. A broad cross-section of Sudanese society -- including doctors, university students, laborers, and union activists -- took to the streets demanding Nimeiry's ouster.

It was precisely this sort of economic malaise that drove the Egyptian protests in 2011. By the time of Mubarak's ouster, 80 percent of Egyptians rated their economic condition as "bad." Poverty was on the rise, with one in four Egyptians living under the poverty line, according to the World Bank. Inflation peaked at 18 percent in 2008 and remained in double-digits through 2010, helping to push up the price of basic goods -- particularly wheat -- despite multibillion-dollar government subsidies. The bleak economic situation hit young Egyptians the hardest. By 2011, Egyptians under age 24 comprised more than half the population, and a whopping 87 percent of the country's unemployed, making it unsurprising that this demographic dominated the ranks of the protesters who overthrew Mubarak.

During Egypt's 2011 revolution, the police mostly remained loyal to Mubarak, but the military proved less reliable -- akin to the circumstances surrounding Nimeiry's ouster in 1985. With protests roiling the Sudanese capital, Sudan's top military commander, Gen. Abdel Rahman Swar al-Dahab, seized power and formed the Transitional Military Council (TMC), which served as the country's governing authority for the next 12 months. Like the SCAF, which ran post-Mubarak Egypt, the TMC bungled basic governing tasks, but also like the SCAF, it followed through on its promise to hold elections in 1986.

Both uprisings -- Sudan's in 1985 and Egypt's in 2011 -- and their subsequent coups held the promise of a more democratic future. At the same time, however, they revealed the hazards of military stewardship. When juntas empowered by so-called "democratic coups" hand over power to civilian governments, the post-coup governments almost invariably find it hard to address the grievances that enabled the coups in the first place. The end result is a cycle of more popular discontent and more coups. Sudan and Egypt have both proved that they are not exceptions to this rule.

But the troubling parallels extend further. Sudan's post-coup elections in April 1986 ushered Nimeiry's former foe, the Islamist Umma Party, into power. But the coalition government led by Umma's Sadiq al-Mahdi thoroughly botched its stewardship of the economy, devaluing the Sudanese pound to roughly 10 percent of its mid-1970s value and allowing the price of basic commodities to skyrocket. In response, the Sudanese flooded back into the streets to protest, setting the stage for a June 1989 coup. This time, it was Omar Hassan al-Bashir, then an army colonel, who led the military back into the political arena.

Like al-Mahdi and his Umma Party, Morsy and the Muslim Brotherhood failed to reverse Egypt's faltering economy. Since Mubarak's ouster, GDP growth has slowed to roughly 2 percent, the unemployment rate has risen to 13 percent, and Standard & Poor's downgraded Egypt's long-term debt rating from BB+ to CCC+. Egypt's foreign currency reserves have also dwindled to $16 billion, half of what they were under Mubarak. While Egyptians chafed at Morsy's creeping authoritarianism, a majority rated having a strong economy as more important than living in a strong democracy in a May public opinion poll. That Morsy could not meet Egyptian expectations for a better economy provided at least part of the impetus for this month's mass demonstrations and coup.

This is where the stories of Sudan and Egypt hopefully diverge. There are reasons to be cautiously optimistic: Gen. Abdel Fattah al-Sisi, the head of the armed forces, has not undertaken a wholesale power grab like Bashir, who held every major post in Sudan's transitional authority. Any expansion of Sisi's power beyond his new roles of deputy prime minister and defense minister would of course be cause for concern. Meanwhile, statistical evidence suggests that nonviolent mass protest, something Egyptian civilians have shown an aptitude for, is a leading indicator for democratization. Such protests succeed by undercutting the legitimacy of authoritarian regimes and fostering more engaged citizenship. This, in turn, creates disincentives for those in power to roll back democratic gains.

But what if Egypt does follow the Sudanese path? Immediate improvements in service delivery since Morsy's ouster could tempt some Egyptians to embrace a military-backed strongman on the model of Bashir. Indeed, with the military now in charge, rolling power blackouts have disappeared, gas lines have melted away, and the police are now fully deployed. The speed of the turnaround has fueled suspicion that the military -- along with Egypt's old guard bureaucrats -- had been purposely undermining Morsy's rule. The return of an authoritarian regime, however, could have disastrous long-term effects on the Egyptian economy. If there is one lesson from 2011, it's that such regimes have a limited shelf life -- a reality that would likely keep international investors away.

Regardless of what kind of regime emerges, turning around the Egyptian economy poses a monumental challenge. If a civilian government takes office, it will face the same economic troubles that plagued Morsy. The IMF has been pushing Egypt to raise taxes and reduce popular fuel subsidies in return for a badly needed $4.8 billion credit line. Morsy could avoid bowing to IMF pressures because of cash infusions from Qatar, Libya, and others, but the faucet will not remain on forever. In the event that such cuts bring Egyptians to the streets again, the military should stay on the sidelines -- lest Egypt risk giving rise to its own Bashir.