A No More Tiers Formula to Clean Up Corruption

April 18, 2017

A bipartisan group of eight Senators led by Senate Foreign Relations Ranking Member Ben Cardin (D-MD) has just reintroduced a new version of a bill designed to identify and combat corruption overseas. The Combating Global Corruption Act of 2017 ties some potentially useful anti-corruption measures to a less-than-useful exercise in corruption ranking that will blunt their impact. That’s a shame, but it also suggests an easy fix: junk the ranking.

The bill mandates a number of requirements around foreign assistance: clauses that allow aid contracts to be terminated if ‘credible indicators’ of corruption are discovered, claw-back clauses regarding recovery of misappropriated funds and (best of all) requirements for the disclosure of the beneficial ownership of all contractors and subcontractors receiving aid funding. 

These are valuable steps, but the bill only directs their use in certain countries. The requirements are tied to a State Department review of (amongst other things) recipient country laws, policies and practices regarding detection, investigation, prosecution, conviction and punishment of corruption, and whether or not the government is supporting education, civil society oversight, independent judicial decision-making and international investigations. Countries will be sorted into three tiers: compliance, trying to comply, or not even trying. The list will be published, and tier three countries subject to the anti-corruption requirements.

The tiered system is modeled on the State Department’s Trafficking in Persons Report, credited as a useful diplomatic tool for encouraging countries to do more to fight trafficking. But for all trafficking is a complex and multidimensional subject, it is considerably narrower and more easily quantified than ‘corruption.’  The same applies to measuring efforts to combat it. A wide-ranging review of policies and practices governing an opaque, multifaceted issue without a clear and widely agreed common understanding of what counts as corruption will inevitably end up an exercise in subjectivity. And so the Secretary of State’s corruption measure would join an ever-growing pile of similar subjective measures, none of which have demonstrated any great reliability or influence on real world outcomes related to corruption or poor governance. Take the Worldwide Governance Indicators, with its (largely subjective) control of corruption indicator: as its authors have noted, the measures underlying that indicator show no average change over time. (For a summary and links to literature on why such measures are unreliable in the first place, see here)

What makes all of this particularly unfortunate is that most of the measures required of aid in tier three countries would be valuable everywhere. Wouldn’t American taxpayers want their money back even if it was misappropriated in a country that the State Department thought was trying hard to fight corruption?  Wouldn’t beneficial ownership information be valuable in all countries as a check against nepotism or self-dealing?

In short, the bill suggests using a fuzzy measure to arbitrarily limit valuable anti-corruption tools to a subset of countries. But the problem is easy to address: forget the ranking and make the requirements universal Call it the no-tiers approach to fighting corruption in US foreign assistance. 


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.