 Hello and welcome to Hard Copy, coming to you from our studios in Abuja, Amman O'Gun Yusuf. This week, Channel's television in partnership with the United Nations Development Programme began a series of conversations called the Development Dialogue Series. The main addition focused on the subject of corruption and how it affects development. The conversation boasted a panel of experts, one of whom is Professor Mushtaq Khan. Khan is a professor of economics at the School of Oriental and African Studies that saw us at the University of London and Executive Director of the DFID-funded Anti-Corruption Evidence Research Consortium. He is our guest in the programme tonight and we're honoured to have him in our studios. Professor Khan, welcome to Hard Copy. Thank you. It is very interesting that just about a few hours ago, should I say 24 hours ago, Transparence International just released a new report for World Rankings. And I want to take a look at some of the findings. They're saying that a majority of countries are showing little to no improvement in tackling corruption. That corruption is more pervasive in countries where big money can flow freely into electoral campaigns where governments listen only to the wealthy or well-connected individuals. It also shows that anti-corruption efforts are stagnating in the G7 countries. I find that very interesting. And I want a number of questions immediately pop up. One, are governments getting weary of fighting corruption? I think they are getting weary of fighting corruption because they're fighting it the wrong way. And I think the research we are doing and the work we are doing, including in Nigeria, is saying that the way in which we have fought corruption and Nigeria has been at the forefront of fighting corruption has been about trying to enforce rules on very powerful people who are breaking the laws without asking if there is any real support from anyone for enforcing these rules apart from the people in general who are generally not very powerful. So I think the assumption behind a lot of the anti-corruption work has been that these countries and not just Nigeria across the developing world have a rule of law that almost everybody follows the rules, a few people are wickedly breaking the rules, and if we can identify them with transparency and force them to be accountable and take them to prison, then we will go back to a better outcome. The problem is that is totally misconceived. These are very informally operating economies. 70 to 80 percent of the economy is informal. So to begin with, you have a large chunk of people in these societies who aren't following rules not because they're corrupt or they want to break the rules. They simply don't have the capability of following a raft of rules that we have constructed with respect to tax, property rights, registration of companies, etc. At the top we have another bunch of people who don't follow rules because actually it's not in their interest to follow the rules. Now here is a very big difference with more developed countries where powerful organizations need to follow rules in their own interest because without contracting and a rule of law their business goes bust. So when a company in an advanced country is caught breaking the rules and everyone wants to break rules to freeride, they immediately apologize, they fire the people who are breaking the rules and they improve their systems. There's a higher incentive for them to do what is right. There's no way that they cannot follow rules and operate in business, whereas what happens in developing countries is that the powerful don't need a rule of law. They know I am corrupt and you are corrupt, but I can do business with you because there are small number of people who are powerful and they have informal ways of enforcing rules on each other. So if I'm buying cement from you and you don't deliver the cement, I have an informal way of sending someone to collect my cement. I don't have to use my contract and go to court. There are informal ways of enforcing for the top people and the bottom is largely informal anyway. On top of that politics and the Transparency International Report says that is largely about using lots of sources of money which can't come from official sources because official sources are very thin. So politics in these countries engages in a lot of clientlism and patronage. Now once we understand that whole situation, we have to design our anti-corruption very carefully because otherwise we will spend a lot of time trying to do things which cannot be done and then we get depressed and say actually we haven't made much progress. So our work is actually identifying feasible anti-corruption and by that what we mean is anti-corruption that we can do which will have the support of some of the people who are engaged in that activity because they actually benefit from it, who have the power to do something about it and which will improve outcomes for society. Now those? That's not an interruption because we're still going to come to some of the theories and we're going to explore how they have worked in terms of, in practical terms so to speak. I want to quickly still focus a little more on some of the findings of Transparency International. You've answered the question as to whether or not governments are getting where you say they're getting where because of how they're fighting it and there's also the link between democracy and corruption which is getting more and more interesting. Some analysts say that you know for some people and observers they say that since the advent of democracy in developing countries it was seen that the problem of corruption has gotten worse instead of getting better. What exactly is the link between corruption and democracy especially in developing countries? So I think there's a lot of confusion about this issue. If you define corruption as a misuse of power, if you have a very authoritarian regime, an authoritarian regime doesn't have to break laws, it can just pass laws which are in its interest and follow them. So if an authoritarian regime wants to take your land, they don't have to engage in corruption in the courts to do that. They just take it and they pass a law saying it's ours. But that will still be corruption. So if you define corruption as a misuse of power, that is corruption. But if you define corruption as is there a bribery going on, you might not see that. So in the same way you have the old Soviet type regimes or feudalism in the past didn't have corruption in the modern sense because you didn't have to bribe to get. But because the powerful had the capacity to actually pass rules in their own interest, they could misuse power without some forms of corruption. But in my book, that is also a form of corruption. So I think this analogy or this comparison is mistaken. The real question is why is it that some types of corruption are much more damaging than other types of corruption? And one of the problems of a lot of developing countries is not only that the powerful are violating rules, but they're also violating rules in very socially damaging ways. Now you can violate rules in ways that actually create new industries or create new employment. So it's a kind of corruption that we used to see in China or South Korea earlier and people associate that with authoritarianism. But the issue is not authoritarianism versus democracy. The issue is whether when the powerful violate rules, they have compulsions on them to use the assets or the resources productively to create jobs. And what is happening now in developing countries is that the elites, the powerful, don't believe in the future. They don't believe in investing in their country. They don't believe in creating jobs. They believe in taking the money and keeping it stashed away in safe places all over the world. Why is that an incentive for them? I mean, why don't they see the good in at least trying to do good for their people? So if you steal the money but put it back, maybe people will not make so much noise. So I think that's what used to happen in countries like South Korea and Taiwan and Japan and earlier in other countries. All countries went through stages of high levels of corruption when they were developing, when the rule of law is weak. The rule of law only becomes stronger when you have a broad distribution of power in society and lots of checks and balances, which takes time to happen. But what has happened now is that the elites have lost confidence or ownership of their own countries. And I think that's a separate problem from just corruption. So I think we shouldn't look at everything from the lens of corruption. We should also try to ask why the powerful don't believe in their countries anymore, don't have a long term. And perhaps it's because, paradoxically, the popular perception that they're breaking rules means that they're not secured that if the government changes, they will be able to remain. So they take their money out. Now, I'm not making too much of that. The alternative approach is we take this context as given because we can't change the behavior of really powerful people by just exhorting them to behave differently or messaging them to behave differently. They will behave in terms of their own interests. What we can do as social activists, as academics, researchers, as media, is try to identify areas where it is hugely against the interests of the powerful that certain things are happening. And by the powerful, I don't necessarily mean people at the very top. The powerful might be at different levels of society where those people are the ones who are making the decisions. Now, when the decision makers themselves are not benefiting from how things are working out, if we can find an alternative set of rules that works for them, that allows them to make money without breaking the rules, then you have the option of actually an effective anti-corruption strategy. And the point is that we can't do it for the whole of these societies at one fell swoop. We have to do it in areas where there are opportunities, in reforming how, for example, why is there doctor absenteeism in hospitals? If we look at the process in great detail, we might find lots of reasons, and most doctors might actually want to be in the hospital. But for all sorts of reasons, it's not viable for them to do that. Why are hospitals engaging in corruption and procurements of medicines? It might be that the rules are set up in such a way that the capacity of the people involved is such that corruption happens. But we can fix that. There aren't mega interests who are going to stop it from the top if we fix up these systems at the bottom. If they are, then that's not a feasible space for anti-corruption. But our proposition is that there are lots of areas like that. For example, can we help SME clusters get access to electricity without engaging in lots of corruption? And I think there is, because in Nigeria there are laws which allow local grids to be set up. Now, why aren't we focusing attention on how to solve the corruption problem by coming up with feasible solutions which allow some groups of people who might create jobs, these SMEs create jobs, they have the capacity to reinvest in society, but they're forced into being corrupt because the system doesn't allow them to buy power from the grid, doesn't allow them or there's no system for setting up cheap forms of local power. And so what do these people do? They go into diesel smuggling and because of the corruption in the big network, there's now corruption in the smaller lower down as people solve the power problem by now having smuggled diesel coming in and generating electricity. Is those sorts of problems which researchers aren't giving attention to? And I think they're not the big ticket ones which will make transparency international rankings change immediately, but it's those step-by-step processes which build up a society where there are millions of pockets where people are following the rules and once people start following the rules, you will get a lot of pressure, real pressure from powerful people on other powerful people who are breaking the rules. But right now everybody who has anything going on in these kinds of societies is breaking some rule. So when you try and prosecute someone who is breaking the rules, even the guys who are breaking the rules for very selfish reasons, other people are breaking the rules not for selfish reasons but because they have to survive, they don't want to go and give evidence against those people because those people tell them, look, if you come and give evidence we will point out all the rules you are breaking. Now, so that is why the standard anti-corruption doesn't work. Standard anti-corruption of enforcement and so on will only work if 70, 80, 90 percent of your society is following rules. We are not there yet so we have to build that up step by step and that is the ace approach, the service ace approach, the research we are doing. Professor, I would like you to quickly take a look at some of the methods that Nigeria has employed to fight corruption and why they seem not to be working. I will have some quotes from UNODC later as to how even the importance of corruption for Nigerians seem to be dropping. It is dropping in terms of the importance of the things that the government should be handling. But at the beginning of this administration, President Mohamed Abu-Hairi's administration, a number of policies were brought up to at least try and maybe get the buying of the powerful people, some really powerful people at the top. There was a tax amnesty program which they came up with perhaps for people to be able to get more of their money into the formal economy, declare them, pay taxes on them. And I don't know, put them in the formal economy, so to speak. That's one, then there was also the program, the whistleblowing policy, which now they're complaining doesn't seem to be working. Why does it seem that some of these policies, even though the whistleblowing policy, you are supposed to get, I think, a percentage of whatever it is that you declare, not from the person who was found to be corrupt, but the person who told on the other person was supposed to be able to get a percentage. Why do you think that some of these policies have not proven as effective as people thought they would when they were proposed? So it comes back to what I was saying earlier. People follow rules when they have to follow the rules. When there is real compulsion on them because others, their peers, will not tolerate them breaking the rules. This is extremely important to remember. When a society becomes rule following, it's not because there is some external agency watching them and they're scared that if I break the rules, I'll be caught and punished. 90% of the time, if you go to advanced countries, people follow the rules, not because they're scared someone is watching them, but because the rules are in their interest. And if they break the rules and if their peers find out, not the state, not the Anti-Corruption Commission, their peers, the people they're dealing with, their peers will stop dealing with them. So a company in the United Kingdom or in any advanced country is paying taxes, not because they're scared of the tax man, is because if their competitors find out that they're not, or if their businesses they're buying and selling find out, they will stop dealing with them because they don't want to deal with someone who breaks the rules because that destroys their reputation in the market. There is no such compulsion yet in countries like Nigeria, as I said earlier. A company can violate rules and other companies will deal with it because they enforce things on each other informally. So giving them a tax holiday doesn't mean they will start following rules again. You have to ask, can we make a system where it is in their interest to follow the rules that if they don't follow the rules, something terrible will happen to them, regardless of the enforcement. That's the 10% of free riders that are occasionally caught. That's why I think we need to focus at an intermediate level of activity. We can't focus on the big companies right away, and it's not much point looking at the violation by really poor people. It's at the intermediate level, and the examples I gave you. Why do doctors not go to hospitals? Why is procurement happening in the wrong way? Why are skills training programs not working? Why are schools not, you know, here you have ways of redefining incentives where the people themselves who are players will find that now the rules are actually in my, aligned with my interest. If I follow them, I can make money. Of course, if I break them, I can make even more money. But then others, my peers are observing me, and they're saying, look, we are following the rules. We're making, why do you want to make extra money? That's when anti-corruption becomes effective. You have to split the rule violation into those who want to follow the rules and can feasibly follow the rules and others who will observe them. Now, the mistake we keep making is that we don't look at this critically important part of enforcement. That 90% of enforcement happens when the people you are engaging with are enforcing the rules on you. We just think that the EFCC or the ICPC or some anti-corruption agency or Transparency International, they will come and blow the whistle and people will stop. They won't stop. They will only stop when it is not feasible for them to behave in this way in an everyday sense when no one is observing except the people they're interacting with. That's when the rules become enforced. And that's why we focus on this manageable, feasible level of activities which are critically important for development. Have you seen instances where this solution which you propose could work or have worked? Loads of them. So our research is finding lots of such opportunities in the countries we study. Let me give you a fantastic example from Bangladesh. In Bangladesh, we found that skills training programs who are paid to incentivize them to train properly, they're paid when they show that the people they have trained in skills actually have a job. Then we found that a lot of these skills trainers do fraud. Their trainees don't have jobs, but they report they have jobs so they can get paid. Now this is wasting massive amounts of public money in the skills training programs because the trainers are training and the jobs aren't being created. Then we asked why are these skills trainers doing this fraud? And we looked at a whole bunch of a dozen trainers and we found that some of them are doing no fraud and some of them are doing a lot of fraud. So why the difference in the same country? And we found something that we didn't expect that the problem was on the demand side, that the companies who are getting the trainees, their capabilities vary hugely. Now if a trainer is in a cluster of companies which is very capable, those companies want skilled workers because their production lines are moving very fast. If they take an unskilled worker, they immediately see the problem. Whereas if the cluster is low capability companies, their production line is moving very slowly. The skilled worker doesn't add much because they can't do much because the line is moving slowly. They prefer to hire from the street at a lower wage. So if you're a training provider and you're supplying to companies that don't want your people, however much effort you put into the training, you won't get paid, so you engage in fraud. Whereas those whose trainees are getting jobs don't do fraud. Now this is a problem of we haven't thought through can the rules be followed? The rules cannot be followed, so the rules are wrong. So what we suggested in our work in Bangladesh is that skills training should be joined up with investments in raising the capabilities of companies. So if the companies become more capable, we already see that in Bangladesh that when you have capable companies, the training providers do know fraud. And there is a massive improvement in productivity when you supply skilled workers to capable companies, but no improvement in productivity when you supply skilled workers to low-capable companies. I am sure the same problem exists in Nigeria. So this kind of research shows how you can redesign incentives and rules so that the training providers themselves will say, okay, if I train hard, I get paid. Now why should I do fraud? There is nothing genetic in us that we do fraud. We have a whole bunch of rules which force people to engage in rule violation because the people who made the rules didn't think through the consequences at that level of detail. So by thinking through in detail why the rules are being broken at huge development costs because hundreds of millions of dollars are wasted in Bangladesh in skills training programs which actually don't add to productivity, actually don't add to employment because we haven't connected the dots. We haven't connected the capability of the employer with the skill of the worker. So that's the kind of thing we're doing and we're doing similar things in Nigeria, in the power sector helping SMEs, understanding why SMEs are buying smuggled diesel instead of buying power from the grid. Those are solutions which take large chunks of society out of avoidable corruption. We have to take our people out of avoidable corruption, the corruption they actually don't want to engage in and show a development outcome. And when you have wins, the problem with our anti-corruption strategies is we can't show any wins. People don't see any wins. Wondering, do you think at any point corruption efforts could peak? Because if you're also looking at the findings of Transparency International, finding that it was seen that there is a stagnation in the fight against corruption in the G7 countries, you think that we could be at a point where what could be responsible for that stagnation? Just wondering, maybe they've peaked. So I think there's a lot of evidence that the billions of dollars spent globally on anti-corruption has not delivered any sustainable results. Anti-corruption commissions, rule of law reforms, police reforms, ombudsmen, the evidence is very clear. They don't work. They don't work for the reasons that we have been discussing. They don't work because they assume that the society has a set of rules that most people are following and can follow and a few people are breaking the rules. This is the fundamental assumption that is wrong. Almost nobody in our society is following all the rules. So, yes. That's in developing economies. In developing economies, right? But the anti-corruption effort of the G7 is targeting largely developing economies. So they're spending their taxpayers' money trying to help us improve our development outcomes. But because of the misunderstanding of the nature of corruption, a lot of this money is wasted. So there is still time. We need to get back to more viable forms of anti-corruption. The anti-corruption, which actually takes real people out of rule violations, improves outcomes for people, improves jobs, and that is both developmental and step by step moving us in the direction of viable, diversified societies where lots of people are following rules. And at that point, the really problematic, powerful people who are breaking rules can be taken on and defeated. But we can't defeat them in step one. We can defeat them in step six or seven. But if you don't take the first five or six steps, you don't get there. And we have been jumping to steps seven without going through steps one to six. And that is what we are trying to change. Okay. Professor Ken, we have to thank you for coming on hard copy. That's what we draw the curtains tonight. Patricia Marira, managing director at Transparence International said, corruption chips away at democracy to produce a vicious cycle where corruption undermines democratic institutions and in turn, weak institutions are less able to control corruption. So if you wish for our fledging democracy to survive, we mustn't give up on the war against corruption, but maybe we have to come up with new ways to fight them. We look forward to your feedback. Do use the handles on your screen. Thank you for watching. I'm Maupe Ogre Yosef. Good night.