Ending poverty by reducing corruption

Last week the United Nations held a summit on the Millennium Development Goals. This is a set of venerable aims laid out in 2000 and intended to be accomplished by 2015. They include things like improving gender equality and ending extreme poverty. While some people indeed treat them as something to strive for, the goals have received very little attention among the media and thus the general public in the United States. That surely was part of the reason behind holding the much-hyped summit in New York.

During his speech at the summit, President Obama chose to highlight a provision of the financial reform act that passed this summer: that the United States “now require[s] oil, gas and mining companies that raise capital in the United States to disclose all payments they make to foreign governments.” This new measure is not incidental. If enforced, it could have a profound impact on the ability of heads of state to secretly siphon off a portion of the proceeds from natural resource exploration. Companies registered with the Securities and Exchange Commission would have to report what they pay for exploration, enabling watchdogs to track the expenditures and discover how much is missing. It is not a new idea, but one that should have much broader application under the U.S. law.

Of course corrupt governments can get around the law by not contracting with U.S. companies, courting those that fall under a different jurisdiction in order to continue to fund their mansions and Mercedes. The law could be a boon for Chinese oil exploration, since China has demonstrated that it cares less about integrity and accountability than Western countries. But it would be difficult to avoid companies registered in the United States altogether, as has been proved with the success of the Foreign Corrupt Practices Act (which makes foreign bribery illegal). Of course the provision will not end corruption altogether, but it will reduce the space for it by demanding transparency and setting a strong example for others. Perhaps it will even inspire similar laws in other countries.

It is not surprising that President Obama chose to focus on fighting corruption in his Millennium Development Goals speech. While the goals themselves do not include reducing corruption (they are much more concrete), it is difficult to imagine meeting them without some effort in this area. At a side event at the summit last week, Transparency International brought together a panel of experts who went as far as to say that corruption is the main stumbling block to meeting the goals. Presumably most of the side events concluded that their pet issue was the main stumbling block, but the corruption-fighters do have some evidence on their side. TI issued a report showing correlations between levels of corruption and failure to increase access to clean water, to reduce maternal mortality, and to increase access to education. For example, if a woman has to pay a bribe she cannot afford in order to gain a place in a delivery room, or travel on roads that have not been repaired due to illegally diverted funds, she may not survive a difficult birth.

In some of the poorest countries of the world, corruption could make the difference between fulfilling people’s most basic needs and leaving them to perish. That means that a few more dollars in the pocket of someone who is not on the cusp of survival is endangering the life of another human being. It is difficult to imagine anyone accepting a bribe if they saw things in these terms.