Fri, Dec 28, 2007 page9

• Spreading cancer of graft is the foe of nation-building

  In Russia, as elsewhere, little transparency feeds a pervasive gangster culture that can hamstring social and economic progress

  • By Max Hastings / THE GUARDIAN
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  Some of us speculate occasionally, albeit without real cupidity, about what we would do if we suddenly found ourselves in possession of a billion dollars. Even after funding a big house with lots of staff, car with chauffeur, yacht, helicopter and suchlike, there would be enough left to live on the interest, with a few hundred million to spare.

  I suppose one could entrust the money to an enlightened soul to give to deserving causes, but not many billionaires are enlightened enough to do that. Instead, there are today so many doggedly materialistic possessors of surplus wealth that a huge luxury goods industry exists to succor their plight.

  In Paris recently, I heard of a restaurant frequented by Russian oligarchs, where woodcock features on the menu. In France it is illegal to sell this delicious little bird.

  The restaurant exploits its scarcity by charging US$450, and finds plenty of takers. Indeed, the place's average bill for lunch for two is more than US$1,200. This is a boon for those with more cash than they know what to do with.

  Yet how could any human being, however devoted to consuming illegal woodcock, want US$40 billion? This was my first thought on reading the Guardian report last week about the alleged secret fortune of Russian President Vladimir Putin. It is comprehensible that he should want to put away a little something, or even a big something, for his old age. But even if he buys an Airbus as a personal jet and bathes in Krug, he can hardly hope to make much of a dent in US$40 billion.

  The story is plausible, however, because evidence suggests that once a head of state finds himself free to write personal cheques on a national treasury, the privilege almost invariably goes to his head. Some African leaders pocket billions, Zimbabwean President Robert Mugabe notable among them. A World Bank report suggests that the sums stolen by the continent's politicians since the end of the colonial era exceed those given to it in aid.

  JACOB ZUMA

  The international community is dismayed by the prospect that African National Congress President Jacob Zuma is likely to become South Africa's next president -- despite an aide's conviction on corruption charges and the likelihood that Zuma himself will face a similar indictment for accepting bribes from a French arms company.

  Alas, however, Zuma's elevation would merely indicate that South Africa is joining the global pack. Transparency International's admirable reports show that far more countries are corrupt than are not. In South America, for instance, Chile is a beacon of integrity in a continent where corruption is endemic.

  In many places, the cancer reaches from the base of the system -- slipping banknotes into a driving license to dissuade a policeman from issuing a speeding fine -- to the summit: theft by ministers from national exchequers.

  In Britain, we are rightly made uncomfortable by allegations of bribery against British company BAE, with supposed government collusion, to sell arms to Saudi Arabia.

  Occasional police and local authority corruption cases make news. But we still have grounds for self-congratulation that our domestic institutions are honest.

  Scandals involving British politicians involve relatively small sums of money, usually destined for party funds rather than personal enrichment. The cash for honors affair is very small beer by global standards.

  Of course, complacency would be foolish. The threat of exposure by a free media and impartial judiciary is a far more potent incentive toward keeping our politicians clean than any inherent moral superiority prevailing at Westminster. But it remains the case that nobody in this country gets rich out of governing. Former prime minister Tony Blair will make millions from post-retirement speechmaking, but that represents a snub to popular sentiment, not a breach of ethics.

  Russia's condition, by contrast, is desperate. Corruption prevails at every level, partly because government employees are so poorly paid. On the Global Corruption Index, Russia stands close to bottom, between Rwanda and the Philippines. If Putin is not transferring huge sums to a Swiss bank account, then he is one of the few powerful men in his country to miss the chance.

  We seem rashly acquiescent about the expatriate community in London. Few of the Russians who frequent the city's most expensive shops and restaurants have made their pile by anything we would call honest toil. Most are active participants in a gangster culture. Their checks may not bounce, but many are drawn on accounts stuffed with stolen money -- no matter that such thefts may have been authorized by the Kremlin.

  If we allow rich gangsters to locate here, their methods are likely, sooner or later, to infect our own society, in a fashion of which the Litvinenko murder provided a foretaste.

  BANKING TRANSPARENCY

  Paul Collier, in his important book on world poverty, The Bottom Billion, makes the point that corruption will flourish until there is an international agreement on banking transparency. A few weeks ago, as I deposited a check for several thousand pounds at a central London bank branch, the teller asked me where I had got the money.

  When I expressed astonishment, she said: "I'm sorry, but we now have to ask that question about all large sums."

  This is part of a clumsy British attempt to check money-laundering. However, I doubt whether many Swiss banks ask such questions, or ever will, about a deposit of a billion or two by Putin, or indeed Zuma.

  Corruption matters most to the peoples of the poorest countries. Ordinary Russians are so grateful to see their standard of living rise on the back of oil and gas revenues that they are not minded to ask how much cash is being diverted by their leaders upriver. But in Zimbabwe, the Democratic Republic of Congo and parts of central Asia, such behavior causes people to starve.

  In China, Nigeria's Lagos state, Argentina and a few other Latin American countries, some progress has been made in reducing judicial corruption by paying judges more and introducing independent monitoring. Civil cases doubled in China's courts in the decade up to 2005, partly because of an improved perception of the chance of litigants securing justice.

  Worldwide, however, rising competition from emerging markets for energy, commodities and contracts is making corruption worse, not better. The Global Corruption Index highlights Italy among the worst European offenders for paying bribes in developing countries.

  Elsewhere, Russia, China and India are the most notable promoters of commercial corruption, but few developed nations are guiltless.

  Cynics shrug, as they do over the BAE allegations: "It's the way of the world, and always will be."

  Yet the cost is dire for scores of nations. Social and economic progress is overwhelmingly dependent on the rule of law. In its absence, societies chronically underperform.

  It will be a tragedy for the people of South Africa if that country continues its descent -- hastened by increasing curbs on media monitoring of government -- toward levels of corruption prevailing elsewhere.

  It does not seem too extravagant to say that Russia will never become a successful society unless it abandons its gangster ethos. It is scarcely relevant whether Putin has helped himself to US$40 million or US$40 billion.

  What matters is that those who wield power in Russia live beyond the law, a reality that benights any society which falls victim to it.
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