Public Services International Research Unit (PSIRU) www.psiru.org Corruption and public services by David Hall Director, Public Services International Research Unit [email protected] November 2012 This report was commissioned by Public Services International PSIRU, Business School, University of Greenwich, Park Row, London SE10 9LS, U.K. Website: www.psiru.org Email: [email protected] Tel: +44-(0)208-331-9933 Prof. Stephen Thomas, David Hall (Director), Jane Lethbridge, Emanuele Lobina, Jenny Nguyen, Vladimir Popov, Sandra van Niekerk Public Services International Research Unit (PSIRU) is part of the Department of International Business and Economics in the Business School at the University of Greenwich (www.gre.ac.uk). PSIRU’s research includes the maintenance of an extensive database on the economic, political, social and technical effects of liberalisation, privatisation and restructuring of public services worldwide, on the multinational companies involved, and on the policies of international financial institutions and the European Union, especially in water, energy, waste and healthcare. This core database is financed by Public Services International (PSI – www.world-psi.org ), the worldwide confederation of public service trade unions. PSI and the European Federation of Public Service Unions (EPSU – www.epsu.org ) commission many of the reports of PSIRU. It has also carried out other research commissioned by the European Commission, other international agencies including the ILO and UNRISD, and by civil society organisations including trade unions and international NGOs. PSIRU coordinated the WATERTIME project, funded by the European Commission under FP5, and collaborates with other universities and research institutions across the world in other research projects. PSIRU University of Greenwich www.psiru.org CORRUPTION AND PUBLIC SERVICES 1. INTRODUCTION AND SUMMARY .................................................................................................................... 4 2. ‘PETTY’ CORRUPTION: BRIBES FOR SERVICES ........................................................................................ 5 3. STATE CAPTURE AND PRIVATISATION........................................................................................................ 6 3.1. STATE CAPTURE AND LEGAL CORRUPTION .................................................................................................................... 6 3.2. PRIVATISATION ...................................................................................................................................................... 7 3.2.1. Healthcare ................................................................................................................................................ 8 3.2.2. Central government .................................................................................................................................. 8 3.2.3. Local government ..................................................................................................................................... 9 3.2.4. Electricity and water ................................................................................................................................. 9 3.3. MULTINATIONALS ................................................................................................................................................ 10 4. THE LIMITS OF EXISTING INITIATIVES ..................................................................................................... 11 4.1. WORLD BANK...................................................................................................................................................... 11 4.2. OECD ............................................................................................................................................................... 12 4.3. USA .................................................................................................................................................................. 12 4.4. TRANSPARENCY INTERNATIONAL (TI) ....................................................................................................................... 12 4.5. OTHER APPROACHES ............................................................................................................................................. 13 4.5.1. Self-regulation and private auditors ....................................................................................................... 13 4.6. WHISTLE BLOWING ............................................................................................................................................... 13 4.7. WOMEN AND CORRUPTION .................................................................................................................................... 14 5. BETTER APPROACHES ..................................................................................................................................... 15 5.1. PAYMENT ........................................................................................................................................................... 15 5.2. WORKER-COMMUNITY LINKS .................................................................................................................................. 15 5.3. MERITOCRACY AND CIVIL SERVICE ............................................................................................................................ 16 5.4. RESISTING PRIVATISATION ...................................................................................................................................... 17 5.5. PUBLIC AUDIT AND FREEDOM OF INFORMATION .......................................................................................................... 17 5.6. EFFECTIVE SANCTIONS ........................................................................................................................................... 18 5.7. POPULAR ACTION AND CAMPAIGNS .......................................................................................................................... 18 5.7.1. Uprisings against corrupt privatisations: the Arab Spring ...................................................................... 18 5.7.2. Tax havens campaign – ATTAC Norway (& global chapters) and Fagforbundet .................................... 19 5.7.3. South African unions campaign against corruption ............................................................................... 19 6. CONCLUSIONS AND SUMMARY OF RECOMMENDATIONS .................................................................. 20 6.1. DEFENDING PUBLIC SERVICES AGAINST CORRUPTION AND CAPTURE ................................................................................ 20 6.2. RECOMMENDATIONS ............................................................................................................................................ 20 7. ANNEXE: SOURCES OF INFORMATION AND READINGS ....................................................................... 22 8. EMPIRICAL EVIDENCE OF THE LEVELS OF CORRUPTION ................................................................. 23 8.1. AFRICA ............................................................................................................................................................... 23 8.2. LATIN AMERICA ................................................................................................................................................... 24 8.3. INDIA ................................................................................................................................................................. 25 8.4. RUSSIA ............................................................................................................................................................... 25 8.5. BALTIC STATES ..................................................................................................................................................... 26 8.6. EUROPE .............................................................................................................................................................. 26 9. PAY LEVELS ........................................................................................................................................................ 28 10. STATE CAPTURE ............................................................................................................................................ 29 November 2012 Page 2 of 50 PSIRU University of Greenwich www.psiru.org 10.1. EUROPEAN VIEWS................................................................................................................................................. 29 10.2. INDIA ................................................................................................................................................................. 29 10.3. USA AND UK LOBBYING AND THE FINANCIAL CRISIS .................................................................................................... 30 11. SOME CASES BY SECTOR ............................................................................................................................ 31 11.1. HEALTH: GLOBAL AND NATIONAL STATE CAPTURE BY PHARMACEUTICAL COMPANIES .......................................................... 31 11.1.1. Global state capture: drug companies and the WHO ............................................................................