At the movies, Gordon Gekko assured us that “Greed, for lack of a better word, is good.”
And that’s true in the private sector. If you’re greedy to make products and deliver services in return for money, you’ll be accomplishing positive things: making consumers happy, earning a living, providing employment to people, and so forth.
But greed, when it comes to raking in bribes, isn’t good. Money spent paying bribes isn’t being used productively. It’s simply wasted. So where’s it going?
There are private sector bribes, but they’re small potatoes. As long as there’s competition in a sector, if someone demands a bribe for providing goods or services, you can always move on to another supplier.
Bribery, then, is mostly a problem in dealing with government officials, who have a legal monopoly in a particular area. In India, for example, the entire governmental system was, for decades, set up around bribes. Under the “License Raj,” getting anything done required the approval of a number of low level officials, and bribing each was simply part of the cost of business. Needless to say, that led to slow economic growth.
So along come governments to “save us” from a problem they almost exclusively create.
“[A]nti-bribery enforcement has been transformed since the early 2000s, when NGOs started to raise a stink and America stepped up use of its Foreign Corrupt Practices Act (FCPA),” The Economist reports. “As recently as 2007, the largest fine under the FCPA was less than $50m. Now the worst offenders pay 10-15 times that.”
As with so many government policies, that’s helping the well-connected do even better.
The anti-bribery crackdown is mostly creating work for lawyers and compliance officers. Mike Koehler at Southern Illinois University follows bribery and writes the “FCPA Professor” blog. He tells The Economist that FCPA litigation is “a very aggressively marketed area of the law,” and notes there are “no shortage of advisers financially incentivised to tell you the sky is falling in.”
In fact, anti-bribery law is simply too complex for a normal American to understand. “The FCPA often means what enforcement agencies say it means,” Professor Koehler tells The Economist. “We have only a façade of enforcement.”
That makes it sort of like tax law, health care law and financial law. Tax lawyers and accountants are making plenty of money in the new economy, devising tax breaks for the well-connected. Meanwhile, under ObamaCare and Dodd-Frank, nobody can say for certain what health care law or financial law are. Policies are being made up, often on the spot, by bureaucrats and administered by well-paid lawyers and compliance experts.
Where bribery is a problem, it’s being eliminated. In India and China, for example, governments are cracking down on their bureaucrats and attempting to eliminate bribes.
In the U.S., the target is private companies such as Walmart that are paying the price. “By the time bribe-busters at America’s Department of Justice (DOJ) are done with their own investigation, which began in 2012, Walmart’s bill for lawyers’ and forensic accountants’ fees will be well above $1 billion—and perhaps closer to $2 billion,” The Economist reported. That’s before the company pays any fines.
That’s good news for those accountants, but bad news for Walmart shoppers, who will pay higher prices, whether or not Walmart actually bribed anyone.
Bribery is bad for business. The best way to stamp it out is to encourage the free market to work properly. A big government crackdown will only cost consumers in the long run.