NCPA - National Center for Policy Analysis

AUDITING OUT OF CORRUPTION

July 13, 2007

An international charter -- some widely publicized guidelines that countries can voluntarily adopt -- to give transparency in spending wealth from natural resources is the best way to make corrupt governments more accountable in spending their money, says Tyler Cowen, professor of economics at George Mason University

The idea at first glance seems toothless; but a closer look could find it effective, says Cowen:

  • Citizens could pressure their government to follow such a charter, and the idea of the charter would create a focus for political opposition and signify international support for concrete reform.
  • Foreign corporations would bring further pressures to heed the charter; multinational companies that are active in corrupt countries might receive bad domestic publicity.
  • In the optimistic case, a few poor countries start abiding by the charter and prosper, which attracts more investment and status in the international community -- spreading the pressure to adopt.

Accounting for natural resource revenues would also help poor countries plan effectively:

  • Many poor exporting nations ride their fortunes up and down with the price of oil or other resources.
  • Ideally, these countries should be setting funds aside when the price of their resource is high; but, of course, no one will save money that will be stolen by others.
  • Secure and audited funds can enable better planning for hard economic times.

Simply sending more foreign aid backfires when leaders are corrupt and governance is bad.  And Western governments are not willing to send enough aid to make a big difference.  Revenue transparency is not an immediate fix, but it would increase the productivity of both Western aid and Western trade.

Source: Tyler Cowen, "A Way for Resource-Rich Countries to Audit Their Way Out of Corruption," New York Times, July 12, 2007.

For text:

http://www.nytimes.com/2007/07/12/business/worldbusiness/12scene.html 

 

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