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The Emergence of an International Anti-Corruption Regime: The Hidden Hand of

Domestic Politics

Research Proposal Elitza Katzarova PhD Program in International Studies University of Trento

ABSTRACT

The curbing of corruption has mobilized support across diverging groups, from anti-globalization activists to

liberalization reformers and potentially offers a new platform for consensus on global governance. While the

international anti-corruption regime, largely taken for granted in the literature, and the US Foreign Corrupt

Practices Act (FCPA) of 1977 have both received considerable attention, the link between the two has remained

obscure. The emergence of an international anti-corruption regime is not, as this proposal will argue, a product of

the end of the Cold War, the resurgence of globalization, or the high visibility of Transparency International.

Systemic factors do not suffice for explaining the emergence of the international anti-corruption regime.

This proposal seeks to examine the explanatory value of sub-systemic factors in the emergence of an

anti-corruption regime from the US FCPA to the OECD Convention of 1997 and the subsequent appropriations of

anti-corruption policies in the framework of the EU, UN, the IMF, and other international organizations. Domestic

factors, correlated with the adoption of both the FCPA and the OECD Convention, allow for a deeper

understanding of the emergence of the international regime and its embeddedness in an overarching debate about

the role of government in democratic societies. Furthermore, the impact of sub-systemic factors on the emergence

of an international regime offers compelling support for the argument that the tools of global governance came

from the toolbox of the nation state itself.

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INTRODUCTION:

‘It is true that when I came to the World Bank, I was given an admonition by our General Counsel that I should read the Artic les of the Bretton Woods

agreements. In there it says I am to deal with economic matters and that as an international civil servant, I should not, if I want to keep my job, talk about

political matters. I was then told that there was one word I could not use, which was the "C" word, the "C" word being "corruption". Corruption, you see, was

identified with politics, and if I got into that, I would have a terrible time with my Board.’

James Wolfensohn at the Global Forum on Fighting Corruption, Washington D.C., 1999

When James Wolfensohn became president of the World Bank in 1995, the ‗c‘ word not to be

used was no longer communism, but corruption. By the time the United Nations Convention

Against Corruption (UNCAC) came into force in 2005, the ‗c‘ word had already become an

intrinsic part of the global vocabulary. The story of the formation of the international anti-

corruption regime reflects this remarkable change of attitude and the factors that made it

possible and even desirable. The origin of the international anti-corruption regime however

was not nested in the post - Cold War period and the revival of civil society organizations or

the visibility of Transparency International or the resurgence of academic research as some of

the recent literature suggests (Davies, 2010, Rosevinge 2010).

The origin of the international anti-corruption regime was a national one and this proposal is

going to investigate a specific part of the regime‘s development: the connection between the

US Foreign Corrupt Practices Act (1977) and the OECD Convention on Combating Bribery of

Foreign Public Officials in International Business Transactions (1997). Before Wolfensohn in

the early 1990s, Peter Eigen dared to utter the ‗c‘ word at a World Bank meeting at Swaziland.

The consequences of this event lead to his early retirement from the World Bank after which

Eigen flew around the world to carry out a series of meetings that eventually led to the

establishment of Transparency International in 1992. The international NGO lobbied key

member states through their national OECD chapters and in this manner contributed to the

adoption of the OECD Convention. The major task of negotiating the new Convention,

however, was performed by the US executive. The successful completion of the negotiations

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led to the ‗internationalization of political authority‘ characteristic of regime formation (Ruggie

1982, 380). Before the coming into force of the OECD Convention; that is before 1999,

corruption internationally was happening in a ‗legal vacuum‘ (Galtung and Pope, 1999, 259).

The ‗C‘ word became ‗depoliticized‘ with the fall of the Berlin Wall (Krastev, 2004) and soon

it gained such currency that in September 2010 it has already come to represent, in the words

of President Obama, ‗the single greatest barrier to prosperity‘.

Corruption has grown from an issue investigated by journalists and illustrated through

anecdotal stories to a problem of relevance for the most important international fora. While the

problem of fighting corruption remains the most important issue at stake, its counterpart - the

story of how an international anti-corruption regime came into existence at the first place - has

as much to reveal about the nature of the phenomenon itself as do issues of compliance with

the regime.

The internationalization of political authority, as illustrated by the process of regime

formation, is representative of a broader pattern of political authority in transition and provides

insights into the paramount question of international order. Theories of international regimes

remain valuable vehicles of explanation when it comes to the question of order in international

‗anarchy‘. The role of domestic factors in the emergence of an international regime

supplements the systemic explanation which cannot fully account for regime emergence.

Taking systemic explanations not only as a point of legitimate departure for an international

regime but also as the only explanation for regime emergence will tell a well known story

about the intensification of globalization and the end of the Cold War as well as the emergence

of trans-national civil society and international NGOs with a healthy appetite for democracy.

The anti-corruption regime will appear grounded in the post-Cold War Era and its roots in the

1970s will remain neglected. The domestic source of the international anti-corruption effort

does not offer a more complicated and therefore less parsimonious account of regime

emergence; what it offers is a valuable insight about the broader context in which anti-

corruption efforts are embedded and therefore an alternative interpretation of the emergence of

the international regime itself.

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International regimes and corruption: The conceptual building blocks in the existing literature

The account about Minerva‘s owl in the preface of Hegel‘ Philosophy of Right poses

the argument that one can only become aware of events and subsequently theorize about them

after they have passed. There appears to be a similar thread in the theoretical and empirical

parts of this research proposal since there is a temporal congruence between the emergence of

the literature on international regimes and the suggested case studies. This section first

examines the emergence of academic interest in international regimes in the 1970s and the

1980s, its subsequent maturation and transmutation in the academic literature on global

governance. The literature review will delineate the conceptual ‗building blocks‘ and show that

one consistent point of criticism of international regime scholarship has been ‗its failure to

incorporate domestic politics adequately‘ (Simmons and Haggard, 1987) and to account for

domestic sources of international regimes (Sandholtz and Gray 2003; Zurn 2002; Hasenclever,

Mayer, Rittberger 1996; Young 1986; Strange 1983). Secondly, the review introduces the topic

of corruption by examining some common threads and contradictions in the academic literature

concerning the definition, cause and consequences of corruption.

The Theory of International Regimes

Definition of international regimes, explanatory variables for their formation

and their neglected domestic source

The concept of ‗international regimes‘ did not only break the dominium of formal

structures and formal international legal arrangements in the study of international affairs but it

marked the beginning of a flux of scholarship on the role of ideas and non-material factors in

the field of international relations. The historical context of the early 1970s propelled the

scholarship on international regimes (Haggard and Simmons, 1998). Academic interest in the

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subject intensified in the 1980s. From the early perspective of Haas (1975, 1980) to the

expansion of the literature on international regimes after the special issue of International

Organization in 1982, the utility of the concept of international regime and its ‗woolliness‘ has

remained a contested issue. The concept of ‗regimes‘ however shares the same ‗contested‘

status with a number of fundamental concepts in international relations such as ‗power‘ and the

‗state‘ (Gale 1998; Kratochwil and Ruggie, 1986). In the case of an international anti-

corruption regime the usefulness of the concept comes from the fact that it implies an amount

of cohesion and intentionality which suggests that the disparate international conventions

against corruption form a cohesive whole. The value added of regime theory is that ‗it goes

beyond individual treaties to envisage a ―functional whole‖ composed of a potentially

heterogeneous set of formal and informal agreements, practices and institutions‘ (Hasenclever,

Mayer and Rittberger 1996, 191). The amount of cohesion or the adherence to a criterion of

compliance in order to proof the existence of an international regime varies according to the

definition of the concept.

The definition of international regimes is relatively unchallenged and it revolves around

Krasner‘s (1982, 1983) formulation of ‗principles, norms, rules, and decision-making

procedures around which actor expectations converge in a given issue area‘ (1). A more

formalistic suggestion by Keohane(1993) constitutes an alternative definition which is going to

be employed in the current study. Even though Keohane (1989) agreed with Krasner‘s

definition for the purposes of the volume of International Organization edited by the latter in

1982, he argued that it was not feasible to distinguish between the different components of

‗norms‘, ‗principles‘ on the one hand and ‗rules‘ and ‗decision-making procedure‘ on the other

and suggested that regimes can be studied as ‗governmental arrangements which are intended

to regulate and control transnational and interstate relations‘ (Neumann and Weaver, 1997,

96).1

The formal approach undermines the intersubjective component of regimes (as

convergence of actor‘s expectations) but at the same time does not provide the analytical tools

1 This return to ‘formalism’ in the concept of international regimes contains an ironic twist for an analytical concept which a imed to disaggregate a rigid

approach to international relations that portrayed the international system as being ‘governed’ by a number of formal arrangements in the shape of international treaties, conventions and organizations. Since the definition put forward by Keohane is the one upon which I set my argument about the existence of an international anti-corruption regime, some clarifications have to be made on the benefits and shortcomings of this interpretation but they are elaborated upon in another section.

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to distinguish between regime and non-regime situations since ‗rules written down on a piece

of paper‘ cannot be conceptualized as institutions if a certain amount of intersubjective

agreement on the validity of these rules and hence ‗convergence of expectations‘ does not exist

(Wendt and Duvall 1989; Hasenclever, Mayer and Rittberger 1996). These considerations lead

to the revision of the formal definition which aimed at reconciling the ‗behavioural‘ and

‗formal‘ strands of the literature and posed the question about discerning the existence of an

international regime as the task of finding ‗the existence of explicit rules that are referred to in

an affirmative manner by governments, even if they are not necessarily scrupulously observed‘

(Keohane 1993, 28). This definition of international regimes in the scholarship provides one

building block in the analysis of an international anti-corruption regime, the second step in the

review of the literature pertaining to regime analysis is that once the ‗regime‘ is discernible in

the international arena according to the provided criteria, the explanatory power of a number of

independent variables has to be assessed a to account for regime formation.

After the ‗maturation‘ of regime theory in the 1980s different approaches to regime

formation crystallized into three relatively distinct positions in the scholarship. Hasenclever,

Mayer and Rittberger (1996, 1997) place these perspectives in the realms of three distinct

‗schools‘ which are designated as ‗interest based‘, ‗power based‘ and ‗knowledge based‘

theories of international regimes‘. Differing on the choice of explanatory variable these three

approaches are intrinsically connected to neoliberalism in the case of ‗interest‘, realism in the

case of power and ‗knowledge‘ in the case of the so called ‗cognitivist‘ strand of scholarship

(Young and Osherenko 1993; Haas 1993). The ‗interest based‘ explanation of international

regimes which features primarily neoliberal and neorealist arguments about the nature of the

international system draws from game-theoretical approaches in both its formal (Keohane 1984,

1993) and what Zurn (1992) has termed ‗situation-structuralist‘ strand. The undermined role of

power in the ‗interest based‘ explanation is subject to more tradition realist critique from

Krasner(1991, 1993), Grieco (1990) and scholars drawing arguments from Kindleber‘s(1973)

hegemonic stability theory. The cognitivist strand of analysis criticizes both the ‗power‘ and

the ‗interest‘ based arguments for the reason that it is intersubjective understanding of interests

and power (which are based on knowledge) that should be considered in the theory of regimes

(Hasenclever, Mayer and Rittberger 1996).

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The distinctions in ontological and epistemological presumptions in international regimes

theory provided by these schools offers a robust platform for debate but also poses a number of

limitations. Haggard and Simmons (1987) put forward the Foucauldian approach to regimes in

order to resolve some of the issues in relation to the cognitive or knowledge based theories of

international regimes which bracketed the role of power in international affairs2. Keeley (1990)

presented the most elaborate argument for the importance of Foucauldian scholarship in the

research on international regimes. This so called Foucauldian ‗perspective‘ is not a theory,

neither is it a theory of international relations, but it provides useful conceptual tools since

Foucault was above all an ‗analyst of orders and communities‘ (85).

The ‗value added‘ of Foucauldian conceptualization of ‗power‘ (power/knowledge) in

the framework of regime theory is that it uncovers some of the inherent tensions and struggles

within regime formation and thus alleviates partly the normative bias of purely liberal

interpretations of regimes which overestimate the consensual convergence and ‗harmony‘ of

opinions (Keeley 1990). Differing from realist interpretations, Foucault conceives of ‗power‘

as a relational factor, not as a commodity which can be possessed but as a force which settles

the spatial boundaries of interaction and is therefore studied externally in the places where it is

applied (Edkins and Vaughan-Williams 2009, 168). Power, conceptualized as a ‗network of

relations‘ requires the study of the networks of individuals who constituted a certain problem

as such and subsequently managed to establish a ‗regime‘ in the form of localized

‗power/knowledge‘(Foucault 2002; Keeley 1990).

The most fundamental part of international regimes as a form of international order can

thus lie outside formal arrangements and be embedded in the network which constituted the

meaning of ‗normal‘(as in norm-guided) behavior in the particular issue area3(Keeley 1990,

97). Regime inconsistencies, which crystallize during the analysis of the political process of

their initiation and construction, become essential part of the analysis without negating the

possibility that the bulk of international arrangements, treaties, conventions and norms form a

2 See in particular Haggard and Simmons (1987) pp.499 -504 and 509-13. 3 ‘The order so created is no more simply an affair of framing texts and formal organizations than international law is simply a matter of multilateral

conventions. The statements and practices of individual states and their bilateral and informal relations are also part of the order. This does not reduce regimes to mere epiphenomena but instead suggests that their most significant and dynamic parts may be outside of grand, formalized arrangements’.(Keeley 1990, 97)

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coherent whole. Keeley provides an example with the ‗Nonproliferation regime‘ but the

question poised is relevant to any hypothetical regime including the anti-corruption one: ‗Does

this complexity form a coherent whole, or is this "regime" a mere congeries held together by

the vague idea that the spread of nuclear weapons is not a good thing?‘ By locating what he

calls the ‗heart of the regime‘, Keeley traces a ‗coherent discourse on nonproliferation‘ and

without neglecting the historical context he reaches the conclusion that the NPT and the

Atomic Energy Agency safeguards system help crystallize the contents of ‗―normal‖4 and

―deviant‖ behavior but also provide a public language for defense and attack, justification and

condemnation‘(102).

A parallel implementation of the Foucauldian conceptualization of ‗power/knowledge‘

to an international anti-corruption regime will place the OECD Convention at the ‗heart‘ of the

regime and address the question of whether this regime is bound by something more than the

idea that corruption as a ‗bad thing‘. A Foucauldian perspective can prove useful in this

endeavor first because it overcomes the bias of neo-liberal institutionalism which associates

regimes with a ‗specific complex of liberal ideas that affects its interpretations: ideas of freely

shared judgments freely converging to a consensus‘ (Keeley, 105). By stressing the importance

of tensions within the formation of regimes, the Foucauldian concept of power/knowledge

applied to regime theories has the potential to crosscut the boundaries of the different ‗schools‘

and combine a number of important insights.5 It can provide a conceptual tool for exploring the

tensions inherent in the regime in terms of conflicting principles that might be reconciled only

superficially under the umbrella of a hegemonic discourse. At the same time while

incorporating elements from post-structural arguments about power is instrumental for

contextually embedding the regime in a deeper nexus of power relations, the epistemological

assumptions that accompany a Foucauldian archeological-genealogical strategy is problematic.

4 ‘The discourses of particular interest to Foucault develop and implement standards of "normal'' behavior. "Normal" here implies a prescriptive element: behavior that adheres to a norm may not be statistically prevalent, although an order may wish to produce such a prevalence. In conjunction with disciplines, discourses also provide statements about how such behavior might be produced: when implemented, they are exercises in social engineering.’(Keeley, 1990) 5 It further opens the possibility of examining regimes as ‘discourse/discipline sets’, as arenas of ‘hegemonic discourse’ which ‘gives definition and order to a public space’ and ‘politicizes’ an issue area that has become essential for public interest’. In addition, the Foucauldian perspective ‘may provide a basis for uniting some features of "cognitive" and "structural" approaches to regime analysis If we wish to take regimes seriously yet also to acknowledge realist warnings on the nature of politics and the centrality of power, we require approaches that will provide leverage on communities yet still recognize and not de-legitimize contestability in them. Foucault's work offers some possibilities here: he takes seriously how actors understand, construct, and act within public spaces, but he does not accept legitimacy claims on behalf of specific constructions. Consequently, he highlights public spaces and regimes as forums and objects of struggle’ (105).

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The power/knowledge concept is therefore taken for its critical value rather than as a

methodological tool.

The current proposal comes closer to an explanation of regime formation as a

consequence of ‗a fusion of power and legitimate social purpose‘ (Ruggie, 1982, 201). Ruggie

argues that ideas at the international level are to a large extent functions of changing

perceptions at the domestic level (Lang 2008,18). The compromise of ‗embedded liberalism‘ is

the outcome of the interaction between domestic and international factors and is later

transported at the global level where ‗fundamental recalibration‘ of ‗public-private sector

balance‘ is occurring (Ruggie 2003, 28-29). This argument is quintessential to the current

investigation of the domestic factors which lead to the creation of an international anti-

corruption regime and to the understanding that corruption is embedded in a social and

political context that can be best understood by starting at the domestic level. Ruggie traces the

initial stages of expansion of free trade policies in the 19th

century to the domestic re-

conceptualization of the interplay between state and society (Ruggie 1982, 202). By stressing

the changing shift in balance in ‗state-society‘ relations and drawing on Polanyi, Ruggie argues

that ideas become ‗internationalized‘ from their domestic source where a battle rages over the

legitimate role of public authority.

Bohman (1999) argues that regimes are ‗currently the most democratic form of global

governance‘ (506)6 and that: ‗Just as democracy in the nation-state took decades to come to

terms with the destabilizing effects of markets, a good test case for the effectiveness of

democratic regime formation will be in softening and even reversing some of the effects of

global markets‘ (512).The extent to which the international anti-corruption regime and the

OECD Convention in particular attempt to alleviate the tensions between (national) democratic

values and the global market constitutes an intrinsic part of the current analysis and is

connected to domestic considerations about the role of government and the legitimate purpose

6 The CGG defines global governance as:

‘the sum of many ways individuals and institutions, public and private manage their common affairs. It is a continuous process through which conflicting or diverse interests may be accommodated. It includes formal institutions and regimes empowered to enforce compliance, as well as informal arrangements that people and institutions either have agreed to or perceive to be in their interest.’ (CGG 1994:4)

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of public authority in liberal democracies7. Therefore, the case of international anti-corruption

regime is not simply an interesting case study of an international regime. Since it encompasses

such fundamental tensions in democratic national governance such as the balance between

democratic and market principles and transports them to the global level, the international anti-

corruption regime may prove to hold some insights about the future transition of legitimate

authority to the global level. Allocating public and private boundaries at the global level and

setting international standards for accountability and transparency are developments already

nascent in the anti-corruption regime which potentially hold important implications for global

governance. (Sandholtz and Gray 2003)

Recasting corruption as a ‗global problem‘ potentially has a threefold effect 1) It

reformulates corruption as an international and global instead of a national problem 2) It may

lead to a ‗one-size fits all‘ anti-corruption policies 3) It blurs or re-conceptualizes the public-

private divide in an international context8. Allocating public-private boundaries and especially

the public interest in a global context may become problematic. An example is provided by the

so called ‗double standard‘ invoked by corporations as justification of grand corruption in

foreign countries in the name of ‗public‘ interest since ‗managers claim that their highest

obligations are to their stockholders and employees, not the citizens of host countries‘ (Rose –

Ackerman 2002, )

7 The emergence of the particular anti-corruption regime points to two important aspects of international regimes and ‘democratic governance’ in general:

Even if sanctioning economic actors is one way to maintain a semblance of normative order, nation-states are reluctant to use the power to sanction economic actors at their disposal for fear of loss of competitiveness. Thus, globalization is a dispersed and decentralized process, and as such is not likely to be normatively regulated by anything short of the massive escalation of executive power feared by Weber, a self-defeating solution to the normative problem of democratic order. However, the absence of centralized institutions leaves no means by which public decisions can be amplified and made effective.(Bohman 1999, 508-9)

In the case of the FCPA and the OECD Convention exactly such sanctioning of economic actors was evident despite the loss of competitiveness. Effectiveness of regime compliance is another element that has to be addressed but this can be measured in terms of economic penalties and ‘international publicity’, as alternative ‘enforcement’ factor which proved to be essential for the emergence of the international anti-corruption regime. The role of international publicity as an enforcement factor is discernible in current corruption scandals such as the Siemens case, for example, when international publicity proved to impose significant costs on international business actors on top of hefty financial penalties. The same goes for state actors themselves, when they terminate investigations of cases such as the BAE Systems, Unfortunately, in the cases when the main obstacle is presented by state actors nontransparent justifications such as matters of ‘national security’ silences much of what Bohman calls ‘international publicity’. The fact that publicity expands beyond the nation state allows for Bohman to conclude that in the words of Dryzek: 'Democracy and democratization may be sought across states as well as in the state and against the state.’(506). The confinement of democracy to the state container, however, makes this statement problematic. The emergence of an anti-corruption regime provides a challenging study for democracy ‘across’ as well as ‘against’ states which can provoke future research on the subject. 8 Some implications of anti-corruption as a global matter involve allocating public-private interest in a global context – thus the ‗double

standard‘ invoked as justification of grand corruption in foreign countries in the name of ‗public‘ interest – ‗Managers claim that their highest

obligations are to their stockholders and employees, not the citizens of host countries‘ (Rose – Ackerman 2002, )

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Academic Debates on Corruption

Definition of corruption, what causes it and how to fight it

As a complex social phenomenon and an interdisciplinary issue, corruption defies neat

distinctions both in empirical and in theoretical terms. At the same time the proper definition of

corruption and related illicit practices is paramount to a sound analysis. The roots of the widely

accepted definition of ‗misuse of public office for private gain‘ (Rose-Ackerman, 2008) can be

traced back to Nye (1967) and stress the ‗public-office-centered‘ aspect of the definition

(Heidneheimer and Johnston, 1989). According to Heidenheimer two more variants are the

‗public-interest-centered‘ definition and the ‗market-centered‘ definition (3-12). Von Aleman

(2004) in relation to Heidenheimer proposes further a five dimensional definition of the

concept which includes corruption as ‗social decline‘, ‗deviant behavior‘, a ‗system of

measurable perceptions‘, ‗a logic of exchange‘ and ‗shadow politics‘(24). Even though the

five-fold definition aims to contextualize corruption and embed it in a social context which is

the aim of the current proposal as well, the elastic nature of such definitions is problematic.

Therefore, this study adopts the conventional definition of corruption but with insertion of the

element of trust: ‗the misuse of entrusted public power for private gain‘ also used by

Transparency International.

The concept of corruption both theoretically and empirically has a propensity for

enmeshing with other bordering concepts such as clientelism, patronage, rent-seeking and

bribery. A characteristic example is the Watergate affair during which the abuse of public

power for personal gain did not appear to constitute a significant part of the problem, but

nonetheless the abuse of entrusted power appeared to be of crucial importance for the crisis of

public confidence (Heidenheimer and Johnston, 1989). Piattoni (2001) sees the inter-linkage of

corruption with clientelism and patronage, not so much as an empirically grounded

phenomenon but also as a feeble grouping of interrelated concepts which constitute a

‗corruption‘ (in the common language sense) of a democratic ideal‘(7). The difference between

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corruption and clientelism can be seen in the existence of monetary or ‗monetarizable goods‘

in the case of corruption and the fact that clientelism occurs in ‗fully mobilized polities‘ where

the state administration has spilled into what was formally a prerogative of the private sphere

(Piattoni 2001, 6-7). In addition just as bribery can be seen as a specific form of corruption,

corruption in the framework of rent-seeking theory can be portrayed as a particular type of

rent-seeking activity (Lambsdorff 2002, 99; Cartier-Bresson 1997; Rose-Ackerman 1999).

These distinctions have to be carefully applied to the cases suggested in this research proposal

since what is crudely termed as ‗corruption scandal‘ can actually be crises more tilted towards

clientelism and patronage rather than bribery and corruption. At the same time the employment

of corruption as an ‗umbrella concept‘ under which a variety of illegitimate phenomena can be

placed was instrumental in pushing forward both the FCPA and the OECD Convention since it

offered an inter-linkage of what can be seen as disparate phenomena as an internal crises of

confidence and transnational bribery.

One of the consequences of conceptualizing bribery as ‗transaction‘ was that corruption

became measurable (Krastev, 2004). Some of the academic studies using the Corruption

Perception Index manage to reach a degree of consensus and to provide fine distinctions about

the effect of corruption on investment and growth. Corruption is widely accepted as having a

negative effect on growth and foreign direct investment, thus being one of the main suspects

for insufficient economic performance (Habib and Zurawicki 2002; Wei 2000; Tanzi 2000). At

the same time recent empirical work shows that corruption even though negatively connected

to growth is far less damaging in certain countries than in others (Blackburn and Puccio, 2009).

The dynamic general equilibrium model applied by Puccio shows that corruption is less

harmful to the economy when the rent-seeking activities of bureaucrats are better organized.

This leads to the prediction that when corrupt officials coordinate their demands as well as

when uncertainty is limited because bribes are reciprocated with the requested favors, corrupt

exchanges will be less damaging.

The nationality of investors also seems to play a role on the likelihood of bribery. Whereas

Heins (1995) finds that US investors have a high propensity to avoid investment in countries

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perceived as corrupt, Lambsdorff (2007) finds that France, the Netherlands, Italy, Belgium and

South Korea share a tendency to invest in countries that are considered corrupt and this

connects to a higher willingness to pay bribes.9 Mauro (1998) arrives at the conclusion that

corruption changes the composition of government expenditure and the most notable trend is

less investment in education. In a study performed over 5 years in 111 countries, Habib and

Zurawicki (2001) point out that FDI is disproportionately harder affected by corruption than

other forms of investment.10

Earlier sociological debates, informed by functionalism, however, were more favorable of

the role that corruption plays in societies and argued that if a disproportionately accelerated

economic development is not counterbalanced by legal reform or if modern institutional

arrangements clash with traditional societal norms, corruption may provide a functional

channel for readjustment (Merton 1957; Huntington 1968). Depending on the preferred role of

government in the economy corruption can be seen as an externality of an interventionist state

or even a natural consequence of the increased role of the government in the economy (Tanzi

1998). Corruption from this perspective is the long term effect of interventionist policies – an

amalgam of ‗high taxes, high levels of spending, and new regulations‘ (16). The opposite

argument presents corruption as the consequence of the unrestrained functioning of the market

and the unrestricted intermeshing of public and business (private) interests which requires even

more regulation and more state intervention (Krastev, 2004)11

.

A further contradiction in the academic literature is the fact that the very undesirability of

the phenomenon of corruption is questioned by some scholars for despite its ‗bad‘ name,

9 Lambsdorff (2007) thus suggests that these investor countries should be considered co-responsible for the corruption level in the countries where they

invest.

10 Wei (2000), Lamsbdorff and Cornelius(2000), Aizenman and Spiegel(2003) all find that corruption deters FDI and later studies also specify between

different forms of corruption (Lamsbdorff, 2005). In a recent study Jarovick and Wei (2009) assert that corruption does not simply hinder FDI but also transforms the preferences of foreign investors who opt for joint ventures in countries that are perceived as corrupt. A local partner is valued for the reduction of uncertainty that it provides with its context specific expertise.

11 Consequently, academic debates might be seen as reflecting the empirical difficulties in curbing corruption and show that even though the open

market and democracy are considered to be a ‘constant pair’(Mandelbaum, 2007), it is difficult to reconcile the two positions on practical strategies for fighting corruption (it would be impossible, for example, to simultaneously have more regulation and less state intervention in the economy, or higher and lower taxes at the same time)

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corruption can be seen as enhancing economic efficiency. Corruption has been referred to as

the ‗grease‘ which may make the economic machinery function more smoothly (Huntington

1968; Wei and Kaufman 2000; Meon and Weill 2010). A foreign investor in a country

burdened with inefficient bureaucracy and incomprehensible and formalistic legal procedures

can find an efficient and inexpensive shortcut in the form of bribing a public official. While

Wei and Kaufman find the ‗grease‘ hypothesis unconvincing, Meon and Weill (2010) find

empirical cross country evidence that corruption has a positive effect on growth and

productivity especially in countries with an inefficient public apparatus.

An inefficient bureaucracy from this perspective is not the result of widespread corruption,

but corruption is rather a response to the clumsy operation of a bureaucratic state system which

impedes economic development. This type of analysis, devoid of normative backbone, places

corruption in the language of a simple economic cost-benefit calculus without taking into

account the long term consequences of corruption on the political system. Nye (1967) was one

of the first to present a cost-benefit analysis which revealed that while certain forms of

corruption can benefit economic development they can have dire effects on the political system

(283-284). The debate whether corruption is ‗grease‘ or ‗sand‘ in the wheels of development

has since taken on a life of its own (Mauro 1995; Ades and di Tella 1997; Kaufman and Wei

1999; Meon and Seckat 2005).

These two positions do not provide a distinction between political scientists and economists

but rather a very brief overview of some debates about the effects of corruption and the way

government intervention can be seen as positive or negative in tackling the problem. The

debates about the role of government between new progressives and movement conservatives

in the aftermath of the Watergate affair in the United States pose similar problems about the

ambiguity of corruption and the even more ambiguous role of government in tackling it.

15

Research Design

RESEARCH QUESTION AND HYPOTHESIS:

The two research questions and the hypothesis are labeled as ‗main‘ and ‗secondary‘ because

further in the development of the research design, sub-hypothesis of the main hypothesis are

introduced for every stage of the process tracing procedure which is the suggested method for

conducting this research.

DOMESTIC FACTORS IN THE EMERGENCE OF INTERNATIONAL REGIMES

By addressing the role of domestic factors this proposal tries to ameliorate two gaps, perceived

as problems in regime theory. The first one constitutes in the difficulty to establish a starting

date for regime creation and the second and more fundamental one is the ‗silence‘ of both

rationalists and constructivists on the role of domestic factors in regime creation and formation

(Hasenclever, Mayer, Rittberger 1996). Zurn (2002) designs a number of hypotheses based on

the role of domestic factors on the creation of international regimes because ‗assessments of

the state of regime theory usually conclude with a complaint about the neglect of domestic

sources of international regimes‘ (282). Similar concerns were expressed previously by Strange

(1983), Young (1986), Haggard and Simmons (1987).

RQ MAIN: To what extent did domestic factors cause the emergence of the international

anti-corruption regime?

RQSECONDARY: Which actors constituted corruption as a transnational problem domestically

and internationally and from where did these actors get their broader cognitive and normative

maps?

H MAIN: Domestic factors constituted a major and necessary factor for the emergence of

an international anti-corruption regime.

16

Two methodological challenges explain the lack of elaboration on the role of domestic factors

in the creation of international regimes. Zurn (2002) presents the first one as the challenge to

manage a research project in which the dependent and independent variables belong to two

different levels of analysis. The second problem is complementary to the assertion of Waltz

(1979) in relation to the first; that is the argument that systemic explanations will be of superior

quality than sub-systemic ones because they are more parsimonious; hence the second problem

purports to the question of parsimony. In trying to address this problem I will explain why the

systemic explanation does not suffice for the explanation of the emergence of an international

anti-corruption regime. In the following sections when methodological issues are addressed

and the case study design, I will suggest a solution to these challenges.12

Inert forces such as globalization, the end of the Cold War and increased awareness of global

civil society are usually invoked as explanations for the emergence of an international anti-

corruption regime. It appears that these systemic factors generate an almost automatic

consensus on the ways to tackle corruption and the adoption of corruption policies at major

international organizations. These general observations however do not explain through what

mechanism did the international anti-corruption regime emerge and who were the actors who

placed corruption at the global agenda. The ‗post-Cold War‘ explanation fails to account for

the fact that attempts to create an international anti-corruption regime were already present in

the 1970s and that from this perspective the systemic change was a ‗window of opportunity‘

rather than the cause for regime emergence.

Accounting for subsystemic factors in regime formation poses the challenge that only a limited

amount of cases can be tackled.13

Recasting the research question in more empirical terms will

transform it into: Did domestic crises of confidence associated with the corruption scandals in

12 The third major challenge at stake (in addition to the levels of analysis and the question of parsimony) when inquiring about the role of

domestic factors in the creation of an international regime is a matter of content rather than procedure. What is meant by ‗domestic factors‘? In

addressing the deeper causes of the creation of an international anti-corruption regime I will explain why systemic explanations do not suffice

and ‗operationalize‘ the role of domestic sources as the role of crises of confidence within the industrialized states which signed the OECD Convention.

13 It is not feasible to account for domestic factors in the adoption of the UNCAC Convention, for example. The OECD Convention on Combating Bribery of

Foreign Public Officials is not only more central to the anti-corruption regime and especially regime emergence but it also presents a tipping point for the emergence of a global anti-corruption norm (McCoy 2001).

17

the 1970s and 1990s have a casual relationship with the ‗internationalization‘ of anti-

corruption legislation? There is a correlation between the Watergate and Lockheed scandals

and the adoption of the FCPA, the Whitewater affair in the 1990s and the Recommendation on

Bribery in International Business Transactions (RBIBT) in 1994 and an alarming number of

corruption accusations in OECD member states such as the ‗cash for questions‘ affair in the

United Kingdom, the ‗Carrignon affair‘ and the subsequent Seguin Law against corruption in

France and three ministerial resignations and imprisonment of public officials over charges of

corruption in Spain to name but a few examples14

. All of these domestic cases of alleged

corruption occurred in the mid-1990 and lead the Financial Times to categorize 1995 as the

‗Year of Corruption‘ and a joint survey of FT, The Economist and New York Times showed

that there has been a fourfold increase in reporting on corruption between 1984 and 1995

(Leiken 1996). Yet the correlation of these events does not constitute any proof of causality.

Whether the two are connected and what were the debates and the cognitive maps of actors

who intersected these domestic confidence crises with the question of transnational bribery

remains to be seen through empirical research15

.

Case Study: Regime emergence from the FCPA to the OECD Convention and Beyond

Why is such an emphasis placed on the OECD Convention on Combating Bribery of

Foreign Public Officials? Three major reasons can be distinguished to justify this choice. First

the OECD Convention constitutes a pivotal moment in the global anti-corruption effort and a

14 The cases of Italy and Germany constitute another point of reference.

15 The above cases provide just three examples form a number of corruption scandals breaking in major US partner countries. While breaching across levels

of analysis in order to examine the role of these domestic corruption outbreaks for the OECD negotiations might not be feasible it is also unnecessary; the role of domestic factors for the successful completion of the negotiations can be examined at the international level through the OECD negotiation process itself. My hypothesis is that domestic considerations triggered by corruption scandals within the partner governments in Western Europe is what tipped the balance towards adoption of the OECD Convention against transnational bribery. The ‘sensitivization’ of the European public on the subject of corruption was successfully employed by US officials who ‘observed the high level of European public interest in all aspects of corruption, including the OECD discussions’. Corruption scandals culminating in the mid-nineties made European public highly attentive to issues of corruption and State Department officials managed to link the preoccupation with domestic corruption to the question of transnational bribery (Abbott and Snidal 2002, 164).

18

watershed in global attitudes against corruption and in particular bribery. In order to illustrate

this point the ‗SEC vs. Siemens‘ case from 2008 can be seen as a point of reference. According

to the Security and Exchange Committee prior to 1999, bribery at Siemens was widespread and

tax deductible (under the heading of ‗useful expenditure‘). Since the ratification of the OECD

Convention, however, corrupt practices have been subject to increased international and

domestic scrutiny. The fact that bribery of foreign public officials was legal and tax deductible

in Germany on the 14th

of February 1999 and illegal and criminally persecuted from the

following day illustrates why the OECD Convention represents a tipping point in attitudes

against corruption in a global context.

Secondly, according to McCoy (2001) the global recognition of an anti-corruption norm

by the year 2000 was primarily attributed to the pivotal role of the OECD Convention while

the emergence of the norm has been traced back to the 1970s and the domestic context of the

United States in the post-Watergate era (McCoy and Heckel 2002). Thirdly, the OECD

Convention was the first major piece of international legislation addressing the problem of

transnational bribery but it was enforced with the rationale that bribery of foreign public

official is harmful for the public and the societies in which the bribes are being paid. The

broader context in which the FCPA was adopted as well as the scope and aim of the OECD

Convention trespasses the narrower definition of ‗trans-national bribery‘ and this is shown in

the explicit statement of influence of the OECD Convention on international organizations

such as the Council of Europe, the EU and in particular article n. 16 of UNCAC.

Case Study: Regime emergence from the FCPA to the OECD Convention and Beyond

1. Case Study Part I: Domestic disturbances from Watergate to Whitewater

This proposal poses the correlation between domestic corruption scandals which are

feared to or have actually caused crises of confidence in the United States and a number of

OECD members as a necessary condition for the emergence of an international anti-corruption

regime. While the establishment of a relationship reaching beyond simple correlation into

19

actual causality requires field research, the existing academic literature on the Watergate affair

and its long-term effects on American domestic and foreign policy can provide an insight into

the nature of domestic factors that underlie the increased preoccupation with corruption and the

further construction of anti-corruption efforts in global terms. In particular the scholarship of R.

North and Doss (1997) places the ‗public integrity war‘ following the Watergate affair and

which was resurged during the Clinton administration and the so called Whitewater affair in

the general context of debates about the role of government in American society. The main

insight of Ruggie‘s (1982) argument about the importance of domestic factors in the

development of an international trade regime is that shifting interpretations about the

relationship between state and society stand in the centre of regime formation in the field of

international trade. In a similar way the debate about the role of government in the agendas of

new progressives and movement conservatives fuels the preoccupation with political corruption

in the United States and its further internationalization in the form of a regime.

As North and Doss argue, the defenders of ‗big government‘ try to portray corruption

scandals as the consequence of the power of ‗special interests‘ over the democratic process.

According to these new progressives the Industrial revolution changed American politics

irretrievably by placing powerful corporate actors in the political landscape of the country and

allowing them to exhibit strong influence over the political system. On the other hand, the

movement conservatives try to portray the corruption scandals since Watergate as the natural

manifestation of the ‗moral bankruptcy of big government‘ (xii). The new progressive‘s

preoccupation with the capability of private actors to exert disproportionate influence (both

legally and illegally) over the outcomes of the national political process has influenced the

‗good government‘ reform model in American politics. This model offers a convincing

explanation for the reforms following the Watergate affair and the conviction that in order to

reinstate ‗public trust in government…citizens must demand that special interests and public

officials comply with strict codes of conduct and fully disclose their attempt to influence public

officials‘(9). The attempt to establish the principle of transparency and the development of

codes of ethics in an international context constitute two essential components of the

international anti-corruption efforts and in particular the OECD Anti- Bribery Convention.

Tracing the national origin of these issues in debates about the role of government in a political

20

system not ready for the attack of ‗industrial giants‘ ready to buy loyalty from public officials

(15) offers potentially a deeper understanding of the role of domestic politics in the emergence

of the international anti-corruption regime and the nature of the problem itself.16

2. Case Study Part II: The OECD Convention on Combating Bribery of Foreign

Public Officials in International Business Transactions

This proposal stresses the importance of regime emergence as central for understanding the

coherence of the international anti-corruption regime. It tries to establish the domestic origins

of a central piece of international legislation, that is the OECD Convention on Combating

Bribery, by tracing its origin to the FCPA and embedding both the former and the latter pieces

of legislation in the framework of a wider domestic debate taking place in the United States

and a number of OECD partners in the 1990s. Secondary literature on the above link is limited.

Abbott and Snidal (2002) use the case of the OECD as a laboratory for showing the Janus-

faced nature of values and interests in international affairs. The authors offer extensive

empirical work on the negotiations of the OECD Convention consisting in interviews, press

releases and review of the documents which seem to support the hypothesis that domestic

considerations in terms of confidence crises in a number of OECD partners played an essential

role in the successful completion of the negotiations.

Congressional hearings offer fruitful sources of evidence for establishing the

connection of the FCPA to the OECD Convention and a general attempt on behalf of the US to

initiate an international anti-corruption regime in the framework of a number of international

organizations like the UN and the OECD back in the 1970s. Rarer but elaborate academic

scholarship by Cragg and Woof (2001, 2003) supplants empirical evidence for the initial stages

of regime emergence. The most recent publication tackling the question of international anti-

corruption regimes (Wolf and Schmidt-Pfister, 2010) while paying attention to the connection

between domestic factors and the creation of international regimes, uses a plural

conceptualization of ‗regimes‘. This choice is not thoroughly elaborated by the authors but

16 The debate about the role of government between new progressives and movement conservatives in the United States is essential

for understanding the US post-Watergate preoccupation with corruption and the ‗internationalization‘ of the FCPA.

21

appears to be influenced by a legal conceptualization of regimes rather than an international

relations one and serves the purpose of showing the diachronic evolution of such ‗regimes‘

from the 19th

century to nowadays. Even though the publication concentrates on the European

continent it draws some useful connections between the European and the American anti-

corruption agenda and maps the possibility of convergence between different legal regimes

into one ‗pluribus unum’ container (Jakobi, 2010).

Methodology

‗Within case‘ analysis and process tracing are suitable methods for pursuing this research

agenda. The congruence method which has already been employed in the study of trade

regimes by Aggarwal can supplement process tracing since the two can be combined in order

‗to assess whether congruence between the independent and dependent variables is causal or

spurious and also to enrich theories that only posit a relationship between dependent and

independent variables and have nothing to say about the intervening variables and causal

processes that connect them‘ (George and Bennett, 2005, 182). In the case of the employment

of the congruence method, this study can make use of the hypotheses generated by Zurn (2002)

concerning the concept of ‗regime conducive foreign policy‘ which he develops in order to

bring domestic sources into the study of international regimes. An example of a hypothesis

developed around the concept generated by Zurn and on the basis of regime theory is:

Sample hypothesis: ‗A foreign policy is most regime-conducive if a state actor tries to

correct dissatisfying outcomes in an issue area by utilizing mainly economic and

informational resources (soft style) and by displaying an orientation towards reciprocity,

accompanied by the readiness to make one-sided concessions intermittently or even

over a longer period of time (strategy of faithfulness) in order for regime initiation to be

successful‘.(Zurn, 299)

While Zurn finds empirical evidence that a strategy of ‗soft faithfulness‘ is the most successful

one and associated with actual regime formation, he hypothesizes that the US is not capable of

‗soft faithfulness‘ and does not constitute a good regime initiator because of their ‗hard‘

military and economic power. He further hypothesizes that ‗regime-conducive‘ foreign policy

will be pursued only if there is not a strong domestic opposition to regime initiation. While the

22

general sample hypothesis may find confirmation in the case of the international anti-

corruption regime, the two other hypotheses about the behavior of particular actors will

probably not find confirmation since the early failed attempt of regime initiation (US 1976) did

not match Zurn‘s predictions. Neither does the assumption about ‗soft faithfulness‘ and

‗foreign policy conducive of regimes‘ match the prediction about the case of the US. These

issues require more detailed empirical investigation but they may eventually lead to refinement

of the hypothesis and even better predictive powers about successful regime initiation.

While the above is one possible route for research and the congruence method can be

employed as complementary to process tracing, at this stage I would rather generate my own

basic hypotheses which are going to guide step-by-step the process tracing since ‗all the

intervening steps in a case must be predicted as by a hypothesis (…) or else that hypothesis

must be amended‘ (George and Bennett, 2005, 207).

My main hypothesis (H MAIN) is that domestic factors constituted a major and necessary but not

sufficient factor for the emergence of an international anti-corruption regime. I have tentatively

identified the ‗domestic factors‘ as crisis of confidence due to so called ‗corruption scandal‘ in

a number of industrialized countries during two temporal snapshots: the US in the 1970s and

the its European OECD partners in the 1990s. The research question and hypothesis can be

restated as: What was the tipping point that led to the regime emergence in the initial form of

the OECD Convention? My hypothesis is that the tipping point was domestic ‗corruption

scandals‘ in the leading industrialized nations. These scandals are hypothesized to have been or

have been feared to lead to a crisis of confidence from which the regime initially emerged as

an attempt to reinstate trust. Therefore the sub-hypotheses guiding my empirical analysis will

be:

HSUB1: The Watergate Affair was a necessary but not sufficient condition for the

adoption of the Foreign Corrupt Practices Act.

HSUB2: The ‗Whitewater‘ accusations during the Clinton administration were a

necessary but not sufficient condition for the Recommendation on Bribery in International

Business Transactions of 1994.

23

HSUB3: The corruption scandals form the early ‗90s in a number of major US partners at

the OECD is what led to the resurgence of negotiations after the Recommendation of 1994.

HSUB4: The corruption scandals in a number of major European OECD members are

what tipped the balance towards an adoption of the OECD Convention in 1997.

These sub-hypotheses do not appear to be very far from ‗raw empiricism‘ but they can

be useful tools in the empirical investigation in process tracing which aims to confirm or

disprove the main hypothesis about the role of domestic factors (in this case internal

confidence crises) on the emergence of an international anti-corruption regime. While the case

for the possibility of developing causal inference appears to be strong the explanatory power of

alternative mechanism has to be considered as well as the problematic question of

counterfactual reasoning (George and Bennett 2005, 222). In addition since the two cases are at

different levels of analysis, discerning the relative actors who shaped the agenda and

constructed and recast the problem in global terms has to be addressed separately at every step

of the process tracing.

Archival data will constitute the primary original source. The Congressional and State

Department archival materials are available for researchers due to the exhaustion of the 20 year

period of disclosure. At the level of the OECD the Council Resolution on the Classification

and Declassification of Information (CES/CRC(97)16 provides access to all archival

materials(including classified) after a period of maximum 6 years. The access to primary

documents dating before 1997 is possible under the same conditions but necessitates a special

request. Problematic might be the access to preparatory documents or the minutes of

negotiations. The examination of journalistic sources will also be necessary in relation to the

‗crises of confidence‘ in the 1990s and 1970s and in order to reconstruct the role of domestic

factors in the course of the negotiations. In depth interviews with policy-makers who took part

in the negotiations or are involved in current anti-corruption campaigns can supplement the

other data sources. George and Bennett put forward a compendium of the same type of data

sources for conducting the process tracing and in particular suggest that classified sources

require acquaintance with the wider context which involves the time-consuming procedure of

reading journalistic data from the period corresponding to the archival material (97).

24

ANNEX:

A Preliminary outline and division of chapters

1. Theory and Methodology

2. International anti-corruption regime- Next Step

Sets the basis and the criteria on which an international anti-corruption regime can be

said to exist. Concentrates on taxonomic factors such as the degree of convergence of

expectations and the degree of formalism (Young 1989). Establishes basic parameters

and explains why the OECD Convention on Combating Bribery of Foreign Public

Officials in International Business Transactions 1997 is of such central importance for

the emergence of an anti-corruption regime. Regime emergence: Regime emergence as

the part of regime development that addresses best the role of domestic factors and the

initial reasons for cooperation

3. Domestic factors in the creation of the international anti-corruption regime17

4. Foreign Corrupt Practices Act18

– First attempt for regime initiation designated as

‗UN 1976‘19

.

5. OECD Convention on Combating Bribery of Foreign Public Officials in International

Business Transactions 1997

5.1. Recommendation on Bribery in International Business Transactions (RBIBT) (1994)20

.

5.2. The role of domestic factors in the adoption of the OECD Convention in 1997

6. Conclusions for the international anti-corruption regime

7. Conclusions for theory

17 Some remarks: International regimes as attempts to reach ‘normative consistency between the international and domestic arenas’ (Rose-Ackerman, 2002).

Global Governance. 18 Some remarks:The Watergate Affair as destabilizing factor (‘origins of the legislation lay in American revulsion over the Watergate scandal’ (Abbott and

Snidal 2002). In order to address the public turmoil over the findings of the Watergate Committee, the FCPA aimed to restore trust and reinstate the distinction

between private business and public interests. (State Department; Cragg and Wolf, 2001)18 The role of Watergate in the adoption of the FCPA. The FCPA as

a starting point or a failure of regime initiation. Early regime initiation failure (US 1976)18. The preference of domestic legislation instead of multi-lateral

negotiations supported by the US Congress in the light of the Watergate affair and the compromised role of the executive.

19 ‘UN 1976’ designs an early attempt of regime initiation at the UN and the OECD which was unsuccessful.

20 Why was the RBIBT seen as such a breakthrough despite its insignificant contents? The role of ‘Watergate 2’ accusations for the vibrant negotiation

initiatives of the Clinton administration and the advancement of the negotiation process at the OECD. 1995 announced as the ‘Year of Corruption’ by the

Financial Times since corruption scandals broke through most of Western Europe. The success of the ‘vague’ RBIBT attributed to the attempt of the US to

bring ‘domestic political pressure, motivated by value considerations’ to the negotiation table (Abbott and Snidal 2002, 164).

25

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