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MEASURING CORRUPTION – A DISCUSSION OF METHODOLOGY

Written by Robert Barrington on Thursday, 21 August 2014

At TI-UK, we spend a lot of time thinking about how to measure corruption. To keep our brains in good shape over the summer, we decided to invite four long-term commentators on the methodological shortcomings in one of TI’s best-known indices, the Corruption Perceptions Index (CPI), to air their views. 


Robert Barrington
Transparency International UK

At TI-UK, we spend a lot of time thinking about how to measure corruption. To keep our brains in good shape over the summer, we decided to invite four long-term commentators on the methodological shortcomings in one of TI’s best-known indices, the Corruption Perceptions Index (CPI), to air their views. Three of these appear below – the fourth person suggested we link to one of his previous publications, which is here.

Having braced ourselves for a barrage of criticism from very well-respected academics and thinkers we were encouraged to find that the arguments put forward are ones with which we are already familiar – indeed have ourselves debated internally for a number of years. Does that mean they are without merit? Certainly not. We have spent twenty years trying to measure corruption, and we know how hard it is. That means that any methodology is bound to be imperfect. The CPI is what we describe as a ‘first generation’ measurement tool – although the methodology has recently been updated, its origins go back nearly twenty years; and we are now onto at least the third generation of corruption measurement. It is also one of a range of tools we publish, addressing only perceptions of public sector corruption; others tools we produce provide insight into areas such as private sector corruption. So should TI stop publishing the CPI, as one writer suggests? I don’t believe so, and for two reasons.

Above all, the findings ring true. Yes, the UK, Switzerland and Singapore might be getting off lightly with regards to their role in global money laundering – but on the other hand, they are also countries in which bribery in the public sector is less common – and nobody would seriously argue that they should be on the same level as Russia or Afghanistan in any index of corruption. The fact that the CPI is still so widely used in the public and private sectors is a sign that it bears a decent resemblance to reality. If it was really painting an inaccurate picture, one of the many other indices that are now produced would have taken its place as the global reference point.

Secondly, I’m not aware of anything that is distinctly better than the CPI. It’s worthwhile remembering what the CPI actually measures – expert perceptions of corruption in the public sector. If such an index did not exist, it would need to be invented. Other indices I’ve looked at have their own shortcomings. The point I usually make is that no index of this type should be used in isolation. Put the CPI along the Global Corruption Barometer, and compare it to levels of bribe-paying; or alongside the Doing Business indicators. These will give a more rounded picture.

The CPI is so widely used and respected that it is important to have an analysis of its strengths and weaknesses. Our guest blogs serve as a reminder that the complexity behind corruption can’t be summed up in a single ranking number. This analysis matters, as we are interested in fighting corruption worldwide. The CPI is one of many indices and analytical tools that we publish and such expert insights help us adapt and respond to the changing environment of measurement and indices so that we can make sure our research reflects the real world.  


Richard Murphy 
Tax Research UK

There is no doubt that the CPI had a role and a place in the history of the civil society movement that has sought to expose corruption worldwide. I have very significant doubts that it still has such a role in 2014.

In 1995 it may have been acceptable to prepare indices on the basis of the opinion of unnamed and unknown persons and suggest they were reliable. In 2014 that is no longer the case: objective data is now needed to appraise the scale, nature and type of corruption found within a jurisdiction. Perversely, in seeking to expose corruption, which always takes place behind a veil of secrecy, the CPI does itself use opaque and subjective methodologies that mean that any assessment of reliability is almost impossible in the case of this index.

It may also have been true in 1995 that the major focus of concern with regard to corruption was the public sector of the various countries being surveyed, but we now know that this is no longer the case. The vast majority of public sector corruption is petty. That is not to deny its consequence and even its individual significance, but in terms of overall corruption an index that focuses solely upon this issue has the potential to be seriously misleading, and the CPI potentially is just that for many who use it without in-depth investigation.

As has been shown by numerous organisations investigating issues relating to transparency, accountability, corruption, illicit financial flows, tax evasion and the behaviour of kleptocrats during the course of the present century, it is the corruption that exists within the private sector that is of greater significance with regard to all these issues, which in total amounts to sums vastly greater than those resulting from some public sector corruption.

So, and for example, tax abuse by multinational companies is estimated to cost developing nations more than 10 times the sum that they receive in aid each year whilst exposure after exposure of high-level corruption within states by organisations such as Global Witness highlights the use of tax havens, offshore secrecy service providers, the use of front organisations and shell companies, and the capture of the legislature of some small states to provide apparently legal veils of secrecy that facilitate such crimes as the key components in the corruption that threatens to undermine the viability and durability of states, corporations, international trade, and the well-being of a great many within the world’s population.

The CPI goes nowhere near these issues. Indeed, it is perverse that the governments of Denmark, New Zealand, Singapore, Switzerland and the Netherlands, all of whom appear in the top 10 cleanest countries in the CPI, are widely considered to be purveyors of various forms of tax abuse mechanism used to facilitate illicit financial flows.

The inevitable conclusion is that the CPI is outdated, its methodology is no longer valid, its message is incomplete and confusing, and what it seeks to measure is no longer relevant. It is time to move on. 


Professor Paul Heywood
University of Nottingham
Consultant on corruption for European Commission 

The Good: First released in 1995 and published annually since then, Transparency International’s Corruption Perceptions Index (CPI) is rightly seen as an immensely important step in focusing global attention on the issue of corruption.  It provided the first systematic attempt to compare ‘perceived levels of corruption as determined by expert assessments and opinion surveys’ across a range of countries.  The CPI identifies corruption as ‘the misuse of entrusted power for private gain’ and ranks countries on a scale from 0 (very corrupt) to 100 (very clean).  It has stimulated much important academic research on the issue, but more than that, it has also generated significant media attention and helped galvanise international anti-corruption initiatives across a host of national governments and international organisations.  Now covering some 177 countries, the CPI is the established go-to source for those wanting to know about levels of corruption across the world.

The Bad: Despite its prominence, the CPI has become increasingly controversial in recent years.  As I have argued in an article with Staffan Andersson the CPI is open to criticism on several grounds: definition problems, perception bias, false accuracy, a flawed statistical model, and a failure to capture long-term trends.  Notably, perceptions do not necessarily reflect reality: in fact, there is no shortage of evidence that, in relation to corruption at least, there is often a striking mismatch between perception and experience.  Moreover, the question of whose perceptions are being tracked really matters: in the case of the CPI, it is a composite index that draws on a range of other surveys (13 of them for the 2013 index).  Respondents to these surveys are overwhelmingly country ‘experts’ (usually based outside the country in question) and resources-resources-business executives; their view of corruption, unsurprisingly, tends to focus on bribery (and bribe-takers).  But corruption involves much more than just paying bribes, and the CPI struggles to distinguish not just between types of corruption, but also their impact and severity.

Another problem is that the CPI approach implicitly sees corruption as ‘one thing’, an indivisible property of political systems that can be summarized through a single number or score, applicable to the whole of a territory.  In practice, though, actual instances of corruption take place in concrete settings and specific places that do not easily map onto the nation state – either because there may be significant variance at local level when dealing with particular sectorial types of corruption, or because of corruption that involves trans-national or cross-border networks.  Every country has regions with a (deserved or undeserved) reputation for significantly higher levels of corruption than average for their country – just think of ‘Donnygate’, a shorthand reference to corruption in Doncaster Council during the 1990s, but hardly representative of local government across the UK.

Also of note is that the index has not changed in any meaningful way since it was first launched. My colleague Jonathan Rose and I recently analyzed this consistency across an eleven-year period using 2001 scores as the independent variable to predict the 2012 scores.  As can be seen from the figure below, there is a strikingly high degree of consistency between the scores: so strong, in fact, that it hardly makes sense to treat individual years scores are separate evaluations.  This kind of evaluation of perceptions could be done on a five or ten year basis, rather than yearly, with very little loss in precision – leaving aside the question of what it actually tells us. 

The Ugly: Perhaps the most telling criticism of the CPI is that it not only acts as a poor guide to policy but actively creates perverse incentives.  For many years, there has been a prevailing orthodoxy – only now being properly challenged – that the only way to combat corruption is to introduce ‘good governance’, defined in terms of a western model of liberal democracy.  But, although there is increasing understanding that governance is contextual many international donors and aid agencies have used a country’s ranking in the CPI as a key performance indicator.  Indeed, there is evidence that falls in foreign direct investment in some very poor countries is directly linked to where they stand in the CPI.  As aid becomes increasingly conditional on the adoption of western-defined measures to combat corruption, so those countries with the least resources to implement ‘good governance’ stand to suffer most from the withdrawal of precisely the support they need to stand any realistic chance of tackling corruption.  Alongside a poverty trap, we may now be witnessing the emergence of a ‘corruption trap’ in which, once corruption becomes systemically embedded, it may be virtually impossible for countries to secure the kind of aid that could help them put in place policies to promote the very development that is supposed to provide the best protection against corruption.


Dr Elaine Byrne
Global Irish studies Centre, UNSW 
Consultant on corruption for European Commission 

CPI and Ireland

The TI CPI has served as an influential annual focal point to raise awareness about probity. Since 1995, the CPI has been cited on 127 occasions within Irish parliamentary debate. These include issues as varied as Irish overseas aid, police oversight, political funding transparency, whistleblowing reform, regulation in banking, lobbying accountability and freedom of information. The CPI has proved to be an effective campaigning tool within good governance policy making.

Influence of CPI

Perception-based corruption indices have significant influence. Standard and Poor, one of the big three credit-rating agencies, rely on perception indices as a method of evaluating governance performance. This is also the case for the U.S. Government agency, Millennium Challenge Corporation, which increasingly makes development aid conditional on the implementation of governance reforms.[1] A 2006 OECD report noted that at least one donor stopped funding a country because of its standing in the CPI.[2]

CPI and the “Corruption Trap”

Nonetheless the CPI is the focus of much criticism regarding its methodology.[3]

Perception-based indices do not reveal the real context of a situation. The indices can have an “echo chamber” effect and may in themselves influence the actual perception of corruption.  The media attention they receive may influence the very same perception on which they are based.

An inverse effect may occur where high profile anti-corruption campaigns are a victim of their own success.[4] Although such campaigns may reduce the level of actual corruption it can simultaneously increase public awareness. The frequency with which citizens are exposed to corrupt acts and reports about the occurrence of corruption has a bearing on public perception. Perception-based indices can potentially punish rather than reward attempts at reform.

The dominance of such indices in policy debate can create a “corruption trap.” Countries with the scarce resources to implement good governance stand to suffer the most from the withdrawal of precisely the support they need to have any realistic chance of tackling corruption.[5] In this way perception-based indices can become counterproductive.[6]

Inconsistencies within Indices

The perception of corruption does not necessarily reflect the reality or complexity of the actual level or experience of corruption within a country.[7] When the CPI which measures perception and the Global Corruption Barometer (GCB), which measures actual experience of corruption, are compared, disparities have emerged.[8]

In terms of corruption actually experienced Turkey and the United Kingdom appear to have equally low levels of corruption, yet a significant gap emerges when levels of perception are compared.

The standard of perception is high, perhaps necessarily so, but so too are the consequences.

[1] http://www.mcc.gov/pages/docs/doc/factsheet-fact-sheet-about-the-indicators-for-fiscal-year-2014
[2] http://www.oecd.org/dev/usesandabusesofgovernanceindicators.htm
[3] http://www.oecd.org/dev/usesandabusesofgovernanceindicators.htm
[4] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=478821
[5] http://www.africareview.com/News/Sierra-Leone-and-Benin-miss-out-on-US-funding-over-graft/-/979180/2108826/-/85h4tx/-/index.html
[6] http://www.standardandpoors.com/spf/upload/Ratings_US/CountryRisk_CorpCriteria.pdf
[7] http://onlinelibrary.wiley.com/doi/10.1111/ecpo.12037/full
[8] http://siteresources.worldbank.org/EXTGOVACC/Resources/CorruptionWhitePaperpub31110screen.pdf
[9] http://irishacademicpress.ie/product/the-books-that-define-ireland/

 

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Read 9182 times Last modified on Tuesday, 24 November 2015 11:47
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Robert Barrington

Robert is TI-UK's Executive Director. You can view his full bio here, and tweet him @TIukED.

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