Generally defined as the offering of money or a favor in order to influence the judgment or conduct of a person in a position of trust.
Bribery is an inevitable consequence of the interaction between political figures who control the economic resources of the state and private firms attempting to gain profit from these resources. For hundreds of years, bribery has been institutionalized across the globe by corrupt political leaders and commercial firms determined to gain access to markets and scarce natural resources. Historical records routinely link European traders to bribes paid to political leaders for favorable treatment, including bribes offered by the East India Company in the seventeenth century to obtain preferential treatment from members of the British Parliament.
Even today, virtually no nation is untouched by bribery scandals related to international trade, and bribery schemes are associated with tens of billions of dollars of illicit activity in all sectors of global trade, especially contracts related to the arms and defense sector and the extraction and distribution of natural resources. Bribery schemes linked to multinational firms remain a significant concern in developing nations, highly industrialized states, free markets throughout Asia, Africa, the Americas, and western Europe, and state-controlled economies, such as Cuba, North Korea, and the People’s Republic of China.
Imperial Legacy
For a number of regions, a systemic pattern of commercial bribery is a legacy of the age of empires. For instance, bribery in the commercial business sector in the Middle East originated during the late Ottoman era. Unlike in Europe, where a large independent and influential bourgeoisie arose, in the Middle East governments remain the largest employers throughout much of the Islamic world. As a result, the political elite in most parts of the Middle East retains control over investments from abroad, and government contracts and Middle Eastern leaders routinely extract political payments from firms to obtain state protection for their investments. Efforts to dampen the prevalent use of bribes to obtain contracts in the Middle East have achieved limited success. For instance, Saudi Arabia has been slow to create a civil law that would provide a secure, stable foundation to permit people and businesses to secure property rights and resolve commercial disputes. Moreover, checks and balances are few, making it difficult to police the Saudi ruling class.
One of the great bribery scandals in U.S. history surrounded the lease of oil-rich government lands at Elk Hills, California, in the early 1920s by Interior Secretary Albert Fall (far left) to oilman Edward Doheny (second from left). Prosecutors said Doheny lubricated the deal with a $100,000 interest-free loan to Fall. The other men in the foreground of the photo are lawyers Frank Hogan and Mark Thomson. (Library of Congress)
The European colonial legacy of a strong central government overseeing economic development remains a part of business throughout most parts of Africa and Asia. In many countries, multinational firms cannot operate without the cooperation of high-level political leaders who award contracts and approve the repatriation of capital and the remittances of dividends to the home country. Low-level functionaries who issue work permits and visas to workers and assist in the construction of plants or upgrading existing facilities are also routinely bribed by foreign firms. Nations in transition are especially susceptible to the contagion of bribery. For example, since the end of apartheid, South Africa, a major transshipment country for products to Asia, western Europe, and the United States, has developed a substantial problem with bribery and financial fraud schemes linked to firms from China, Nigeria, and the Russian Federation.
Throughout much of the twentieth century, communist propaganda maintained that capitalism was the breeding ground for illicit financial activities, including bribery. In truth, many communist states fostered a systematic pattern of bribery through poor state planning that led to shortages in basic goods, delays in transportation, and poor quality in repairs and services. To achieve better products and services, the communist governments were prone to accepting bribes from firms based in communist, capitalist, and nonaligned states. Communist officials routinely provided preferential treatment in the awarding of contracts and privileged access to the transportation and service sectors.
While bribery is a significant problem in nations with regressive political regimes, high inflation, and low salaries for civil servants, the industrialized world is also routinely plagued with bribery scandals. From the time that the first settlers arrived until today, the United States has suffered through many commercial bribery scandals. The problem became increasingly acute after World War II, when American firms expanded their commercial operations across the globe. One of the local business practices that raised considerable debate among American firms was the demand from foreign political leaders for payments to secure and protect business investments and from minor government officials for facilitating payments to induce them to perform their official duties. To ensure the contracts were awarded to American firms, a number of traditional accounting practices were skirted.
Efforts to Curtail Bribery
Initial efforts to curtail American firms from offering bribes to foreign companies arose from investigations into the 1972–1974 Watergate scandal, an internal political corruption investigation. During the investigation, special prosecutors uncovered a $55,000 contribution from American Airlines to the Nixon political campaign. The Securities and Exchange Commission (SEC) quickly issued a questionnaire mandating that American firms provide details explaining the extent of questionable payments to domestic and foreign political leaders. The investigation uncovered 360 companies that were negligent in reporting payments to domestic political parties and foreign government employees. The SEC investigation resulted in a renewed effort to combat commercial bribery. In 1977, Congress passed the far-reaching Foreign Corrupt Practices Act, which mandates the prosecution of employees of firms who offer bribes to foreign government officials.
Despite a number of high-profile bribery schemes in Europe, including allegations that Prince Bernhard of the Netherlands solicited and accepted more than $1 million from Lockheed Martin and the conviction of the managing director of Belgium’s state telephone company for accepting thousands of dollars worth of gifts from the Belgian subsidiary of International Telephone and Telegraph, European states responded more slowly to enact laws to combat bribery schemes linked to global trade. Only after an extensive campaign by European nongovernmental organizations, especially the Berlin-based anticorruption group Transparency International, did efforts to combat bribery in Europe gain momentum.
European efforts to curtail commercial bribery payments were significantly strengthened in 1997 with the passage of the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The convention defines bribery as a criminal of-fence whereby a person intentionally offers, promises, or gives any pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official to obtain or retain business or other improper advantage in the conduct of international business. This broad definition explicitly recognizes that both parties, the public servant receiving the bribe and the person giving the bribe, are equally guilty.
Events in the United States and western Europe show that the acceptance of bribes is common to all political and economic systems. International initiatives to curtail bribery schemes linked to commercial trade are slowly increasing, but efforts to harmonize practices will take time. Domestic efforts are also achieving some successes. While corporations from Russia, China, Taiwan, and South Korea continue to routinely bribe public officials in developing countries, a number of encouraging trends, including greater scrutiny of high-ranking political figures by the media, the standardization of legal and accounting practices, and the growth of a professional class, including accountants and lawyers, are slowly limiting the number of commercial bribery schemes and encouraging the growth of transparent business transactions.
Trifin J. Roule
See also: British East India Company; Multinational Enterprise; United States.
Bibliography
Bialos, Jeffrey P. The Foreign Corrupt Practices Act: Coping with Corruption in Transitional Economies. Dobbs Ferry, NY: Oceana, 1997.
Jacoby, Neil H., Peter Nehemkis, and Richard Eells. Bribery and Extortion in World Business: A Study of Corporate Political Payments Abroad. New York: Macmillan, 1977.
Lovell, Stephen, Alena Ledeneva, and Andrei Rogachsevskii, eds. Bribery and Blat in Russia: Negotiating Reciprocity from the Middle Ages to the 1990s. New York: St. Martin’s Press, 2000.
Noonan, John T., Jr. Bribes. New York: Macmillan, 1984.
Robinson, Mark, ed. Corruption and Development. London: Frank Cass, 1998.