THE railway boom after the American civil war ushered in a period when corruption was endemic. Railway companies bribed members of Congress to pass their bills. Towns bribed the companies to bring their tracks closer, and railway owners manipulated company shares to line their pockets. But as the economy boomed and government regulation tightened, the tide of corruption receded so that the likes of Cornelius Vanderbilt came to be remembered for philanthropy, not graft.
Most developed countries have passed through similar sleazy phases, giving rise to the widespread view that corruption is simply a stage countries go through 鈥� much as people pass through adolescence. Attempts to stamp out corruption get more effective because better-paid officials have more to lose as wealth increases 鈥� or so argument goes. But is this true for today鈥檚 developing countries stuck in a rut of poverty and corruption?
In 19th-century America the money may have found its way into the wrong pockets, but it stayed in the country and helped the economy to grow. Now, money can flow freely one continent to another. And a study has concluded that corrupt officials salting away money in foreign banks help to keep developing countries in poverty (see 鈥淔ree markets hit growth鈥�).
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The results are the latest to show that some of the direst predictions of the anti-globalisation lobby are coming true. Surveys conducted last year found that the rules and conditions laid down by the International Monetary Fund, World Trade Organization and others make the poorest nations poorer. Even a study of western-style patent rules, which WTO members must adopt, found that they benefit rich nations at the expense of the poor.
Developing countries cannot solve the problem alone. They need concerted efforts from international agencies, and especially the western nations that dominate them. This will never happen until those wealthy nations regard international agencies as instruments for creating a more just world, and not solely as vehicles for their own enrichment.
There is much that can be done. Take corruption. Since the Al-Qaida attack in New York, western governments have passed laws and increased the pressure on banks to clamp down on sources of money for terrorism. They are also vociferous in closing down the money-laundering activities of drug barons. Why not act to combat corruption in developing countries?
Such measures could include controls over the movement of money from economies where corruption is rife, perhaps forcing banks to hold on to exported funds for a few days to allow the funds to be tracked. Any notion of creating an economic cocoon to protect poor countries while they develop will be resisted by western advocates of free trade. Yet the power of their arguments diminishes with every new piece of evidence that the global free-for-all is leaving so many countries out in the cold.