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Commentary

Corruption and the G20: Insufficient Success

Chris Sims, G20 Research Group
January 9, 2019

The 2018 G20 Buenos Aires Summit was a crucial opportunity for G20 members to fully commit to eradicating corruption. The G20 first addressed corruption at the 2009 Pittsburgh Summit with a narrow focus on money laundering, terrorist financing and the proceeds of corruption. In the past decade, the G20 has expanded its corruption commitments to address broader facets of corruption. At the 2016 Hangzhou Summit, G20 leaders committed to "improve public and private sector transparency and integrity, implementing our stance of zero tolerance against corruption, zero loopholes in our institutions and zero barriers in our actions," with additional mention of greater transparency regarding the beneficial ownership of legal persons. However, this ambitious commitment was only followed up by a somewhat less ambitious commitment at the 2017 Hamburg Summit to "organis[e] our public administrations to be more resilient against corruption."

Corruption is one of the most important issues on the G20 agenda, as well as one that has the greatest impact on the others. Corruption misallocates resources, inhibits effective administration, and erodes trust in democracy and national institutions. As a result, unlike most of the issues the G20 deals with, corruption is primarily instrumental: it is difficult to implement new policies in a society where corruption is prevalent. Reducing corruption magnifies and facilitates achieving other objectives, such as sustainable development, gender equality and strengthened health systems.

That being said, different G20 members have very uneven levels of corruption: the G7 members generally face low levels of corruption, while the BRICS members and other less developed members have endemic corruption. This dichotomy can hide the fact that the fight against corruption characterizes a large proportion of the activities of certain governments, but a much lesser proportion of the activities of other governments.

Nevertheless, corruption is not a solved problem anywhere, and the G20 should acknowledge the fight against corruption explicitly through ambitious commitments to tackle such a pernicious and important problem.

Argentina's G20 presidency made some major strides in the area of corruption in 2018, although the commitments remain less ambitious than those made at the Hangzhou Summit in 2016. Corruption was referred to in the preparations for the summit as an issue area being included to ensure continuity with the progress made at previous summits, but it was neither one of the main priorities for the Buenos Aires Summit nor an area that leaders gravitated towards amid the current charged geopolitical climate and rising tensions in topics such as trade. Although the Anti-Corruption Action Plan 2017-18 produced in 2016 provides a comprehensive list of the anti-corruption measures the G20 should work towards, relatively few sections have been explicitly committed to since then. In the end, the final commitment at Buenos Aires was to "prevent and fight corruption and lead by example," specifically by endorsing several corruption-related documents that would "foster transparency and integrity in the public and private sectors."

Although this is a step forward in that it reacknowledges the importance of combating private sector corruption, it is disappointing that there was no explicit mention of fostering greater transparency by modernizing the legal structures that allow individuals to evade responsible for their actions by abusing corporations and trusts. This comes despite the fact that the G20 has been severely criticized in the past for its failure to promote transparency regarding the beneficial ownership of corporations and trusts. Many countries, including Canada, have not made satisfactory changes in this regard despite past commitments to this effect.

The Buenos Aires Summit also did not explicitly address another of the most pressing sources of corruption: corruption by individuals at the highest levels of government. The term "public sector" is somewhat ambiguous as to whether the commitment concerns mostly the civil service and not senior political officials. With the election of Donald Trump in the United States, but also recent experiences in G20 members Brazil, South Africa and Russia, corruption or perceived corruption at very highest levels of government can have detrimental effects on people's confidence in democracy, capitalism and the liberal order generally. Although stronger action may be controversial given some potential allegations of corruption against leaders themselves, it is nonetheless troubling that G20 members have failed to address this source of corruption explicitly. Political leaders are and ought to be models of integrity for other members of government and society, so corruption on their behalf has substantial negative effects on the rest of society.

This unwillingness to tackle corruption substantively in the summit communiqués has been exacerbated by the relative failure of G20 members to fulfill the relatively modest commitments set out at Hamburg in 2017. Despite a record-high compliance score for the Hamburg cycle according the G20 Research Group, corruption had the second-lowest compliance level of all the issue areas surveyed at 70%, which is itself only a slight increase from the compliance level for the more ambitious Hangzhou commitments. These rates pale in comparison to the issue areas such as tax and health, with compliance rates of almost 100%.

Corruption is by no means a solved problem, even in advanced economies. The G20 should increase its corruption commitments and prioritize fighting corruption far more than it has done these last few years. With the current rhetoric about the death of liberal democracy, it should be obvious that one of the first steps to resolving this apathy and loss of trust should be to increase transparency, integrity, and trust within government and society by comprehensively working to eliminate corruption.

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Chris Sims was the lead analyst for the corruption commitment made at the 2017 Hamburg Summit and is the compliance director for the macroeconomics commitment being assessed from the 2018 Buenos Aires Summit. He is in his third year at the University of Toronto, studying economics, philosophy and mathematics. His main academic interests are income and wealth inequality, economic growth, distributive justice and the impacts of globalization on economic institutions.

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