Regulating Corruption in International Markets: Why Governments Introduce Laws They Fail to Enforce

Abstract

Corruption allows firms to earn profits unfairly. In exchange for bribes and inducements that occupy a gray zone of uncertain legality, government officials and politicians offer firms better deals, terms, or benefits than they would otherwise obtain. These unfair advantages are sought by companies for a wide variety of reasons --to win contracts; to obtain production licenses, import permits, or permits to acquire a competitor; to secure subsidies, tax rates (or tax holidays), or tolerance for cartel collaboration; or to achieve any number of other corporate goals. Through corruption, firms can effectively buy impunity for an equally wide range of harmful actions, from producing poor-quality or even dangerous products and services to polluting the environment, violating human rights violations, and conducting illegal trade.

This drafted book chapter explains why many initiatives against bribery in international markets seem dysfunctional. Reasons are categorized as (i) “technical reasons” including inherent challenges associated with the crime and barriers for efficient enforcement; (ii) “institutional reasons” meaning challenges associated with the organization of various enforcement functions, and (iii) “political reasons” comprising the backdrop for political priorities as well as the relevance of government’s coordination of anticorruption strategies internationally.

Based on the given review of reasons for inadequate enforcement, the chapter describes policy tracks that appear particularly meaningful for governments and other players who want to see markets better protected against corruption.

Keywords: corruption, bribery, corporate liability, law enforcement