Until 1977, there was no country that criminalized the practice of bribery abroad. But that year, President Jimmy Carter signed a law making the United States the very first. In due course, this measure eliminated corruption from every nation where our corporations operate.
Yes, it did"”right after Carter got a tattoo and a Harley. In fact, bribery remains a way of life in much of the world, including rapidly developing countries where American multinationals need to be. These firms often are forced to choose between following age-old local custom in order to compete and obeying U.S. law, which may leave them high and dry.
That could be the explanation behind the behavior attributed to Wal-Mart in its effort to expand in Mexico. The New York Times reports that the company's internal inquiry found "evidence of widespread bribery" and "suspect payments totaling more than $24 million""”in apparent violation of the Foreign Corrupt Practices Act.
The scandal hit the world's biggest retailer like a ton of bricks. It lost $10 billion of market value literally overnight. The Justice Department had already launched an investigation, and congressional committees may not be far behind.
If you think this is a case of greedy Americans corrupting innocents abroad, think again. In its annual Corruption Perceptions Index, the watchdog group Transparency International ranks Mexico 100th from the top, out of 183 nations and territories. On a scale of zero ("highly corrupt") to 10 ("very clean"), it gets a score of 3, which I would read as "pretty sleazy." (The U.S. was 24th, at 7.1.)
If you want to reach the Mexican consumer, you may have little choice but to grease some palms. The Times interviewed a former high executive of Wal-Mart de Mexico who offered insight: "Bribes, he explained, accelerated growth. They got zoning maps changed...Permits that typically took months to process magically materialized in days. 'What we were buying was time,' he said."
Sure, executives can refuse to pay bribes. But while they get old waiting for permits to clear, they will lose business. They may also get to watch less scrupulous competitors swoop in. Those rivals may not have to fear the possible legal consequences quite so much, if they hail from countries with more permissive standards.
China, for example, didn't get around to passing its law making it a crime to bribe foreign officials until last year. But a spokesman for the British anti-corruption group Global Witness told the South China Morning Post, "It remains unclear whether the Chinese government is serious about prosecuting individuals and companies who have broken the law." Not a sure thing, since China is rated only slightly cleaner than Mexico.
The question is why it's the duty of the U.S. government to dictate business practices in nations with very different business climates. You would think the Justice Department has plenty to do enforcing American laws on American soil without trying to sanitize the rest of the world.
Our idea of appropriate business practices ought to prevail in America, but less developed countries are entitled to do things their own way. If Mexico doesn't police bribery and can't change its economic culture, why should Uncle Sam take on the job?
One effect of the anti-bribery law has been to scare U.S. investment away from corrupt countries. But as one study found, it didn't reduce the overall amount of investment in these locales: Corporations from more tolerant countries were happy to take up the slack.
If other governments were brave and vigilant in fighting graft, there would be no need for American prosecutors to step in. Foreign prosecutors would be happy to issue indictments. It's only in vice-plagued nations that the FCPA makes a difference.
But the difference is not necessarily a positive one. Andrew Brady Spalding, a professor at Chicago-Kent College of Law, says the law often amounts to imposing economic sanctions on particular countries. By deterring American companies from investing in such places, we deprive their citizens of goods and jobs that would improve their lives.
When extortionate officials block Wal-Mart from opening stores in Mexico, ordinary Mexicans suffer. Economic growth is a good thing, even when it's lubricated by graft.
If the goal is to make ourselves feel good, this law is a success. It's a failure only if the point is to actually do good.
Steve Chapman blogs daily at newsblogs.chicagotribune.com/steve_chapman.
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Interesting post. Unfortunately (or fortunately) this is the case especially with societies practicing exclusive economic systems. Think about it this way. If the rebels fought in accordance with the common rules of war during the American Revolution would we be here today. I'm a fan of "fair play" but sometimes in order to succeed we must go with the flow as it were.
Carter is a stereotypical liberal dimwit. That anyone could even think a law such as the FPCA would do anything except hobble U.S. businesses is laughable. You cannot do business in Mexico at all without bribery. Hell, you can barely walk down the street without having to bribe someone. Another 'intentions count results dont' law.
Suthenboy, I don't know if you are old enough to remember Carter, but I am. The general consensus on Carter was that he was "too nice" to be President, that he was in over his head, that he was a moral man in an immoral business. If you know anything about Georgia politics, you know Carter didn't get to be governor of Georgia by being a nice guy - or stupid. He was a moralizing manipulative little prick, a nasty, tiny, petty little man who never forgave an enemy, and it was real easy to make his enemies list. He knew where a few skeletons were buried because he put them there. He may have seemed like a dimwit - rather like people thought Clinton was a rube - but you would be making a big mistake ever turning your back to that bastard.
Carter ran the last segregationist gubernatorial campaign in GA and failed to pardon his convict cook in the governor's mansion (she was convicted of murdering her husband under somewhat "justifiable" circumstances)as was the tradition.
"The general consensus on Carter was that he was "too nice" to be President, that he was in over his head, that he was a moral man in an immoral business."
I can't wait to see how history treats Obama. Probably something like he was a brilliant man, too smart for this dumb, brutish country.
'Holy Baksheesh, Batman!'
Yeah boo government tyranny that keeps you from paying other tyrant governments!
OK now that this article has been thoroughly discussed, Giant Douche or Turd Sandwich?
Giant Douche. Less evocative of nasty imagery. I don't know about you, but I have an overactive imagination. Ugh.
For what it's worth, the corruption perception index is here. They seem to be rather stridently anti-corruption, but if paying tribute to the local functionary gets you around stupid laws and is the local custom, what is the big problem? Are any of the officials Walmart bribed being charged? Did Walmart pay bribes to get them to hinder competitors' activities or just facilitate their own activities?
If Walmart had made campaign contributions to the right people, would that have avoided the charges of illegally giving politicians money to influence their behavior?
For what it's worth, the corruption perception index is here.
As someone who used to do business internationally, I found that interesting. Russia (2.4) was by far the most corrupt place I ever experienced. There's an odd honesty about it when it gets that bad. The Philippines show a 2.6, but was a much nicer place to do business in the 80s and 90s. I'm surprised South Korea (5.4) did so well. There's a system there you wouldn't believe... in some ways like the "good 'ol boys," but also like having the mob around.
Might as well outlaw Americans taking siestas in Latin America.
The US is 7.1, but Australia is 8.8. Aussie Aussie Aussie, oi oi oi!
Seriously, other countries have similar laws. These can be drawn so widely that your facilitation payment to an official in Country A (just to do his job, not do it corruptly) can get you and your company prosecuted under Country B's law, even though you're not a citizen of Country B, your company isn't incorporated in Country B, or even your company's parent isn't incorporated there. Doing business (and hence having assets) in Country B is enough. So you as a US citizen could be liable under the UK's Bribery Act for paying a Mexican official to do his damn job, as long as the company that pays you (or even has you as an agent) has the requisite link with the UK
oi oi oi!
It is literally impossible for me to hear this or, apparently, read it without thinking of "TNT."
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