June 20th, 2011
11:33 AM ET

Corruption and the Arab Spring

Editor's Note: Stuart Levey is Senior Fellow for National Security and Financial Integrity at the Council on Foreign Relations. He previously served as the Under Secretary for Terrorism and Financial Intelligence at the U.S. Department of the Treasury.

By Stuart Levey

From Tunisia to Yemen, the corruption of Middle Eastern regimes has played a significant role in motivating the Arab Spring. Former Tunisian President Zine el-Abidine Ben Ali and his family now face trial in absentia for, among other crimes, money laundering and drug trafficking.

Meanwhile, Egyptian courts have charged former President Hosni Mubarak with corruption and sentenced in absentia his former finance minister, Youssef Boutros-Ghali, to 30 years in prison on charges of corruption and embezzlement of public money. Frustration with cronyism and corruption is a key grievance of those protesting in the streets in Libya, Syria, and Yemen as well.

These corrupt leaders have managed to stash much of their collected wealth abroad, despite international obligations designed to prevent such looting. The Arab Spring has thus highlighted the inadequacy of current international efforts against corruption.

If global leaders are serious about strengthening anticorruption efforts in response to the Arab Spring, they should build on recent improvements in an unlikely place: Switzerland.

Switzerland recently changed its law about returning corrupt funds and has led much of the international community in freezing the assets of certain deposed leaders, including Ben Ali, Mubarak, and former Ivory Coast President Laurent Gbagbo.

Switzerland took these actions at least in part because it feared that its reputation as a haven for illicit assets could harm its ability to attract legitimate business. The United States and its allies should capitalize on such reputational sensitivities by promoting mutually enforced anticorruption standards and exposing those countries that fail to cooperate. This is the most promising path to inducing countries to prevent corruption and to excluding the proceeds of corruption from the global financial system.

Read: The New Arab Revolt eBook.

Swiss banks became known as a top choice for corrupt dictators by holding the multi-million dollar accounts of, among others, former Nigerian ruler Sani Abacha, former Filipino President Ferdinand Marcos, and former Haitian strongman Jean-Claude Duvalier. Thus, it may come as a surprise that last October, Switzerland adopted what is arguably the world’s toughest law for repatriating the ill-gotten gains of corrupt politicians to the people of those countries, allowing the country to return potentially corrupt assets more easily.

Returning the fruits of corruption to their country of origin is a difficult undertaking. In the first place, the process of tracing and repatriation does not begin unless and until the corrupt regime is removed from power (obviously, a ruling regime depositing the money is highly unlikely to request such an investigation). Even when assets are located, legal obstacles often complicate repatriation. The new leadership in the country of origin may not be sufficiently independent of the old regime to pursue the matter, or may be unable to provide adequate proof that the assets in question were illicitly derived. As a result, only a relatively small amount of money has actually been returned to countries of origin. The World Bank estimates that corrupt regimes steal $20–$40 billion from developing countries each year; only $5 billion has been returned to those countries over the past 15 years.

The new Swiss law, known as the Restitution of Illicit Assets Act, took effect in February and addresses some of these problems by giving the Swiss government more freedom of action to repatriate questionable funds. For example, the new law shifts the burden of proof - the countries of origin are not required to prove the illicit nature of the funds. In situations where the wealth of a politician in question has increased dramatically during his reign and corruption is endemic in his country, the new law requires the politician to prove that he earned his wealth legitimately. Beyond improving the likelihood of restitution in specific cases, this law might persuade corrupt politicians to place their illicit assets elsewhere.

Read: Understanding the revolutions of 2011.

Switzerland hopes that its strengthened restitution law will do just that. The Swiss Foreign Ministry Web site states that “it is in Switzerland’s fundamental interest to ensure that the assets of politically exposed persons obtained by unlawful means shall not be invested in the Swiss financial center.” This, the Ministry explains, is because “competition between financial centers is global. In long term, it is a financial center’s reputation and credibility that are the most important criteria with respect to competitors.”

Like other nations, Switzerland undoubtedly realizes that a reputation for shielding corrupt assets can discourage legitimate investors, who may be deterred by the lack of transparency or by the prospect of being stigmatized by placing their money in a known destination for corrupt funds. Investors may also fear that a jurisdiction’s poor reputation may attract greater regulatory and law-enforcement scrutiny. A suspect reputation may also complicate the ability of a country’s financial institutions to conduct business abroad, especially in the United States.

It is easy to be to be cynical about Switzerland’s attempts to portray itself as a world leader in preventing corrupt politicians from hiding their money, given the country’s history. But indulging that cynicism would risk missing the opportunity represented by Switzerland’s desire to improve its reputation. With corrupt rulers stealing billions per year from their people, the international community must develop methods to counter corruption while they remain in power. Repatriation of funds only after a corrupt regime falls is insufficient. To ensure that effective preventive measures are taken, the international community should harness the dynamic that motivated Switzerland to reform - its desire to demonstrate the integrity of its financial system - to incentivize other nations to act.

Read: Foreign Affairs' coverage of the Libya crisis.

A multilateral commitment to improve anticorruption regulations exists. A hundred and forty nations have signed the United Nations Convention Against Corruption (UNCAC), a 2005 agreement that mandates a comprehensive vision for fighting corruption. Its signatories committed to adopting measures to prevent corruption such as creating anticorruption bodies, maintaining an independent judiciary, and establishing transparent procurement systems; criminalizing bribery and the embezzlement of public funds, and providing for the freezing and confiscation of the proceeds of those crimes; cooperating with other countries to enforce anticorruption laws and to return looted assets to their country of origin; and implementing rules to protect the financial system from the proceeds of corruption.

Unfortunately, there is no credible mechanism to ensure that countries implement the UNCAC. The implementation process sounds like a parody of an ineffective UN process: it relies on a “non-intrusive” “desk review” of a “comprehensive self-assessment checklist” completed by each signatory. A visit by an assessor to the country being reviewed can be made only if that country agrees. Reports on a country under investigation remain confidential unless the country under review chooses to have it published. On top of that, at the current pace, the first round of assessments will take 15 years to complete.

Other well-intentioned anticorruption efforts similarly lack sufficient implementation mechanisms. Although a G-20 anticorruption “action plan” announced last November calls for countries to report back to G-20 leaders, it lacks a formal process to ensure concrete improvements. And the Organization for Economic Cooperation and Development’s existing assessment of whether its members are allowing companies to bribe foreign public officials does not extend to potential corruption issues within any member country itself.

Although the implementation of a comprehensive set of anticorruption measures undoubtedly poses daunting political challenges, there is an existing model that works: the global effort to combat money laundering and terrorist financing by the Financial Action Task Force (FATF). By publishing expert-created standards to combat illicit finance which are enforced by rigorous mutual evaluations among members, FATF has created a perpetual race to the top, or at least a race away from the bottom, as countries continuously seek to improve their FATF evaluations. The FATF consisted of only 16 members when first formed by the G-7 in 1989; today, more than 180 countries subject themselves to its or its affiliates’ assessments. Its efforts are viewed as nonpolitical and are thus respected. Most important, FATF publishes its evaluation reports and its conclusions about which countries pose a risk to the system. Financial institutions around the globe pay close attention to FATF’s assessments and use them to decide whether or how to operate in specific countries. Countries’ fears of landing on one of FATF’s warning lists, and their intense desire to remove themselves from those lists once named, are powerful motivators for self-improvement.

The international community could make real progress in combating corruption if an organization with FATF’s credibility were empowered to set standards and assess countries’ performance on the types of measures established in the UNCAC. Such a process should build on the key lesson of Switzerland’s reforms: the best way to motivate countries to prevent corruption is to harness their own desire to protect their reputations.

For more long-form analysis, visit ForeignAffairs.com.

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Topics: Ethics • Europe • Middle East

soundoff (9 Responses)
  1. Rick Cline

    In 1947 the mathematical logician, Kurt Godel, claimed that a contradiction exists in the U. S. Constitution. The contradiction he located is the extra-constitutional authority of judicial review found in the judiciary. As "textualism," the reigning interpretive theory of the Constitution, is contradicted by his theorems, Godel was correct in asserting that tyranny is possible by legal means when that interpretive theory has unlimited authority in striking legislative enactments by the people's elected representatives.

    Fareed Zakaria has begun a long overdue discussion on the continuing relevance of an 18th century document. But, I believe, a more thorough grasp of its relevance requires perhaps a better understanding of our country's intellectual history.

    Godel's Contradiction and Jefferson's Solution

    As a student of classical and mathematical logic, I have known for some time that the famous mathematical logician Kurt Godel used his incompleteness theorems to locate a contradiction in the U. S. Constitution whereby tyranny is possible by legal means. While examining the Constitution and its extra-constitutional powers, I have found Godel's contradiction. Before pointing it out, however, I'll briefly recount the humorous circumstances of how, thanks to Einstein, Godel's keen but rather peculiar insight came to be hidden from the world for the better part of sixty years.

    In preparation for his citizenship examination in 1947, Godel examined the Constitution thoroughly. A good friend to both Einstein and the economist Oscar Morgenstern, the three headed to Trenton from Princeton's Institute for Advanced Study for the swearing-in ceremony. The previous day Godel abruptly announced to Morgenstern that he had found a contradiction or an inconsistency in the Constitution. Alarmed, Einstein somehow imagined that Godel's hopes for citizenship would soon end if word leaked, and concocted a scheme to distract him. Confident that twice-told jokes and often repeated anecdotes had worked, Einstein was completely unprepared when the presiding judge, after mistaking Godel's nationality, exclaimed "...unlike Austria and Germany, a dictatorship is not possible here because of our constitutional safeguards!" Godel jumped, shouting, "No, no, no! I have found a way."

    The contradiction Godel located is an extra-constitutional authority in the judiciary. Before going into further detail, a simple review of his first and second theorems is necessary: 1. The first theorem more or less states that within any consistent formal system, with a precisely defined set of rules for operations, it is not possible to find a complete set of axioms for all of mathematics and related systems. Consequently, and somewhat paradoxically, a formal proof of the theorem leads inexorably to contradiction. 2. The second theorem is logically entailed by the first. It states that, for any consistent formal system, true statements exist that are not provable within the system. Following publication of the theorems, the mathematician John Von Neumann said that he regarded Godel as "...the greatest logician since Aristotle. As I hope to demonstrate, the implications for the U. S. Constitution are both considerable and fit entirely within the scheme of our intellectual history.

    The interpretive legal theory known as "textualism" is contradicted by Godel's theorems. As the reigning method of judicial review textualism, or textual analysis, seeks to find original meaning and intent in the formal language of the Constitution. It is contradicted by Godel's theorems in two fundamentally important ways: 1. lacking all necessary and relevant information within the formal system of the Constitution, the rules for operations of analysis cannot decide the constitutionality of legislative actions, and 2. it is not possible to exhaust the number of meaning statements necessary to decide the constitutionality of particular legislative enactments without contradiction. That the reigning interpretive theory is contradictory is due principally to its excessive reliance on the formalism of the legal code, and, because of this reliance, textualism ultimately breaks down into what was known by the Greeks as the "liar's paradox." Two glaring examples of this paradox include our initial inability to solve in principle the question of slavery and, more currently, the dilemma of a seemingly uncontrollable national debt. Any attempt, therefore, to explicate a consistent set of "meanings" from the Constitution by formal analysis of its textual content ends in contradiction and is of inherently limited value.

    The implication is that tyranny is possible by legal means when a contradicted and fallacious interpretive theory, such as Originalism, has unlimited authority in striking legislative enactments by the people's elected representatives. Armed with a fallacious interpretive theory, the judiciary has an unchecked power to decide any or all legislative enactments as unconstitutional. Consequently, the judicial review process is spurious because the reigning method is invariably arbitrary. When asked years later to comment on a possible legal analogy to his theorems, Godel remarked that any undue reliance on the formalism of the legal system poses unanticipated risks to the legal code. The current financial crisis is illustrative and may represent the type of threat Godel referenced. Textualism or Originalism must be abandoned if we are to restore integrity to the judicial review process and, consequently, to our constitutional system of checks and balances. Godel's keen insight necessitates, therefore, a legal analogy consistent with his incompleteness theorems. In this sense his insight mirrors the anxieties and principle concerns of Th. Jefferson; perhaps none more so than with what Jefferson called "the problem of Rome," that is, the looming historical example of a republic deteriorating into tyranny.

    Throughout our nation's history, the Constitution has assumed the character of the tool or method used for deliberative inquiries and interpretive analysis: it has assumed the character of F. Bacon's "Novum Organum" and the logical pragmatism of C. S. Peirce as interpretive analogies. Question: why these analogies and not others? Answer: a sound interpretive legal analogy, consistent with the methods of the most recent advances in the sciences, is one we lack the means of contradicting. Bacon's method of pure induction was sound until the development of the non-Euclidean geometries of Lobatchevsky, Bolyai, and Gauss. It was the heroic effort of C. S. Peirce, toward the end of the 19th century, that resulted in his creation of a logical framework explaining how these geometries are possible. As Jefferson was the first to point out, despite his grave doubts on the value of judicial review, the interpretive method used to strike legislative actions must be sound because once contradicted this extra-constitutional authority turns into what he called a "despotic oligarchy." In other words, a sound interpretive legal analogy demonstrates the fallacies and limitations of its predecessor(s). Jefferson, of course, had strong reasons for arguing that the Constitution is a "living document." The plain historical fact is that the Constitution has changed "chameleon-like" since its adoption. While the interpretive understanding of the "formalists" is a fairly recent innovation, the analogical "meaning" of the Constitution for Jefferson, Madison, and Franklin, at least, was more akin to that of Newton's "Principia Mathematica." Peppered throughout his considerable correspondence, Jefferson writes that his "trinity of gods is that of Bacon, Newton, and Locke." It would not otherwise be too great a leap of the imagination to understand how Jefferson fitted the works of each "god " into the system he had inscribed on his tombstone; nevertheless, this insight is lost on the Originalists who lack a firm foundation in both the history of the sciences and the intellectual history of their country. To clarify this last point requires an examination Jefferson's remarkable achievement.

    Jefferson argued throughout his life that the criterion for a legal interpretive theory and, consequently, a program for education reform must stem from the most recent advances made in the sciences. The sciences, Jefferson and others argued, exercise a liberating effect on the mind and body from the tyrannical and prejudicial leanings of crown and pulpit. Therefore, his legal interpretive theory (meaning, of course, our first interpretive theory) relied on Bacon's method of inquiry. An interpretive legal theory relying on an inductive method led to his founding of the University of Virginia. Following Jefferson's example at the end of the 19th century the great American philosopher, John Dewey, popularized Peirce's logical pragmatism and initiated an unprecedented education reform program. Dewey understood more clearly than anyone that education reform is only possible following deep insights into the foundations of our constitutional system, and that participatory democracy requires consistency between the reigning interpretive theory and a program for education reform. Textualism, or its more recent off-shoot Originalism, is not an interpretive theory of the Constitution because it does not meet this criteria.

    Of signal importance is Jefferson's solution to the problem of Rome: his argument addressed the historical fact that the normal working of Rome's Republican Constitution deteriorated into tyranny. The interpretive legal theory of the Roman aristocracy was what they called the "mos maiorum," or "way of the ancestors." It was, in the words of the great Roman historian, Ronald Syme, a "screen and a sham," leading to the destruction of what remnants remained of Rome's republican institutions in 46 B.C.E. The paradox of the liar is evidenced at this point in Roman history. The Roman virtues were replaced by greed and carpe diem at the higher ranks. That Rome was falling apart was plain for all to see and, yet, there was nothing anyone could do to stop it. All that Rome did and experienced was, nevertheless, justified as "constitutional" by an "originalist" interpretive legal theory. Alternatively, Jefferson's solution (engraved in syllogistic form on his tombstone) stressed that only methods of inquiry, stemming from the most recent advances in the sciences, could serve as sound interpretive legal analogies and, as such, engines of education and institutional reforms. Consequently, the Supreme Court must not be the sole authority in interpreting the Constitution through a process of judicial review; that responsibility, Jefferson argued, belongs to every American subscribing to the argumentative scaffolding he and some of the other founders championed. This solution escaped the nets of the considerable talents in Europe for seventeen hundred years. It wasn't Leonardo Bruni, Machiavelli, or Guicciardini during the height of the Italian Renaissance; nor was it Bacon, Leibniz, Hobbes, Locke, and Montesquieu during the modern period that solved the problem of Rome. They all made monumental contributions to the political debate, of course, but towering above them all is Jefferson whose writings and example continue to argue that republican government is possible without deterioration.

    It is imperative that we understand that the integrity of our Constitution, meaning primarily our constitutional system of checks and balances, is at risk in the absence of a legal analogy to Godel's theorems. This Godelean interpretive theory will give our federal courts a sound interpretive legal theory and claim the confidence of the people when those courts scrutinize legislative enactments through judicial review. We must recognize the insidiousness of narrow intellectual specialization to the proper object of maintaining republican government; if we ignore, or do not adequately understand, the significance of foundational advancements made in the sciences our Constitution and free institutions are imperiled. We must also acknowledge a lack of sufficient balance between the complementary aspects of human rights and liberties, on the one hand, and the responsibilities of citizenship, on the other. And, finally, following Jefferson's instruction, we must use the insight Godel gave us for much needed education reform. We have no need to fear a contradiction so long as this important insight is handled wisely.

    June 20, 2011 at 1:13 pm | Reply
  2. Craig Sanes

    "...establishing transparent procurement systems.." !? .. How about fully internationalized 'regulatory' procurement procedures? Really, we have gone past the point of offering the quesion of who is naughty and nice. We have yet to consider 2/3 of the continent of Africa. These illicit infrastructures did not just crop up recently, they were put out of sight and out of mind for the purposes of maintaining the status quo; lazy conflict resolution and regional stabilization.

    Games up. Stability is over, and our government and those of others cannot afford to put the issue aside any longer. What issue? The vast bulk of the worlds oil supply, among other commodities, were built upon an entirely unregulated sytem; the value per barrel was based entirely upon that set by the distributors. and in dispraportionate level of individual income was left in its wake. It's time to put full sancions on the whole region. I'm sorry, but what a mess.

    June 20, 2011 at 3:19 pm | Reply
  3. j. von hettlingen

    Switzerland is regarded by many as a paradise on earth. Yet Friedrich Dürrenmatt saw his country as a “Prison in Europe”. In a metaphorical speech he made in November 1990 in honour of His Excellency Vaclav Havel, the President of the Czech Republic, he compared some of his fellow citizens to prisoners of their own bigotry and paradoxes. Only by fleeing into this insanity would they find their sanity – freedom and security.
    For decades Switzerland had benefited from its neutrality and lent itself as an international key player in the world of finances. The thriving prosperity of the country has also an opposing perspective. Gain-maximizing is in fact a national consciousness among many Swiss, so much so that it reflects their urge to maintain the high living standard at all price. Labour has become so expensive that civil servants only act when it serves their personal purposes. Some of them take advantage of the plight of their citizens and enrich themselves whenever the occasion arises. Foreigners are welcome as long as they are docile, spend and pay taxes. Jumping on the national bandwagon of fiscal competition, politicians feel no qualms about grovelling before the rich and powerful, if it serves to bring their cantons burgeoning wealth.
    That is the reason why many in the finance sector resent the Restitution of Illicit Assets Act and mourn the loss of those important clients, who come with hundreds of millions. They see their sovreignty infringed by outsiders like the EU and the U.S.

    June 20, 2011 at 7:01 pm | Reply
  4. Bryan Baugh

    Dr. Andrew Terril wrote a fantastic article on the issues of the arab spring for the Strategic Studies Institute. Link included, and be sure to check it out.

    http://www.strategicstudiesinstitute.army.mil/index.cfm/articles/Arab-Upheavals-and-the-Future-of-the-US-Military-Policies-and-Presence-in-the-Middle-East-and-the-Gulf/2011/6/27

    June 29, 2011 at 3:24 pm | Reply
  5. woodstocker

    And then there is "gut" instinct which says not to put any money in any bank, and not to believe anything read that was meant for popular consumption.

    July 24, 2011 at 7:38 am | Reply

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