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Graft and bribery are big government’s byproducts: EU studies

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The nation of Spain is prosecuting 37 people – including former officials in the ruling center-Right party – for steering government contracts to their politically connected friends. It will not help the defense that the suspects gave themselves audacious, Godfather-inspired nicknames like Don Vito and “The Little Meatball.” While a disturbing example in itself, a series of studies show that corruption is becoming a growing threat in the EU – and the larger the government, the greater the level of perfidy.

The number of single-bid contracts in the European Union nearly doubled between 2006 and 2015, and the number of bidders per contract fell by 40 percent during the same period. The penchant for cronyism in such arrangements is obvious.

As government officials award contracts based on favoritism, citizens must resort to bribery in order to procure the services their taxes already funded. Transparency International found that, “[o]n average, one in six households” in Europe and Central Asia “paid a bribe when they accessed public services.” EU bribery rates – which range from zero percent in the UK to 42 percent in Moldova – generally track with the Heritage Foundation’s Index of Economic Freedom, where the UK ranks only behind Switzerland, and Moldova ranks a dismal 117.

Interestingly, in Western EU nations, the most likely bribe recipients were part of the government-run healthcare systems.

The fiscal costs of this arrangement are pronounced. “A study by Rand … calculated that the annual increase in contract costs due to corruption in the EU was $5 billion,” The Economist reports. Would-be entrepreneurs are locked out of the market, and customers are denied the innovations they invented.

However, the greatest damage is not measurable in economic terms. Cronyism vitiates the equality and impartiality that lies at the heart of the rule of law. The Torah warns rulers, “Thou shalt not respect persons, neither take a gift”; and the Psalmist contrasts the righteous man with one whose “right hand is full of bribes.” Denying the rule of law arbitrarily stratifies society based on status and ability to curry favor with the powers-that-be.

Government officials’ role in doling out funds to their favored constituencies further strains our political discourse, as well. When graft afflicts a private enterprise, defrauded shareholders call for prosecuting the guilty parties and recovering their pilfered funds. Government favoritism begets political polarization and an ensuing fight-to-the-death over the right to distribute the spoils.

There is an innocent explanation of some of these no-bid contracts: Larger orders require a firm with adequate capacity to fulfill them, unduly favoring Big Business. “Small is beautiful” advocates must first set their sights on government.

But the size, scope, and distance of the government financing the contract in question increases the likelihood of its corruption in another way. The Economist notes:

Worse, the contracts most susceptible to corruption are those backed with EU funds, which make up about 15% of the total. A [Corruption Research Centre Budapest] study in Hungary and Czech Republic found that they are significantly more likely to be abused. Governments seem less worried about misspending money from Brussels than that of their own taxpayers. European integration was intended to promote public integrity and competition. In some cases, it seems to be doing the opposite.

Government procurement – which makes up one-fifth of the total GDP of EU member nations ($2.02 trillion U.S.) – makes a tempting pot for the morally challenged. Compounding this with the indifference of spending money furnished by a faraway bureaucracy, extracted from anonymous foreigners, wears down self-restraint to the breaking point.

To paraphrase Lord Acton’s most famous dictum: More government corrupts and larger, more remote government corrupts to a higher degree.

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Rev. Ben Johnson Rev. Ben Johnson is Senior Editor at the Acton Institute.

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