Corrupt but Legal
Institutionalised Corruption and Development Finance

by Nicholas Hildyard

first published 13 December 2016

Most corruption today is entirely lawful.

Some corruption is certainly criminalised. But bribery, money laundering and fraud are not the be-all-and-end-all of corruption. Indeed a narrow focus on such crimes (vital as it is to investigate and prosecute them) hides many perfectly legal practices that the general public often rightly regards as corrupt, but which, today, often pass as "good governance".

A presentation to a Counter Balance symposium on “Inequalities, wealth extraction and 'legal corruption' in the large infrastructure era” sheds light on the lawful, routine, accepted practices that are the mainstay of today's economic system but represent nonetheless the decay of democratic politics.

It draws on a Counter Balance report, researched and written by Nicholas Hildyard, that explores the entanglement between public and private sectors; the enablement of corruption by financial institutions; and the role of Public-Private-Partnerships (PPPs) and new financial instruments in supporting infrastructure mega projects.

The report explores recent examples of "corrupt but legal" practices among public financial institutions in the US and Europe, with a particular focus on the European Union’s main financial institution, the European Investment Bank (EIB).

It shows how the promotion of PPPs, public financial support to private equity funds and revised rules on conflicts of interest have created a distorted, privatised vision of the “public interest”.

See also 'A critical perspective on the financialisation of infrastructure, PPPs and mega-corridor projects', another presentation given at the same symposium.

Counter Balance – Challenging Public Investment Banks is a European coalition of development and environmental non-governmental organisations (NGOs) with extensive experience of development finance and international financial institutions (IFIs). It campaigns to prevent negative impacts resulting from major infrastructure projects funded by such institutions. A current focus is analysis of illicit financial flows through the public financing of large infrastructure projects, which represent a new trend of state capture by for-profit interests.