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Monday, September 12, 2011

Can I Flip Your Deontological Switch? A Philosophically Perplexing Anti-Bribery Case Study, or Two

I am going to argue, in this and subsequent posts, that our current anti-bribery enforcement regime actually creates the very conditions overseas in which bribery proliferates.  And I want to therefore challenge the logic, likely embraced tacitly by most readers, that if bribery is wrong, we should punish it as severely as possible.   Right premise, wrong conclusion.  Let's start with a couple case studies from a year of Fulbright research in Asia (and BTW, if any in this readership are thinking of applying for Fulbrights, contact me off line -- I've got a couple insights on how best to do so). 

First is Kazakhstan, that oil- and gas-rich country that western companies aggressively sought to enter following the Soviet collapse.  One U.S. lawyer named James Giffen positioned himself as the go-to guy for winning contracts from the Kazakhstani government and -- surprise, surprise -- was arrested about ten years ago for violating the FCPA.   What happened next?  New investment by U.S. companies dropped precipitously, but overall new investment remained fairly constant.  Where, then, did the new capital come from?  Answer:  a country that is similarly well-capitalized and thirsty for resources, but lacks effective anti-bribery laws.  I'm speaking of China.

Today, China is a dominant commercial presence in Kazakhstan, much to the dismay of Kazakhstanis.  They'll tell you, as they told me, that the new Chinese companies "do business differently -- they care nothing for labor, or the environment, or corruption -- they only care about resources and profits."  A partner in the Kazakhstan office of a major U.S. law firm told me that today his clients are almost all Chinese, and that they're far harder to bill because "they are accustomed to solving their legal problems by other means."  Upshot:  U.S. companies certainly bribe less in Kazakhstan as a result of FCPA enforcement, but the overall level of bribery and other forms of socially destructive corporate behavior has almost certainly increased.  So what should we do? 

Next up:  one more case study, from India.  And then the fun really begins.





Posted by Andy Spalding on September 12, 2011 at 11:53 AM | Permalink


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