Dirt in the corridors of power

Is the British government becoming more corrupt? asks Howard Davies.

There is a useful little organisation called Transparency International, run by a former World Bank official, that regularly publishes an index of corruption, listing countries according to how corrupt their governmental systems are thought to be by multinational firms. Those at the top of the league are deemed to be the least susceptible to bribes.

In the last survey, the UK was in 13th spot, three places ahead of the US and seven and ten places ahead of Germany and France respectively. We rank behind the Scandinavians, the old Commonwealth and one or two other goody-goodies such as the Netherlands.

How satisfied should we be by this position? Well, it is below our global ranking for football and gross domestic product per head, but a higher position than we have in equestrianism or the per capita consumption of fish. Overall, I would imagine the government is reasonably content, and it seems unlikely that many overseas investors are scared away by the need to grease the British palm.

Robert Neild, by contrast, thinks we scarcely deserve our premier-league ranking. He believes that ethical standards in British public life fell sharply in the past two decades of the 20th century. The evidence he adduces for this supposed decline is largely anecdotal. He lists a range of scandals from John Poulson to Lord Ashcroft, through Bernie Ecclestone and Jonathan Aitken. While many seem minor taken in isolation, he believes that cumulatively they show that things have changed, and for the worse.

To underpin this pessimistic assessment, he attempts a rough taxonomy of public corruption, under eight headings. On the first six of the eight - the bribing of MPs, party funding, the sale of honours, the arms trade, patronage in the public services and the conduct of ministers towards civil servants - he maintains that British standards have materially fallen since the end of the second world war. Under the last two headings - the pursuit of private interests by public servants and the contracting out of public services - he argues that opportunities for corruption have been greatly increased by privatisation, with potentially adverse consequences that we cannot yet see.

Let us leave aside, for the moment, the question of whether this analysis is sufficiently robust to be persuasive; and turn to the possible explanations. Why does Neild believe that these trends have developed? What convinces him that Britain's public administration is now for sale to the highest bidder?

In answer, he points to "the apparent emasculation and displacement of two old British elites - the patrician politicians and the administrative class of the civil service. These two elites that helped to produce clean governments in Britain supported each other." But he argues that they were seen to be obstacles to Margaret Thatcher's reforms and "the reduction of the two elites can be seen as part of the ascent to power, under the leadership of Mrs Thatcher and her successors of both parties, of the new middle class".

Put this way, and I am using Neild's own words, it seems an unusually and unfashionably class-based analysis for the beginning of the 21st century. But there is more going on in Public Corruption than a nostalgic yearning for the days when a chap could be snubbed in his club for caddish behaviour and never seen again.

Neild's thesis, which derives from a conversation with Gunnar Myrdal, is that we are wrong to believe that honest and clean government and public administration are part of the natural order of things. He argues that practices that we now call corrupt have been accepted as normal in most countries, for most of recorded history. The phenomenon he calls "clean government" essentially arose in the late-18th and early-19th centuries in a small number of countries in north-western Europe. This enlightened approach has still not spread to most countries in the world, and certainly not to those that rank below about 25th in the Transparency International league table.

Most of the book is therefore devoted to chapters on Germany (or rather Prussia), France, the US and the UK, which attempt to describe and analyse the way in which clean government, or perhaps more properly, cleaner government, came about in each case. In Prussia, Neild credits Frederick the Great with the creation of something approaching an incorruptible civil service, with the establishment of the Beamtenstand (the estate of the bureaucracy). As early as 1770, a standing Civil Service Commission was established and entrants were selected by competitive examination, rather than by class or family connection. From then on, he argues, Prussia had the basis of sound finance and honest government.

The French story he tells is somewhat different. Neild credits a number of individuals, such as Colbert, Fouquet and Napoleon, with establishing some of the building blocks of clean government. But there were other contributors too. For example, the Polytechnique was not established by Napoleon but introduced in the last months of the Convention in 1794. Since then, while kings and republics have come and gone, the national administration has been passably honest throughout, or so he maintains. (He does not comment on recent practices at the Parisian Hôtel de Ville.)

In his chapter on the UK, Neild argues that we were relatively late in establishing the framework of honest public administration. Competitive entry to the civil service, for example, was not introduced until 100 years after Frederick the Great's reform. Many of the aspects of public service that we take for granted were introduced first into India, often by the East India Company rather than by the government. Indeed, the term civil service was first coined in relation to the Indian civil, as opposed to military, service. But Neild accepts that by the second-half of the 19th century our governance arrangements stood comparison with the best of the rest.

The US story is inevitably rather different. Neild has little sympathy or empathy for the US. While acknowledging the early reforms of administration in Washington, he dwells with some amusement and pleasure on the antics of the 19th-century Tammany Hall politicians in the major cities. His verdict on city government across the US is damning. He also has no time for politically elected judges, who offend against his strong bias in favour of a rigorously independent judiciary.

These essays are entertaining enough in themselves. But Neild is not simply aiming to inform. He has an analytical purpose in mind. His aim is to identify the key driving forces behind moves to reduce, if not eliminate, corruption in public life. In doing so, he looks for pointers that may be helpful to developing countries struggling to clean up their act.

His tentative conclusion is that two explanatory forces drive much of the change. The first is the argument that the pursuit of military strength, which required efficient and cost-effective administration, was a crucial element in the building of a clean modern government. Effective military power was crucial to national survival in 19th-century Europe. So Neild believes that military competition was as important in reducing corruption as in creating other elements of a modern democratic state.

His second argument is that the enlightenment and the age of revolutions generated strong popular demands for better government, which affected the attitudes and behaviour of the ruling classes.

This bi-focal explanation seems unexceptional and, indeed, largely conventional. But what can we make of Neild's overall thesis and the evidence he adduces? One observation might be that his evidence is rather thin. Essentially, it is what journalists call a "cuttings job". His raw material is drawn from newspaper clippings or secondary sources. The catalogue of scandals does not successfully discriminate between the serious and the trivial. His historical description is sketchy and often openly derivative. In a number of chapters he says he is basing his description on one secondary narrative.

To some extent, therefore, Neild anticipates this criticism. In his introduction he acknowledges that he has had to rely on the work of others rather than dig into original sources. Indeed, he says his main objective is to encourage others to address the problem of corruption, and how to remove it. So while Public Corruption is ultimately unsatisfying as a survey of the subject, Neild has alighted on some important issues, on which too little is written. It would be unfortunate if emerging-market countries were to conclude that the elimination of corruption required the creation of a big standing army. But his modest contribution may stimulate more analysis.

Excessive modesty is not a vice from which Greg Palast suffers. Nor are he and his publishers constrained by the stultifying dictates of good taste. The dust cover and the publisher's press release quote Mark Thomas, of the Mark Thomas Product on Channel 4, as believing that Palast is "****ing brilliant, brilliant".

Palast had his 15 minutes of fame in this country when he exposed the "cash for access" affair in 1997. He sought out a young man called Derek Draper who claimed to know everyone who mattered in the Blair court, and to be able to guarantee access to them for a consideration. The Observer liked the story, and ran with it. Exit Draper, pursued by Peter Mandelson.

The Best Democracy Money Can Buy is a collection of his journalism, from both the UK and the US (Palast is an American), remodelled with introductions that explain just how prescient his reporting was, how foolish those who disagreed with him were and how devastating the consequences have been for all those who benefited from his attentions. Palast may well have his uses, as do other fearless investigative journalists. He has the essential scepticism and independence of the gadfly and manages the occasional scorpion sting. But his work is largely ephemeral, and the tone self-satisfied. He also lacks discrimination in distinguishing a major scandal from a minor peccadillo.

I shall look out for his byline in future. But there is no need to collect his work in hard covers. Pluto Press should be looking for better material than this.

Sir Howard Davies is chairman, Financial Services Authority.