How Corrupt Are American Companies Overseas?

Despite recent cases involving Walmart and JP Morgan, government regulation has kept business abroad relatively clean. Rather than loosen those regulations, other countries should follow suit. 

What's the Latest Development?


Last month, Walmart was accused of bribing Mexican officials to let the company expand faster than the process of securing permits would allow. Prior to that, JP Morgan and several Hollywood film studios were implicating in paying bribes to open up the Chinese real-estate and movie markets, respectively. But despite these high-profile cases, American business abroad has never been cleaner, says James Surowiecki. That's thanks to the Bush and Obama administrations who have sought tougher enforcement of the Foreign Corrupt Practices Act, which banned the bribery of foreign public officials in 1977.
 

What's the Big Idea?

For countries like India, which have no anti-bribery laws, or Russia and China, which do not enforce theirs, greasing the palms of foreign officials is considered a cost of doing international business. Some American academics, notably Samuel Huntington, agree. In developing countries with "hypertrophied bureaucracies", might bribes be an acceptable way to encourage commerce? It might be in the short-run, says Surowiecki, but in the long-run, bribes create financial incentives for bureaucracies to create more red tape. Rather than loosen regulation against corruption, the US should persuade others to fight against it. 

Photo credit: Shutterstock.com


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