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Transparency International’s Corruption Perception Index falls short of nudging govts to undertake reforms

The Corruption Perception Index generates short-lived hype/hysteria but rarely prompts a Pygmalion effect.

Written by Mallika Mahajan , Pawan Kumar Sinha |
Updated: February 25, 2021 8:46:09 am
Does the CPI nudge governments to initiate anti-corruption reforms, referred to as the Pygmalion effect?

Measurement of corruption has remained a perennial problem. Transparency International’s (TI) first Corruption Perception Index (CPI) released in 1995 was a bold initiative. Until then, corruption was a taboo topic. International financial institutions regarded corruption as an internal policy matter of the respective countries. Does the CPI nudge governments to initiate anti-corruption reforms, referred to as the Pygmalion effect?

Experts argue that the CPI is not a reflection of the corruption environment of a country and it cannot be a blueprint for sustained reforms sequencing because it fails to highlight the pressure points.

For starters, the CPI is an Index of Indices and lacks representativeness. From 2002, TI uses only expert assessments and surveys of business people, excluding surveys of the public. This generates a sample bias, as business elites are less negative about forms of corruption that favour their own group. Effectively, this means that it ignores the experiences and perspectives of the poor. It also means that the interests of “unofficial businesses”, which employ the overwhelming majority of the population in poor countries, are ignored. The cultural nuances of corruption within the business community further muddy the waters. Foreign businesspersons may regard Diwali gifts as acts of corruption that are customary for local businesspersons, without a corresponding quid pro quo.

The CPI narrows the definition of corruption to bribe taking and is therefore unhelpful for granular reform. It does not distinguish between a wider catalogue of corrupt acts, such as nepotism, extortion, patronage, facilitation payments, collusive networks, administrative and political corruption, or state capture by major private interests. The CPI makes reducing corruption that is inimical to foreign investors the dominant paradigm for reform.

Another blind spot is that while CPI spotlights the major bribe takers of the world, it lets the major bribe givers and safe havens of looted funds, off the hook. The CPI requires a minimum of three surveys per country. As a result, a significant number of countries cannot be included in the CPI. In 2003, the CPI scored 133 countries. Based on UN membership alone, this meant that 58 countries were missing from the Index. The failing of irregularity (countries drop in and out) makes the ranking order irrelevant. India’s highest rank was in 1995 when it stood 35. However, at that time only 41 nations were included in the CPI. India was ranked 95th, the lowest ever, in 2011, when CPI had included 182 countries (highest number).

Apart from the overall rank, there is the second figure in CPI — the integrity score (out of 10). Ten stands for a highly clean country, while zero is for a country where kickbacks and bribery dominate business transactions. Ideally, one should base comparisons with the earlier score of the country. A higher score indicates that respondents provided better ratings, while a lower score suggests that they revised their perception downwards.

One must treat this metric with caution also. In TI’s own words, year-to-year changes in a country’s score result not only from a changing perception of a country’s performance but also from changing samples and methodology. The CPI admittedly excludes un-updated sources and includes new, reliable ones. The TI compares this to the problem of designing a price index for a basket of goods. It is not possible to compare the price index for one period to that of the next as the ingredients of the initial basket itself have changed. Additionally, within the CPI’s methodology, an implicit data “lag” exists.

Another problem with the collection of perceptions arises when respondents do not report their personal experiences but rely on media coverage. Anti-corruption drives may bring corruption into the open precisely during a period of genuine reforms. India’s scores on the CPI plummeted in 2011, the year of the unearthing of major corruption frauds. The assessment of a country might then reflect the quality of the press in uncovering scandals, and particularly its freedom to do so. Countries that suppress a free press may escape a bad reputation.

The CPI measures perceptions and not actual incidences of corruption. We demonstrate this with the India-specific example from TI’s Global Corruption Barometer (GCB). In the 2020 GCB, 89 per cent of Indians thought that government corruption was a big problem, whereas 39 per cent of Indians had actually paid a bribe in the preceding 12 months. The comparable figures of the 2017 GCB highlight this dichotomy between perception and practice. In 2017 GCB, 41 per cent of Indians thought that corruption had increased whereas 63 per cent actually paid a bribe in the preceding 12 months.

This is not to denigrate the CPI. The TI, being an NGO, establishes the reliability of the CPI in the field of corruption assessments. Its standalone use may not be result-yielding. Nonetheless, if one excludes a reliance on rankings, the CPI can be a useful tool for a broad longitudinal assessment of a country. This may not be useful where the changes in the scores are not drastic. From 1995-2020, India scores have moved at a snail’s pace from 2.63 to 4.1 (out of 10). Another alternative could be that a national governmental agency conducts corruption assessments. This could suffer from a perception that the governmental assessment is biased. The use of proxy data can help overcome this.

The CPI will be meaningful when understood in the national context and alongside other indices such as Global Corruption Barometer, Press Freedom Index, and Rule of Law Index etc. To conclude, the CPI generates short-lived hype/hysteria but rarely prompts a Pygmalion effect.

This article first appeared in the print edition on February 25, 2021 under the title ‘A flawed index’. Mahajan is Chief Commissioner, CBIC and Sinha is Director, International Anti-Corruption Academy, Austria

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