Perhaps because of the relative success of anticorruption measures or the rise in authoritarian regimes that keep power to themselves for lengthy periods of time, kleptocracy is emerging as a new phenomenon in the fight against corruption. Kleptocracy is a government whose corrupt leaders use political power to appropriate the wealth of their nation, typically by embezzling or misappropriating public funds at the expense of the wider public good. Kleptocracy has global, national and local dimensions and consequences, and it has been detrimental to democratic governance in many countries around the world. As such, its dynamic make kleptocracy a transnational phenomenon. But kleptocracy’s national dimension is where some of the most damage is done against democratic governance. Once kleptocrats have seized power, they aim to remain in control through corruption and by capturing all control institutions and keeping the power circles small with relatives and loyal friends. Their intent is selfish, and focus on destabilizing any balance of power, corroding the rule of law, and sustaining their power by destroying democratic institutions and casting doubt on the free press, elections, and the judiciary. Kleptocrats treat their country’s treasure as if it were their own personal bank account. Let’s unpack this new challenge.
Thieves Stealing the Future and Hope
Kleptocracy means literally, rule by thieves, and focuses on the type of corruption that occurs when government leaders, many elected, and generally in poorer countries, steal large quantities of public funding. Kleptocracies manifest themselves in many forms. Some would argue that Russia, China and South Sudan may fit some of the more classical models of kleptocracy, but there are other more nuanced cases. For example, there is growing evidence that the United States plays a key role in the global dimension of kleptocracy. It is the largest provider of anonymous shell corporations in the world due to its federal structure that allows the formation of companies at the state level, not the federal level. During the four years of the Trump administration, not only his conduct and decisions pointed to some evidence of kleptocratic behavior, but also to a number of corruption schemes to benefit his business and family and hide the origin of his wealth. It was also when the United States lost its global leadership role in anti-corruption. Venezuela’s Nicolas Maduro’s regime has been accused of operating “a kleptocracy” on a rarely seen scale that includes not only embezzling from the state-owned oil company but stealing from a government program created to feed millions of hungry people. The case of Angola, also has been often used to explain how ruling families have used oil related public resources to enrich at the expanse of the country’s human development.
While kleptocracy can manifest in many governance systems, included those with relatively strong institutions, it is in systems that are weak where it finds more enabling conditions to take root and institutionalized. A recent study by the Carnegie Endowment for International Peace focused on analyzing the conditions in a governance system that enable kleptocracy to flourish and consolidate. Kleptocracy is not just the result of an individual that has come to power, either by elections or force, and the behavior they display, but they are also the product of a sophisticated operating system and networks in and outside the country. Autocrats or would be autocrats influence governmental functions to deliberatively shape the system to serve their kleptocratic objectives. They do so by curtailing horizontal accountability mechanism, such as the rule of law, courts, audit offices, attorney generals, as well as shutting down vertical accountability mechanisms such as civil society and media actors. In some cases, kleptocrats promote partnerships with business and private sector actors, under the premise that they can also loot and or engage in corruption practices, as long as they support the kleptocrats and/or remain silent and guaranteeing that as partners they are protected politically and legally.
The logic behind the strategy of kleptocrats is to stay in power indefinitely by bribing groups and sectors to remain loyal and by making it difficult to remove them from power. Maintaining different groups divided, through polarization, disinformation and conspiracy theories, is a key strategy in the playbook of kleptocrats to ensure selective incentives and costs across actors, and exploitation of fragility to curtail cooperation. What was once thought to be an issue associated with developing and poor countries, today kleptocratic practices are expanding into developed and richer countries. Russia, China, and the United States have and are experiencing some form of kleptocratic tendencies. Moreover, a global kleptocratic network has emerged, which include heads of states, businesspeople, and non-state actors. According to the International Monetary Fund, as much as 5% of the world’s gross domestic product is laundered money.
International and Regional Responses to Kleptocracy: Cages of Reason?
As analyzed in another article here, over the past couple of decades, international and regional organizations joined local, private sector and non-governmental actors and produced anti-corruption conventions, recommendations, policy statements, research, and evidence. Corruption, today, is broadly recognized as a critical democratic governance and international development challenge not only for developing and transition countries, but for all countries, including the most developed. Also, in response to domestic and international pressures, many corrupt politicians have been tried and put to jail.
However, the national, regional and international anti-corruption architecture is insufficient to address the toxic and corrosive challenge of kleptocracy. Given the interconnectivity of the global financial system, the size and primacy of the U.S. economy, the significance of the U.S. currency in global trade and financial transactions, and the role of Russia, China, and other non-state actors, anti-kleptocracy measures must involve strong financial pressures in all nodes of the system. Pressures can create leverage in support of strategies developed in concert with international partners and organizations like the United Nations, European Union, and other regional organizations. International organizations and countries can continue to build and strengthen tool to fight kleptocracy, such as sanctions, anti-money laundering measures, and anti-bribery provisions. For example, the Stolen Asset Recovery (StAR) Initiative, a joint effort of the World Bank and the United Nations Office on Drugs and Crime (UNODC), and the G20 Anti-Corruption Working Group have identified corruption by senior public officials as a major obstacle to achieving development and democratic governance.
An example that helps illustrate the dilemmas of combatting kleptocracy is reflected in the United States Department of State 2021 Fiscal Transparency Report published in June 2021. The report found that 74 of the 141 governments reviewed met minimum requirements of fiscal transparency during the review period of January 1 – December 31, 2020. The report also indicates whether governments that did not meet those requirements made significant progress to publicly disclose national budget documentation, contracts, and licenses during the review period, since most are recipients of U.S. assistance. These periodic annual reviews provide opportunities to engage in dialogue with governments on the importance of fiscal transparency to offset kleptocratic practices. However, while these reports offer valuable information, analysis and data. In general, there are no consequences for those who do not meet the requirements.
Kleptocrats use their gained power to protect their individual and family investment, even though it is illicit because they use public resources as their own. One way they protect their illicit enterprise is the use of nationalism tactics, victimization of interference by foreign powers, and closing the civic space. This almost guarantees any popular unrest will be met with force and justification, as well as to be indifferent to international pressures. Moreover, regular citizens under kleptocrats have no recourse, as there is no law, rule of law, or justice to protect. Moreover, in cases where kleptocrats control the entire state apparatus, they can jail opposition leaders, and while in prison they will not be able to see their lawyers or members of their families. Often there is no information on where they are being held and or whether they have due process. Under kleptocracies citizens and anyone who opposes them, will paid dearly. Most kleptocrats find independent media and freedom of expression and assembly to be “enemies” of their cause. Recently, Reporters Without Borders (RSF) published its annual analysis and identified 37 heads of state or government, many considered kleptocrats, who crack down massively on press freedom.
Kleptocratic regimes and their families who benefit in Azerbaijan, Nicaragua, Venezuela, Belarus, Russia, and Zimbabwe, to name but a few cases, are not deter by international sanctions. What the French economist Frederic Bastiat said is appropriate: “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” Kleptocrats depend on illicit financial flows and this is often the means to penetrate weak democratic regimes. In turn, a sophisticated network of global patronage helps kleptocrats obtain resources, loyalty, media infrastructure, political parties and favorable policies. They have the power to permeate bureaucratic and organizational boundaries for lawlessness at the expense of rules, regulation and accountability, and to destroy any vestige of a Weberian aspiration, like the cage of reason.
Building an Anti-Kleptocracy Network to Regain Trust
Kleptocrats have assets, such as impunity, corruption networks, absolute state power, and wealth acquired illicitly. They need to move money outside their countries, often using legal means others through laundering and using illicit networks. For example, is a common practice among kleptocrats to buy real state in hot markets in the United States and United Kingdom through anonymous companies or other schemes. In addition, kleptocrats use illegal and criminal networks, such as cartels, organized crime and international terrorists groups to launder money, finance illegal operations and sponsor conflict and instability.
As this new landscape of autocracies, kleptocracies and illicitness evolves, the landscape of democracy, accountability and rule of law seems to be fading. According to Freedom House’s 2021 Freedom in the World Report, as a lethal pandemic, economic and physical insecurity, and violent conflict ravaged the world in 2020, democracy’s defenders “sustained heavy new losses in their struggle against authoritarian foes, shifting the international balance in favor of tyranny. Incumbent leaders increasingly used force to crush opponents and settle scores, sometimes in the name of public health, while beleaguered activists—lacking effective international support—faced heavy jail sentences, torture, or murder in many settings.” Similarly, 2021 marked the 15th consecutive year of decline in global freedom, showing the long democratic recession deepening. The impact of the long-term democratic decline has become increasingly global in nature, broad enough to be felt by those living under the cruelest dictatorships, as well as by citizens of long-standing democracies.
Two narratives emerge in this context. First, frustration with the inability of democracies to deliver what citizens expect: equality, opportunity, inclusion, and accountability. Second, apathy and mistrust on governments around the world is relatively high (see Graphic 1). Both of these trends are dangerous for global stability and in general for humankind, as it would consolidate the rise of kleptocrats and open the field for criminal enterprises to dominate governance systems and destroy any human progress made over the past centuries. What can be done about it?
Kleptocracy is a monster with four heads. Besides the predators themselves, kleptocrat systems need to: 1) capture a state and grab power, 2) create predatory networks for support, 3) open and maintain resource streams, and 4) have at their disposal tools to violate norms and human rights and sustain impunity and unaccountability. Thus, any response needs to be multi-pronged and coordinated to break these systems and tools. For example, a group of U.S. lawmakers intend to introduce three bipartisan bills designed to curb kleptocracy and corruption worldwide. They say their proposals close gaps in existing laws concerning sanctions of corrupt individuals, address abuses to investor visa programs and allow visa bans to be imposed on corrupt individuals. There is also renewed international focus on combating grand corruption and ending impunity for kleptocrats. Recently, over 100 leaders from more than 45 countries signed a declaration in support of the creation of an International Anti-Corruption Court (IACC). President Biden’s National Security Study Memorandum announced a comprehensive initiative to revamp efforts to tackle domestic and foreign corruption.
Three U.S. based think tanks , Freedom House, the Center for Strategic and International Studies (CSIS), and the McCain Institute, formed a bipartisan Task Force on US Strategy to Support Democracy and Counter Authoritarianism. The Task Force produced a report to both call to action domestic and global actors and to highlight a roadmap for a practical, bipartisan and global path forward to rescue democracy. Seven interrelated strategies were proposed, and one of them centers on making combating corruption, kleptocracy, and state-capture a national security priority. The strategy recognizes that any serious effort to promote democracy and counter authoritarianism must include measures to combat corruption and kleptocracy, which have become business models for modern-day authoritarians.
All of these initiatives aimed to fight kleptocracy. Authoritarian and would be kleptocrats use corruption to undermine effective democratic governance, economic growth, and weaken the rule of law. Their goal is to corrode public trust, and build illicit networks with organized and transnational crime, and engage in countless human rights abuses, and incite conflict and polarization. Democracies across the globe need to align and fight kleptocracy. The cost of not doing anything about it is too high. While kleptocrats and would be kleptocrats around the world have taken advantage at the time of Covid-19, there is still a strong foundation upon which to rebuild democratic values, human rights and accountability systems.
*Source of the photo: Pexels, 2021