Headlines 2013

Corruption in Sweden

2013-04-09

Richard Öhrvall and Andreas Bergh.
Richard Öhrvall and Andreas Bergh.

What if Sweden is like Iceland, warns researcher Andreas Bergh and refers to the report "Public benefit or personal gain? ESO report on corruption in Swedish." The report which has IFN researchers Andreas Bergh and Richard Öhrvall as co-authors was released on April 9. Corruption was basically unknown in regards to Iceland until the financial crisis exposed irregularities.

"Allmän nytta eller egen vinning? En ESO-rapport om korruption på svenska (Public benefit or personal gain? ESO-report on corruption in Swedish" is written by Andreas Bergh, Associate Professor of economics IFN, Gissur Ó Erlingsson, PhD in Political Science and Associate Professor at Linköping University, Mats Sjölin, Professor of political science, Linnaeus University, and Richard Öhrvall, Fil. Mag. political science IFN.


The ESO study (The Expert Group for Public Economics) has classified corruption in a wider sense than the law, i.e. not only bribery and fraud, but "abuse of power that favors yourself and/or your relatives at the expense of taxpayers."
It turns out that almost 25 percent of Swedes believe that politicians are involved in corruption and almost 50 percent believe that it is common for politicians and bureaucrats to abuse their power/position of trust, to their own benefits or for their loved ones. Swedes perceive corruption in society in significantly greater extent compared to other Nordic citizens. This despite the fact that all the Nordic countries are at the top of international lists accounting for corruption freedom.

"This is surprising," say the researchers, because the Nordic countries have much in common - related traditions, culture and institutions. "We do not find any obvious explanation for the difference."

“Citizens' perception is important and should be taken seriously, regardless of how serious the corruption is, says Richard Öhrvall when the negative attitude of Swedes is mentioned. An outcome that has been documented in a number of empirical studies.

IMG_0056

From left Richard Öhrvall, IFN, Lars Heikensten, Chairman ESO, and Andreas Bergh, IFN,
at the seminar April 9, when the report about corruption was presented in Stockholm.


The authors of the report believe that corruption has "a number of negative effects on the economic and political system": distortion of competition, decrease of business investments and a drop in desire to become an entrepreneur. Moreover, corruption threatens the legitimacy of the democratic system, lowers confidence in important public institutions and reduces reliance on market economic processes.

Corruption is also expensive. In a hypothetical example - comparing Iceland and Sweden, where it is assumed that both countries have problems with nepotism, cronyism and abuse of confidence – it appears that the effects of corruption can mean at least 0.25 percentage points lower annual economic growth, which is equivalent to SEK 9 billion on an annual basis.

It is to some extent at the municipal level that corruption is present, which is not surprising as "Local authorities are responsible for 75 percent of welfare services," notes Andreas Bergh:
“A hypothesis is that corruption is greater at the local level due to organizational changes in the last 30 years.”

The fact is that corruption occurs more frequently in some areas than others - areas that are largely a local responsibility: Primarily technical management and secondly planning and building issues. In the business and tourism sector corruption is also relatively widely-spread.
Andreas Bergh explains that the municipal audit is not as powerful as it should be. The auditors are often too close to those examined. In addition, the municipal companies are "ill-fated in-betweens"; neither regular companies, nor solely for public good. Thirdly, privatization has meant increased public procurement in progressively more areas, and procurement is a documented risk area for corruption. Adding to this sensitive situation is the complicated Public Procurement Act (LOU).

Andreas Bergh and Richard Öhrvall deliberate the role of municipal politician's, observing that their responsibilities have grown considerably in recent decades. While few of these are full-time politicians they have to relying on municipal administrators. "They are at an immense disadvantage relative to the administrators," says Andreas Bergh.

So what can those in power do to ensure a corruption-free society?

The authors of the ESO report suggest three concrete steps to curb corruption:

  • “We should make creative use of ICT so that citizens can more easily see where their tax money is going. This includes procurement.”
  • “Review the annual operations and finances of randomly selected municipalities, including municipal corporations.” This effort, suggest the researchers, could be led by The Swedish National Financial Management Authority (Ekonomistyrningsverket), the Government's Survey Support (Statskontoret) or the Swedish National Audit Office (Riksrevisionen) or a brand new institution.
  • “Create a more independent municipal audit. A move that should include the development of an accounting standard for municipal operations. "The audit of local governments has since long been criticized for being toothless, and although there has been some tightening up of the regulations the developments in recent years seems to have gone the wrong direction," claim the authors.

Two frequent allegations refuted in the ESO report: there is no indication that the size of the public sector creates corruption problems or that more women in politics would reduce corruption.

Text: Elisabeth Precht

Read the report - summary in English

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se