1. SUMMARY

A 1996-1997 letter from the Chairman of the International Society of Panetics to 1100 higher education leaders throughout the world elicited some of the most enthusiastic expressions of interest from universities in Russia and former republics of the Soviet Union. Little wonder.

Many citizens in these countries suffer greatly as they pass through the uncertainties of economic, social and political transformation. Their suffering is aggravated profoundly by high and low level corruption.

Illicit activity undertaken for personal benefit at the expense and injury of the rest of the community, corruption is a pervasive phenomenon found in all societies. However, it is particularly virulent in those countries where customs and institutions that should monitor and control such abuse are themselves corrupted.

Most efforts to assess the consequences of corruption attempt to gauge the damage in terms of the economic cost or "tax" it imposes on the society. 3 Comparatively little attention has focused upon the behavioral consequences–in particular, the "petty" corruption to which high level corruption induces a major part of the population to resort in order to survive financially. When engaged in by millions of people every day, such acts are far from "petty" in their consequences. Many of the "inflicted" become "inflictors" and the vast majority suffer from round after round of additional suffering as a direct result.

Can we use Panetic Analysis to help find ways to untangle this web of corruption? To assess the relative severity and distribution of national distress engendered by this chain of inflictions? To identify "break-points" where we can intervene to sever the chain and alleviate suffering? To measure our progress along the way? Further, can we use Panetic Analyses to help educate both decision-makers and the public about both the consequences of corruption and ways to alleviate it?

In April 1997, a limited experiment was undertaken in the Republic of Georgia, a former constituent republic of the Soviet Union, to help explore possible answers to these questions.

Although they were unfamiliar with the formal methods of Panetic Analysis, 32 young professionals–-all of them students in the Georgian-American Institute of Public Administration in Tbilisi–-were asked to describe and "diagram" how corruption inflicts suffering on the citizens of their country, and how this jeopardizes their nation’s future. This was an opportunity to take a first step toward defining the complex interactions between individual acts of corruption at a national level, their consequences for individual and collective suffering, and the points at which it is possible to intervene and bring the cycle of corruption under control.

Despite its short duration and tentative nature, the experiment demonstrated just how challenging it will be to develop Panetic Analyses of highly complex national and international systems. It illuminates the research challenges that lie ahead in the further development of Panetics. It also suggests that the tools of Panetics can be useful to decision-makers and the public even when the results are reported in non-Panetic terms.

2. CORRUPTION AND HUMAN SUFFERING

Corruption is an illicit act undertaken for personal gain at the expense and injury of the larger community. It occurs in every culture. It has never been eliminated in any society, only controlled. In many countries transforming from Soviet to democratic systems, corruption is a particularly virulent contagion because the institutions that should control it often are corrupt themselves. 4

Two classes of corruption exist–

The first is self-serving and "Mafia-style" criminal activity at the highest levels in institutions that should themselves monitor and combat corrupt behavior. Many of the perpetrators occupied positions of power during the Soviet period and simply carried their criminal entrepreneurship over into the new regimes. They have used their knowledge and past positions to establish illicit operations for their personal benefit. They are motivated primarily by personal greed and a thirst for power. This form of corruption and criminal activity "bleeds the country" by exporting capital and income to secret or laundered foreign bank accounts while undermining economic and social revival and popular trust at home. Worse, it provides the pretext for "petty" corruption in the rest of society.

Because their wages (if they have a job) are too meager to support them and their families, many ordinary citizens and public servants feel they have no alternative but to resort to low-level corruption in order to gain badly-needed income. With rampant examples of high-level corruption in government, the law, and their institutions, they feel few compunctions about doing so.

Not all corruption necessarily causes suffering. So-called "grease money" paid to a functionary to speed an otherwise licit decision or action through a cumbersome bureaucratic process may be illicit and unfair (to those who cannot afford it and must abide by the process), but such bribes or extortions might actually help improve "efficiency." However, they accentuate inequities.

Inequities breed distrust. Democracy is held together by trust rather than fear; trust that decisions will be fair. Distrust loosens the ties that bind. At a minimum, corruption follows, and faith in "consent of the governed" withers. And corruption greatly increases the inevitable suffering that accompanies the process of profound economic and social transformation.

3. THE REPUBLIC OF GEORGIA: A CASE STUDY

Georgia's President, Eduard Shevardnadze, declared 1997 to be the year when his government would make a frontal assault upon corruption.

As First Secretary of the Georgian Communist Party, Shevardnadze earned a reputation as a reformer in the 1970s and early 1980s by attacking corruption in his home Republic. On the larger Soviet scene, he teamed up with Gorbachev to conceive and implement glasnost and perestroika. Gorbachev appointed him Foreign Minister of the Soviet Union in 1985. Shevardnadze resigned in December 1990 when he saw Gorbachev drifting away from reform and back toward dictatorship. 5

In 1992, Shevardnadze assumed the role of Head of State in Georgia after the newly-independent Republic nearly tore itself apart in a fratricidal civil war. When he assumed the role of President, brigandage and violent crime ruled the streets and highways of the country. The financial system and the economy had collapsed. 6 Shevardnadze has been able to restore some stability to his country. Georgia now has an elected President and Parliament. Its currency has remained remarkably stable for the last several years. Some degree of law and order has returned to the streets and highways. The economy's rate of improvement is better than that in any other CIS country.

Yet the situation remains desperate (Table 1). Per capita income in the country is miserably low. One out of three male adults is unemployed. Imports far exceed exports and displace many local products. The production system is nearly destroyed. There is virtually no distribution or marketing system for the products that the country can, or does, produce. The infrastructure has collapsed. Most highways and roads are hopeless networks of potholes linked by narrow bands of pavement. Electric power and water are available to most homes only intermittently.

Potentials for Economic Revival

Yet despite these conditions, the possibilities for economic revival in Georgia are significant. The country enjoys a highly strategic position in a natural corridor between the Higher and Lesser Caucasus Mountains. The corridor links the oil-rich Caspian Sea region with the Black Sea coast and provides access to western markets for much of Central Asia.

Recent discoveries indicate some possibilities for future energy independence. From sub-tropical citrus and tea-growing regions on the Black Sea coast, to the fruit, livestock, and grain-growing areas of the uplands, to the largest wine producing vineyards in that part of the world–the country's agricultural export potential is considerable. Yet these potentials are thwarted by exceedingly high levels of official and petty corruption that discourage large-scale investment from the outside, as well as legitimate indigenous new business start-ups. They also jeopardize trust in democratic government.

Addressing Corruption

Parliament created an investigative commission several years ago which identified many of Georgia's corruption problems. That Commission's existence has come to an end. Since it had no prosecutorial powers, effective follow-up has been nil. Shevardnadze has created another investigative body, but it has similar prosecutorial limitations. Prosecution powers are lodged in institutions which are suspect.

What is more, the President confronts a difficult tactical challenge in order to bring high level corruption in the country to heel. He has gathered into several top posts of the country, persons known to be directly in charge of, or involved with, corrupt and criminal operations.7 This has the virtue of keeping them "above ground." However, a frontal assault upon one of them might well trigger a response from all. This could threaten the fragile domestic peace Shevardnadze has cobbled together over the last three or four years.

• How big and how serious is the corruption problem?

• What kinds of suffering does it impose on the people of Georgia?

• What are the cumulative consequences for the people of Georgia?

• How can the self-perpetuating patterns of corruption be controlled so that economic and social revival can be accelerated and suffering alleviated?

These are questions 32 young professionals attending the Georgian-American Institute of Public Administration (IPA) were asked to address in the spring of 1997 in order to introduce them to the ethical obligations of individuals in the public service. The Institute is a joint educational venture between Georgia and the United States created at the request of President Shevardnadze and the Parliament. US obligations for the Institute are managed by the National Academy of Public Administration in the US. Financial support is provided by USIA, US AID, the Eurasian Foundation, and the Soros Open Society Fund. In its third year of existence, the Institute has graduated two classes. Seventy percent of the graduates are now working in the public service of Georgia.

The formal concepts of Panetics and Panetic Analysis were presented to these 32 young professionals in late March 1997 (See Table 2).8 While intrigued, they thought the concepts and techniques of Panetics too "advanced" for application in Georgia at this stage in its development, though they indicated it was certainly a discipline about which they wish to keep apprised as they move forward in their public careers. So they were persuaded to portray corruption in their country from their personal points-of-view, a process they found quite natural, unaware that they were, in fact, performing the first stages of a Panetic Analysis.

Ten of the young professionals hold degrees in economics or finance; nine hold degrees in the English language; seven in engineering or technical fields; three are health professionals; one is an environmental biologist; one an architect-urban planner; and one a working artist.

They were told to assume that they were policy analysts for the President and that the Head of State wants to–

(1) Stabilize political conditions in Georgia.

(2) Get the economy of the country on the road to recovery, so that people's incomes can rise to acceptable levels and tax revenues can rise to levels necessary to restore essential public services.

He knows that corruption is a factor affecting each of these priorities. He is under pressure from the World Bank and western "donors" to do something about corruption.

He knows that corrupt "business practices" have deterred a number of major foreign private investments and economic opportunities crucial to the future of Georgia. He knows that corruption is deterring the formation of new enterprises by Georgian entrepreneurs.

He knows that the cynicism and distrust of government and major institutions among the citizenry, which arise from this corruption, will ultimately undermine the legitimacy and survival of an independent, democratic Georgia–and so action must be taken as soon as possible. He also knows that he can not do everything at once. He must pick his targets carefully so that he does not take the country back into brigandage and civil war. He needs some "quick wins" to gain public confidence. He must catch a few "big fish" as well as "little fish" in order to demonstrate that he is going after the real problem.

But first he needs a "diagram" or "map" to show how one kind of corruption relates to others, how they all affect the country's future, and at what points in the chains of corruption he can intervene most effectively.

4. CORRUPTION AND SUFFERING: THE VICTIMS’ PERCEPTIONS

The first step in a Panetic Analysis is to ask the victim what degree of suffering he or she feels or perceives. 9 In a survey in early 1997, Georgians were asked where they most often encountered corruption in their daily lives (Table 3). Similarly, students in the IPA class were asked to enumerate individually the five top problems they perceive that block economic and social improvement in Georgia (Table 4). Each of the students was assigned a sector of Georgian society and was asked to describe his or her perception of how individual and collective corruption in that sector of national life imposes unneeded suffering upon the people of Georgia and impedes the country's economic and social revival.

A Note About Nepotism and Cronyism

Nepotism and cronyism figure very importantly in Georgian life. Both appear quite often as root sources of corruption in the analyses which follow.

During the Soviet period, officials used nepotism and cronyism to steer appointments and favors to family and friends. A particularly egregious example of nepotism is illustrated in Figure 1 portraying the government of the Adjari Province on the Black Sea coast along the Turkish border.

However, during the Soviet period nepotism and friendships also provided an avenue through which ordinary Georgians could establish networks of personal relationships they could trust (since one could never be certain about who was spying on whom). The roots go back still further into the ancient history of Georgia during which family and friendship and "clan" loyalties figured very importantly in social life. 10

In a 1995 IPA class, John Stewart found that students believe–to a person–that, in the final analysis, nepotism and cronyism are corrupt practices which prevent people from gaining their fair place in society. All of these young professionals believe that impartial merit and performance systems must replace nepotism and cronyism. 11

It will be a challenge to design reforms that root out the corrupting effects of nepotism and cronyism while, at the same time, the virtues of loyalty to family and friends are preserved–lost values for which many western societies now pine.

Quantifying Suffering

In the brief three and a half weeks of this experiment, time did not permit the students themselves to assign relative weights of intensity to the various kinds of suffering Georgians currently experience as a consequence of corruption.

For illustrative purposes, hypothetical Panetic weights ("dukkhas") have been assigned by the author based on casual conversations with Georgians and a few surveys. Table 5 illustrates the possible values in dukkhas which might be assigned by victims of various corrupt acts. The magnitudes, when measured at a national level, compelled the use of "megadukkhas" (1,000,000 dukkhas=1 md). It must be stressed that these weights are hypothetical and are provided solely to raise methodological questions and to stimulate discussion.

Several anomalies in these hypothetical weightings are apparent. For example, a victim might experience corruption during a particular day, but the consequences may affect his or her life–and that of the family–for the rest of the year. So a calculation based on the one-day experience may not represent the actual duration of suffering, only its average for the year. For example, "one-day" can represent actual suffering experienced at different levels of intensity over the course of a year: (a) 4 hours at intensity " 0.5"; plus (b) 4 hours at intensity "1" four times; plus (c) 4 hours at intensity "2."

A small number of people experiencing very high levels of suffering may represent a much smaller gross intensity than millions of people suffering at low levels of intensity. Because our efforts to alleviate suffering should always focus on those suffering most intensely, Panetics must develop a means to take this into account in its weighting and calculation of intensities.

So the experiment in Georgia should not be construed as a definitive piece of research, but solely as an exploration which points in directions for still more useful development.

The Rule of Law: Foundation of Trust and Fairness

The young Georgian professionals ranked corruption in the law enforcement and justice system as most pernicious for its widespread negative effects on daily life in the Republic.

Without respect for the law, and fair enforcement of the law, trust barely exists. Trust, as opposed to fear and the exercise of brute power, is the mortar that holds a democratic society together. Georgia's citizens have no confidence that The Rule of Law yet exists.

Extensive high and low-level corruption permeates the police forces. A former police chief from one of the major cities estimates that about 80 percent of the police are engaged in corrupt activities of one kind or another. Because of the scarcity of jobs at present, many police jobs are awarded through nepotism or "sold" by higher-ups to the highest bidders. The jobs are valued because of ample opportunities to extort payments from those stopped or arrested. As a consequence, the size of the police force, particularly the traffic police, far exceeds that necessary to perform the mission.

It is a common sight to see traffic police flagging down car after car along Georgia's streets and roadsides. Drivers are told they are guilty of some offense. (Often they are. Traffic rules are violated flagrantly.) Money is then extorted from the offender and pocketed, a portion to be passed on to superiors. Sometimes the process works in reverse: the offender takes the initiative and bribes the policeman. Few of the extorted funds find their way to the public treasury.

Kiosks, or new businesses along the streets, are harassed by the same extortion/ bribery rituals with police and inspectors and licensing officials involved in regulating them.

Should a Georgian be taken to jail, the same extortion/bribery rackets occur. An inmate may bribe his way out of the prison, or to another cell, or from the cell to the hospital, if hurt. Torture in the jails is common and can be stopped through bribery.

Courts are viewed with suspicion. Only some "authorized" lawyers are permitted to practice before the courts. Again nepotism, cronyism, and bribery determine who and who cannot represent people in court. Judges are not necessarily qualified by training and education. They sometimes gain their appointments through nepotism, cronyism, or by actually "buying" the post. Bribery and extortion, even when it may not have taken place between the judge and the accused, is suspected by the public when a not guilty verdict is delivered.

A blind eye is turned by the police and courts to such crimes as the abuse of "street children" for prostitution, pornographic, or criminal activities.

Result: There is no trust in the law. Rule-breaking is viewed as a legitimate way to display ingenuity and defiance. A weak legal system deters legitimate foreign investment or interest because it is not clear that contract laws, offenses, or adjudications will be administered fairly and objectively.

Quantifying:

• (A) If 63 percent of Georgia’s 3 million adults (Table 3) say they have had some direct experience an average of one day each year with "grease payments" to police-

1.89 million people x 1 day/year x intensity 1= 1.89 mds/year.

• (B) If 22 percent of adults say they have had direct experience an average of one day each year with harassment from police more serious than traffic grease payments–

660,000 persons x 1 day/year x intensity 3= 1.98 mds/year.

• (C) If 22% of Georgia’s adults have suffered corrupt harassment from District Inspectors an average of one day each year–

660,000 persons x 1 day/year x intensity 3= 1.98 mds/year.

• (D) If 19% of Georgian adults have experienced corrupt acts by regional officials an average of one day each year–

570,000 persons x 1 day/year x intensity 3 = 1.71 mds/year.

• (E) If 8% of Georgian adults have experienced an act committed by a criminal an average of one day each year–

240,000 persons x 1 day/year x intensity 5= 1.2 mds/year.

• (F) If 5000 street children per year are exploited for illicit purposes average 30 days per year–

5000 persons x 30 days/year x intensity 8= 1.2 mds/year.

• (G) If 1500 jail inmates are tortured an average 5 days each year-

1500 persons x 5 days/year x intensity 9= .067 mds/year.

The Tax Office

As in the case of the police, jobs in the Tax Office are often awarded through nepotism or cronyism, or "sold" to the highest bidder because of the opportunities for extortion or bribery. There are no "cashless" or electronic ways to pay taxes in Georgia. All transactions are in cash and face-to-face. There are no paper trails; no reliable independent audits.

A taxpayer may be told by a Tax Office official that he or she owes a large amount. Upon protest, the taxpayer will learn that the process to straighten out the disagreement will take a long time; unless, of course, a little "grease" money is paid. The possibility of reporting a lower tax will be offered, extorting a payment for such a benefit. Or the taxpayer himself might offer a bribe.

Three results: (1) Taxes actually paid into the national treasury are far less than they should be; (2) many people, including the very wealthy, find ways to avoid paying taxes at all. [Government taxes in Georgia are about 7 percent of GDP compared to 33% in the US and 40+ percent in most developed western countries.] (3) The government can not afford to provide the services people want so, in protest, taxpayers pay even less. For lack of revenue, the infrastructure and services remain sub-par, deterring economic revival. As a consequence peoples’ incomes remain low and many remain jobless. All of which feeds the self-perpetuating cycle all over again.

Quantifying:

• (H) If 50% of Georgia’s 3 million adults have had to make grease payments an average of one day per year to the Tax Office–

1,500,000 x 1 day/year x intensity 1= 1.5 mds/year.

• (I) If 25% of Georgia’s adults have had to endure more complex harassment from the Tax Office an average of one day per year-

375,000 x 1 day/year x intensity 3= 1.125 mds/year.

• (J) If all of Georgia’s citizens suffer from the lack of public services throughout the year as a result of unpaid or diverted taxes-

5,500,000 x 365 days/year x intensity 2= 4.015 mds/year.

Banks

"There is far more money in this country than is in the banks," a Parliamentary Committee member said to me in October 1996, upon my first arrival in Tbilisi.

The reasons are apparent.

Several years ago, shortly after independence, a number of financial institutions in Georgia, with support from the government, offered people extremely high rates of interest if they would deposit their savings with them–a Ponzi scheme similar to others in Albania, the Czech Republic, and Russia. Some payments were paid to early investors from in-coming new deposits in the initial phases of the program, so–based on this evidence–still more deposits were attracted. Then the supply of new depositors was exhausted, interest payments could not be paid on the earlier "pay-as-you-go" scheme, the currency (ruble) collapsed as inflation went out of control, and depositors lost all their savings. Deposits in the banks plummeted (Figure 2).

Even today, when a new stabilized currency (the lari) has been created, deep distrust of the banks persists. The few who have put their money into demand deposits in some banks have found that they can not withdraw from their accounts at will because negative cash flow in some banks, as a result of illicit disbursements, makes it impossible to cover demand. This has fed the already-existing distrust.

Further, some international loans and grants supplied to the financial institutions to provide capital for low-interest loans to stimulate economic revival are lent, not at the donor-stipulated amount, but at high rates exceeding the "low interest" they are supposed to charge. The hidden excess in interest payments is creamed off by bank officials unreported.

Result: This has fed a deep-seated popular distrust of financial institutions. A great deal of the money earned in Georgia is not deposited. Bank deposits are only now recovering from their lowest point. Therefore, a great deal of capital in the country is not circulated as loans for development. Money is kept "under the mattress" uncirculated. Economic revival is hobbled. Incomes remain low. And, once again, the cycle of corruption feeds back on itself.

Quantifying:

• (K) 6000 households (3.2 persons/family) lost savings x 365 days x intensity 5=35.04 mds/year.

• (L) 990,000 jobless persons x 365 days x intensity 7= 2,529.45 mds/year.

• (M) As result of lost capital, economic development is deterred, 1.5 million adults in the workforce are underpaid/underemployed forcing them to find additional means of support (often through corruption)-

1.5 million low paid/underemployed x 365 days/year x intensity 5= 2,737.5 mds/year.

Customs

The chain of corruption produced when one act triggers another, and then turns back on itself to feed the cycle all over again, can be illustrated by the realities of the Customs "Gauntlet." (Figure 3)

1. When a truck crosses the Turkish border into Georgia, for example. It may first have to pay a bribe to the Border Guards (Russian).

2. Once past the Border Guards, the truck faces customs inspection. The freight may be valuable, or it may weigh more than is allowed. The driver will be extorted to pay an amount to the customs officials to report a cargo of less value or weight.

3. After a few hundred yards, the truck may then confront the road inspectors. They may again raise the question of truck weight or length and extort payment to under-report both.

4. Then the truck will confront the "environmental" (health) inspectors stationed there to protect public safety. The cargo may or may not be dangerous or illegal (out-dated medicines, out-dated food stuffs, illegal substances). Again a payment may be extorted to let the truck pass.

5. The truck then begins the road trip from the border to its destination. Every few kilometers, it may be stopped by local police to have documents checked. The local police may threaten to arrest the driver because the load weighs less than is on his Bill of Lading (approved by Customs), or is a different cargo (approved by Customs).

6. Similar corruption exists in the ports. Payments are extorted by Customs and Environmental Inspectors. Port officials will delay having the ship unloaded until payments are made to order the workers to unload. The off-loaded cargoes then must travel the truck gamut.

Similar corruption is reported in connection with the airline and railroad.

Result: The national treasury is denied revenues it would have received through an honest procedure. The cost to Georgian consumers of whatever comes in is driven up. Legitimate foreign trade is deterred. Economic revival is slowed. Incomes stay low. Joblessness persists. And the motivation to engage in the same self-defeating corruption persists.

Quantifying:

• See Calculation J for public services lost as result of diverted revenue.

• (N) If 90% of the population suffer from high prices and low incomes-

4.95 million x 365 days/year x intensity 4= 7227 mds/year.

• See Calculation M for consequences of deterred economic development.

Electricity

The corruption chain can be illustrated in the country’s electricity company as well. When the Soviet Union dissolved, so did the centralized energy exchange between republics which had been designed to keep control in Moscow.

Georgia, at present, is energy-poor. Corruption, which pervades the power system, has made the problem profoundly worse.

At the highest levels, corrupt decisions were consciously made not to supply power to some districts–outlying "suburbs" of the capital of Tbilisi, for example–so that "Mafia" organizations could continue to sell kerosene and cylinders of natural gas to those without

electricity. Additionally, in a desperate search for income, the electricity company sold imported energy to Armenia even while it was cut off to Georgian homes, kindergartens, and hospitals. This high level corruption drips down through the electricity company. Jobs in the company, as in most other public service and state operations, are awarded on the basis of nepotism or cronyism, or sold to the highest bidder. As in the case of police, the jobs offer many opportunities for extortion and command a good price.

Meter readers extort money from customers to under-report their consumption. Equipment installers over-report their installation costs to the company. Some users purposely find ways to by-pass and cheat the meters. Consequently, the company comes up short on revenue. It lacks the technology to cut off power to single households or buildings, so it cuts off power to whole districts, even to households that paid. Consequently, electricity for homes and businesses is provided during only part of the day.

Result: In protest, people refuse to pay their electricity and water bills which, of course, denies the company the revenues to do anything about the problem. The whole circular pattern of corruption feeds back on itself leading to still more power cut-offs, jeopardizing economic revival.

Quantifying:

• (O) If 4 million people suffer an average three hours per day (aggregated as 45.5 days) from cut offs in electricity and water–

4.0 million x 45.5 days/year x intensity 5= 910 mds/year.

• If 5000 enterprises can operate at only 50% capacity because of power interruption, see Calculation M to estimate consequences for deterred economic development.

Workforce

During a visit to a US vocational training center in January 1997, a member of Georgia’s Parliament explained that the Center offered precisely the solution needed in Georgia because, he said, "I know personally of several western companies we could not attract because of the poor quality of our workforce."

Yet the joke in Georgia (and the former Soviet Union) is: "You pretend to pay our salaries and we'll pretend to work." Nepotism and cronyism play an important role in getting hired in most organized workplaces. Jobs are also bought. Competence or skill are an after-thought. In many state enterprises, once hired, the worker often does not report daily for work. He may be out on the street bidding for piece-work to supplement his low on-the-job salary. Most Georgians must hold several jobs to make ends meet.

Georgian workers get little protection from their unions or employers. Employers bribe union officials and the worker has no recourse.

Result: A poor work ethic, a workforce incompetent to manage modern production and service operations, and weak management skills. This is one more deterrent to outside investment and a roadblock to economic revival.

Quantifying:

• (P) If 1,500,000 workers experience an average of at least one day of exploitation in the workplace:

1.5 million x 1 day x 4= 6 mds/year.

• If 500,000 workers absent themselves, or malinger, at one job to work at another 250 workdays per year include in Calculation N to estimate impact of cost to all consumers.

• Use Calculation M to estimate suffering from deterred economic development.

Business

Legitimate entrepreneurs must run a steeple-chase lined with many hurdles. Officials extort money to register the business and award a license. The Tax Office extorts money once the business starts to make money. Inspectors extort money to allow the business to keep its doors open. And protection rackets extort money to prevent robbery and criminal disruption, probably by their own agents.

Result: The very "jump-start" in new business formation that is essential to generate jobs, raise incomes, and increase tax revenues is snuffed out at its source.

Quantifying:

• (Q) If 100,000 entrepreneurs per year are extorted an average of 10 days per year –100,000 x 10 days x intensity 4=4 mds/year.

• (R) If 10,000 businesses per year shut down or do not start up because of corruption, then the consequences in joblessness and lost income at 3 persons per business contribute to the losses included in Calculation M.

Elementary/Secondary Education

Often, teachers are appointed through the same nepotism/cronyism found in other sectors of Georgian life, or they "purchase" their post. Like most Georgians, they must hold several jobs because of the very low salaries–$11 per month in many cases. Some teachers will suggest that they will "tutor," or give good grades for a bribe. Some have even been known to have a "price list." Some take bribes in the form of "gifts." For their part, students and families freely bribe, purchase, or fake exams. Few strive for excellence.

Result: A poorly educated workforce which acts as a major deterrent to outside investment and economic revival.

Quantifying:

• Contributes to Calculation M.

University and Technical Education

The same corrupt practices poison much of the university system. Georgia's population was one of the best-educated in the Soviet Union, and remains the best-educated in its part of the world, as measured by diplomas received. But emphasis is on the diploma rather than real knowledge.

University admissions are all-too-often influenced by nepotism, cronyism, extortion or bribes. A number of university lecturers "bought," rather than earned, their diplomas. Some lecturers, on pitifully low salaries (as low as $10-$20 per month) extort money from students for books and grades. Examinations are leaked or faked. Grades are awarded on the basis of favoritism or bribes.

Result: Many students do not strive for excellence, learn little. This is one more deterrent to economic revival. In part, students are discouraged by the lack of professional opportunities after they graduate.

Quantifying:

• Contributes to Calculation M.

Health

The consequences can be seen readily for the nation's future health.

Bribes and nepotism influence admission to medical school. The same nepotism and bribes are used to get good grades. Doctors look on interns as competition and do not train them properly. Nepotism and cronyism determines who can practice medicine. Once they do practice, low salaries lead to corruption among physicians and other health professionals.

Result: Professionals are discouraged from studying and striving for excellence. Concerns about their competence deter patients from coming to them, thus driving salaries in medicine and income to the hospitals down still further.

A portion of the medicines received through international humanitarian aid for the poor is diverted for private gain. Some of the diverted medicine is sold to private drug stores for sale. Hospital managers ask for kick-backs from illicit distributors. Corruption in other channels of medical supply further accentuate the problem. One pharmaceutical company was found guilty of counterfeiting and selling worthless medicines. Some pharmaceuticals, the effectiveness dates of which have expired, frequently find their way to market through corrupt importers who have the silent acquiescence of corrupt customs and heath inspectors.

Result: Inadequate supplies for the intended beneficiaries, increased distrust of the system, declining revenues for the hospitals, perpetuation of low doctor salaries.

Even the food inspection services are corrupted. Farmers markets are a principal source of "fresh" food. Foods from Turkey and Iran which find their way into these markets are sometimes infected, but allowed to pass because of extortion or bribery. Local producers also pass unsafe food on to consumers, stores, or restaurants by buying off inspectors.

Result: The health of the population is jeopardized, legitimate business is discouraged, and outside investment is deterred. Public trust is further eroded.

Quantifying:

• (S) If one-fourth of the population is deterred an average of one day each year from using the health care system because it can not afford or does not trust it–

1,375,000 x 1 day x intensity 4= 5.5 mds/year.

• (T) If 150,000 cases occur an average of one day per year in which counterfeit, expired, or no medicine is provided for patients in dire need–

150,000 x 1 day x intensity 8= 1.2 mds/year.

• (U) If 75,000 cases of food poisoning occur an average of one day per year because of corrupt enforcement–

75,000 x 1 day x intensity 8= .6 mds/year.

Social Services

Yet even when families and individuals are reduced to extreme distress by such practices, they are victimized.

Applicants for unemployment or social security payments will sometimes find that the bureaucrat dispensing the payment will demand a share of the payment as the price of providing it.

Result: De-moralization of a large segment of the population, a loss of faith in the ability of the country to transform itself, and–in desperation–a willingness to return to the certainties and controls of a Stalinist system.

Quantifying:

• (V) 375,000 poor or jobless on social security extorted by officials an average of 12 days per year–

375,000 x 12 collection days/year x intensity 6= 27 mds/year.

5. THE BLACK HOLE OF CORRUPTION

If simply summed, these separate acts of corruption inflict a hypothetical 17,510.9 mds of suffering (Table 6). Obviously, reality is not this simple.

Much is missing from Table 6. It must be stressed that limits of both time and circumstance prevented this from being a comprehensive experiment based upon rigorous research and validation. Using incomplete raw perceptual data, the experiment is intended solely to help us sketch the challenges ahead as we apply Panetic Analyses to large, complex national systems.

Because of the way each student described corruption and its effects in his or her assigned sector, causes and effects are jumbled together in Table 6. We must separate one from the other in order to understand the sources of inflicted suffering, motivations to inflict it, and the consequences. For example, the separate high and low-level corruptions in customs, electric power, medical care, education, and the tax system all drain the capacity of the country to provide adequate public services. In rebellion against these deficiencies, people then engage in another round of corruption which aggravates their public service deprivations still further. (See Calculation J-Figure 4)

Corruption in the banks, customs service, workforce, education, and business regulatory systems all divert, or deter, the capital investment necessary to revive the economy. This perpetuates low incomes and joblessness, which in turn lead to still more corrupt acts because of economic desperation and anger. (See Calculation M-Figure 4.)

Similarly, corruption in the marketplace, workplace, the customs service, medical services and in the power and water systems drives prices for goods and services beyond levels people can pay because of their very low incomes. Again, out of desperation and anger they refuse to pay their electricity and water bills and taxes and engage in still more corruption, aggravating their problem still further. (See Calculation N-Figure 4.) Every infliction triggers another, then another, which, in turn, feeds back on itself and others to create system-wide consequences which, unfortunately, incite a whole new round of similar inflictions.

Such circularity in causes and effects can be likened to a "black hole"–a self-perpetuating whirlpool of corruption and suffering from which it becomes increasingly difficult to escape (Figure 5).

Determinants, Constituents, and Consequences

For some years, the World Bank and the United Nations have searched for ways, other than using traditional economic measures, such as "Gross Domestic Product," to measure the quality of life across many very different cultures. In its search, the Bank has distinguished between "constituents" of development (e.g. health and literacy) and the "determinants" that produce these "constituents"; i.e.,the goods and services produced that provide incomes needed to improve the quality of living. 11

Once again, it is necessary to emphasize that reality is not so simple. "Constituents" not only depend upon "determinants." They also influence and feedback upon the determinants profoundly.

For example, literacy and health of the population very much help define workforce quality, which, in turn, influences the development of the economy, which, of course, determines whether the resources are available to further strengthen literacy and health. The relationship between "constituents" and "determinants" is circular, not linear. And we must add "behavioral consequences" to the equation.

There are "constituent" acts of corruption that inflict suffering on individuals. Some of these impose extraordinarily high levels of pain on individuals (e.g., jail torture, exploitation of street children–See Table 5). However, acts that inflict much lower levels of individual suffering trigger "behavioral consequences" among the afflicted (i.e. refusals to pay taxes or electricity bills) which result in much higher levels of aggregate suffering for the society as a whole because of the number of individuals affected. These, in turn, exert profound effects upon "determinants" in the economy and society. The diversion of tax revenues undermines the ability to improve infrastructure and public services. The corrupt diversion of private capital and deterrence of investment undermines the economy, which aggravates joblessness and poverty and perpetuates low incomes. Low production and dependence on imports drives prices still further out of reach. To survive, individuals engage in still more corruption. And so the cycle repeats itself again and again.

Table 7 shows that 99 percent of suffering in the population is the result of retardation at the "determinant" level of the economy and society. To a very significant degree, this retardation is the product of millions of self-perpetuating acts of high and low-level corruption at the "constituent" level which feedback upon and determine the "determinants.".

Toward a Panetic Model

To quantify all of these interactions and "feedback loops" calls for capabilities rivaling those necessary to create a highly sophisticated econometric model. Figure 6 provides a simple diagram of the challenge. We can begin by assuming, as the 32 young Georgians asserted, that high-level corruption ("A") directly inflicts suffering upon the population ("B"). It is possible to calculate the impact of these inflictions using the Panetic equation and then summing them.These inflictions break down trust, divert tax revenues, and retard the economy ("C"). This "loosens the strings" for personal behavior in the rest of society, particularly the lower reaches of officialdom. Extremely low incomes, poverty, and joblessness reinforce motivations in the populace at large to engage in petty corruption in order for individuals to support themselves and their families ("D"). Again, these can be calculated using the Panetic equation and summed.

However, complex "Behavioral Consequences" ensue when individuals respond to inflictions received from elsewhere in the system by inflicting still others themselves, e.g., refusing to pay the electric bill (or shunting the meter) in protest against power cut-offs ("E"). The "Behavioral Consequences" ("F") that emanate from these complex interactions profoundly affect the "Determinants" of national economic, social, and political well-being ("G"). Indeed, as these "Determinants" are eroded by the "Constituent" corruption in the system, the very fact of that erosion triggers still more frustration which stimulates further acts of corruption through a feedback loop ("H") that diverts still more tax revenues into private pockets and aggravates joblessness, low income, and poverty.

Reporting in Non-Panetic Terms

We can see why efforts to calculate the "costs" of corruption nationally and world-wide have proven so daunting. It is also easy to see why most such efforts have focused on the "economic cost" of corruption, since economic data are available more readily. But few such inquiries have addressed the behavioral consequences triggered by uncontrolled corruption. This is where Panetic Analyses can be highly useful.

One of the major challenges for Panetic scholars will be to devise models that can facilitate such computations. However, the need to reign in corruption in order to reduce suffering in societies that are transforming is immediate. We must turn to tools readily at hand. The units of measure used for public discussion and decision-making can–and should be–those most appropriate for the purpose, and those understood best by the users and audience.

Obviously, the cumulative consequences of corruption in any country can be quantified, in many ways. They can be reported in income lost, jobs uncreated or lost, skill declines, public services unavailable, declining housing conditions, shortages of food, infant mortality, declining health indicators, etc.

For example, at this stage in the life of the Republic of Georgia, a Panetic Analysis which shows demonstrably how corruption undercuts the most urgent priority agreed upon by nearly everyone in the country– economic revival–may well be understood and acted upon more quickly than if it is couched solely in quantitative measures of suffering (such as "dukkhas"). Georgians know they are suffering, and they seek a specific plan that will help them understand how corruption forestalls economic revival and how to bring it under control. They want to know where they can intervene to break the chain of corruption, and how to identify the main perpetrators.

After several years of trying many different measures, Partha Dasgupta, one of the World Bank’s researchers, concluded that recent suggestions that national income is a vastly misleading index of well-being are not borne out by tests among several indicators conducted by his colleagues and himself. "We can do better than rely on national income, but we wouldn't have been wildly off the mark as regards an ordinal comparison of countries had we relied exclusively on national income per head," he concluded.12

Nearly all Georgians would subscribe to the view that, in order to alleviate suffering from corruption, it is essential to renew the economy so that (1) peoples’ incomes can be raised to levels at which they can support themselves and their families; (2) new jobs can be created for the nearly one third of the working age population currently unemployed; and (3) public services, including infrastructure, can be renovated so that living conditions are improved. So, for the near term, it might prove most efficacious to report the results of a Panetic Analysis of corruption in Georgia in economic terms. The data are readily available.

Panetic diagrams can be used to educate citizens about how corruption, whether inflicted by others, or self-inflicted, inhibits improvement in their income and the availability of jobs. Panetic diagrams can also be used to assist decision-making and planning about how to bring corruption under control, including identification of the "break-points" where anti-corruption measures can be introduced most effectively.

6. ROOTING OUT CORRUPTION

Initial Break-Points

Most of the 32 young professionals argued that the first group of "break-points" are in these key public institutions (Figure 7):

Chamber of Control

Trade Chamber

Tax Office

Customs

Banks

The "Chamber of Control," Georgia's counterpart to the role of an Auditor General or Comptroller General in western societies is not trusted. Students argued that they had personal knowledge that several of the Chamber of Control's audits were corrupted. It must be cleansed, trained in modern auditing methods, and equipped with the means to monitor public agency transactions electronically. (Priority 1-Figure 7)

Installation of computing equipment that can replace face-to-face, unrecorded transactions (open doors for personal corruption) at each institution that is astride critical break-points in contacts between citizens and government must be financed by international sources during the first stages of reform, since there is no capital in the country for that purpose. At the same time, modern accounting and auditing procedures must be introduced and intensive training undertaken.

Priority 2 (Figure 7) is to introduce these technologies in the Trade Chamber to monitor and control import/export transactions. Priority 3 (Figure 7) is to install the same equipment and procedures in the Tax Office to minimize face-to-face exchanges of cash. Priority 4 (Figure 7) is to undertake the same interventions in the Customs Service at all levels. Priority 5 is to intervene similarly in the banks to prevent corrupt diversions of deposits and interest.

By making more and more transactions "faceless" and "cashless," the opportunities for corruption will be reduced. Introduction of these procedures and technologies will tend to deter the less serious abuses almost immediately because offenders will fear being detected and caught. Offenders can be apprehended and removed as they are identified. These institutions will then be equipped better to help reduce corruption in other sectors.

Public Salaries

Step 1: (Priority 6-Figure 7) Eliminate face-to-face collection of wages and salaries in cash by transferring wage and salary payments directly to bank accounts in the reformed banks. This will significantly reduce opportunities for superiors and paymasters to extort kickbacks.

Step 2: Raise public wages. Exceedingly low salaries of public employees provide a major incentive for corruption. "Kick backs" which many must pay to their superiors only aggravate the problem further. Exceedingly low salaries of public employees provide a major incentive for corruption. "Kick backs" which many must pay to their superiors only aggravate the problem further.

Obviously, it is difficult to raise public wages and salaries so long as the economy fails to grow and a huge share of tax revenue is diverted away from the Treasury through corruption by public servants. However, a commitment should be made to raise wages and salaries indexed to national economic performance measures in exchange for very tight controls of–and punishment for–corruption in the public service, including expulsion and prison.

Public Education

An equally important, non-threatening early initiative must be to launch a major educational campaign with the public to begin the difficult task of changing attitudes that permeate every level of society. Suggestions from the 32 Georgians included:

Training Programs for non-governmental civic groups

Programs in the schools

Television programming

Radio Talk Shows

Exhibits

Panetic Diagrams showing the connections between corruption and the nation's economic and social revival can be used as the basic tools for such an anti-corruption public education campaign.

Organizing An Anti-Corruption Campaign

What is the best way to proceed without inciting wholesale opposition from powerful criminal and bureaucratic resistance that could undo whatever progress has been made during the last three or four years in Georgia?

Where can people be found that will be trusted by the people of Georgia to carry the campaign forward free of suspicion?

If highly respected, well known, honest leaders can be identified to preside over an anti-corruption campaign, how can their lives and their families be protected from retaliation while their work goes forward?

And how can such an anti-corruption campaign be organized?

The 32 students were given materials to read about how other societies tackled this problem. These included The Sourcebook, of Transparency International, and Controlling Corruption, by Robert Klitgaard.13 It is no surprise, in view of these background readings, that the students borrowed most of their corruption-fighting proposals from experiences in Hong Kong and Singapore, which are highlighted by Klitgaard.

Because of profound distrust of the government, and its ability to police itself, students were asked to name well-known, highly revered Georgians whom they believed could oversee an anti-corruption campaign that was above popular suspicion. They named:

Ahaki Bakradze, writer and former politician

Irina Sarishvili, Member of Parliament

Michael Saakashvili, Member of Parliament

Notar Natadze, Member of the Republican Party

Temur Basilia, an advisor to the State

Irakli Menagarishvili, Minister of Foreign Affairs

These persons would be asked to serve on a "National Integrity Commission" that would oversee a tri-partite effort organized as illustrated in Figure 8.

The Ombudsman

The first step early in the campaign is to provide a protected, confidential outlet to which citizens can report corruption without fear of retaliation. An Ombudsman equipped with confidential hot lines and various other protected access points would serve this purpose.

The Ombudsman’s office would continually supply information to the press about abuses uncovered, so that "transparency" is steadily increased in Georgian society and the shroud of secrecy hiding so much corruption is slowly eliminated. The Ombudsman would also feed complaints to the two other agencies in the National Integrity organizational triad: the Auditor General, and the Anti-Corruption Agency.

The Auditor General

The Auditor General’s office would have primary responsibility for installing proper accounting and auditing procedures in state institutions. It would also be responsible for training. Its objective is to eliminate as many of the face-to-face exchanges of cash as possible, and thereby reduce opportunities for personal corruption. In the course of its work, it will detect "break points" where corruption occurs. It feeds this intelligence to its partners in the Anti-Corruption Agency.

The Anti-Corruption Agency

The Anti-Corruption Agency, a carefully selected investigative agency with enforcement powers, would have three major responsibilities:

(a) To operate an "intelligence" system that identifies offenders either reported to the Ombudsman by citizens or identified at "break points" by the Auditor General as he goes about his introduction of accounting and auditing procedures. As part of its intelligence-gathering, the Agency will also examine property records, permits, and licenses to identify instances of corruption and manipulation.

(b) As the intelligence operations identify offenders, regular investigators will be sent to locations where offenders, or offenses, are located and obtain direct evidence for prosecution, then apprehend the offenders.

(c) By monitoring "lifestyles," a third group in the Agency will gather indirect evidence that may point to corruption. For example, it is a common experience in the morning on the streets of Tbilisi to see high police officials driving to their offices in very expensive foreign cars. If police salaries are so low, where do they get the wherewithal for such vehicles?

Civil Rights Concerns

The students were concerned that in creating such agencies, they might have reinvented the KGB. They discussed how the anti-corruption initiative itself must be accountable to the people, so that any new suffering at the hands of such a power might be forestalled. Additionally, they were concerned about the personal safety of those engaged in the campaign. Finally, they were uncertain about how to design fail-safe selection procedures for personnel.

They had no alternative but to turn to the successful experience of Hong Kong’s Independent Commission Against Corruption (ICAC), as described by Robert Klitgaard.13

ICAC had the full backing of the Governor, an ample budget, a carefully selected and well-paid workforce subject to rigorous ethical and performance standards. It was independent and possessed draconian powers. Nevertheless, it was administered so as to represent the highest moral authority (to be provided in Georgia by the esteemed individuals serving on the National Integrity Commission). ICAC was also subject to an independent oversight process through which citizens could bring complaints against it. It also had its own, carefully-selected protective force to ensure the safety of its employees.

The situation in Hong Kong was unique, but every situation is unique. Much care is required to design an anti-corruption initiative in Georgia, or anywhere else, that safeguards the rights of citizens while tracking down the perpetrators of corruption.

Nonetheless, a three-week experiment by a group of highly-motivated, but non-expert, professionals to address this very complex problem made a good deal of progress in performing–and using–Panetic Analysis to measure the relative degrees of suffering from corruption, and the interconnections between its causes and effects, even if they did not know that they were so engaged.

7. CONCLUSION

Their effort demonstrates a clear need for Paneticists to concentrate their future research energies upon the development of equations and models that take account of the inter-connections between multiple causes and effects of suffering in a complex social system, the behavioral consequences that flow from them, and the way they feed back upon each other and the system as a whole. We must now move beyond simple linear computations and undertake these much more challenging multi-dimensional measurements and calculations.

This same challenge confronts non-Paneticists who are more specifically concerned with measuring the true costs and consequences of corruption.

In the meantime, we should not be reluctant to report the results of Panetic Analyses in economic, social, or physical units of measure if they should suit the purposes and applications of the analysis better.

FOOTNOTES

1. Chairman of the International Society for Panetics. Elected as a Fellow of the National Academy of Public Administration in 1975, he is a sometime faculty member at the Georgian-American Institute of Public Administration in Tbilisi and was formerly the first President of the Academy for State and Local Government.

2. Correspondence from universities received by Carl F. Stover, Chairman, International Society for Panetics, Washington, DC; 1996-1997.

3. For example, see 1997 Transparency International Corruption Perceptions Index, Transparency International, Berlin, Germany; July 31, 1997.

4. See, for example, Congressional Opposition Rises to Aid for Ukraine; Reports of Corruption Afflicting US Firms in Washington Post, May 10, 1996, p. A4; and Banditry Threatens New Russia in Washington Post, May 12, 1997; pp. A1 &A15.

5. See Carolyn McGiffert Ekedahl and Melvin A. Goodman, The Wars of Eduard Shevardnadze, The Pennsylvania State University Press, University Park, PA; 1997. For a highly readable account of this period in Soviet history see Hedrick Smith's The New Russians, Avon Books; New York, 1990.

6. A journalistic summary of this whole period can found in Edgar O'Ballance, Wars in the Caucasus, 1990-1995; New York University Press, New York, 1997; pp. 91-160.

7. For a summary of the principles of Panetics, see Ralph G.H.Siu, Panetics and Dukkha; An Integrated Study, Vol. II Panetics Trilogy; International Society for Panetics, Washington, DC; 1993.

8. See Siu above.

9. See Ronald Grigor Suny's Making of the Georgian Nation, Indiana University Press, Bloomington; 1994.

10. John G. Stewart, Student Attitudes Toward Systemic Corruption: Teaching Ethics in the Republic of Georgia, Journal of Public Administration, v.3, No.1, January, 1997.

11. The World Bank, 1997 World Development Indicators, World Bank, Washington, DC, 1997, p.3.

12. Partha Dasgupta, An Inquiry into Well-Being and Destitution, Clarendon Press, Oxford, UK, 1993; p. 115.

13. Jeremy Pope (ed.), National Integrity Systems, The TI Source Book, Transparency International, Berlin, 1996, and Robert Klitgaard, Controlling Corruption, University of California Press, Berkeley; 1988.

14. Klitgaard, pp.120-121