IMF'S Lagarde pens essay on corruption

The International Monetary Fund's Christine Lagarde is one of this year's attendees of the Bilderberg Meetings.
Adam Berry | Getty Images
The International Monetary Fund's Christine Lagarde is one of this year's attendees of the Bilderberg Meetings.

On the week of more corruption allegations from a second Panama Papers leak, and on the eve of U.K. Prime Minister David Cameron's Anti-Corruption Summit in London, the International Monetary Fund's managing director has penned an essay addressing corruption.

Christine Lagarde's piece, divided into three parts, addresses firstly the economic and social costs of corruption. She writes that while the direct economic costs of corruption are well known, "the indirect costs may be even more substantial and debilitating, leading to low growth and greater income inequality."

"[Corruption] undermines trust in government and erodes the ethical standards of private citizens."

Lagarde cites a recently updated study that estimates $1.5 trillion to $2 trillion (or around 2 percent of global gross domestic product) in bribes is paid annually in both developing and developed countries.

Secondly, Lagarde addresses the concept that corruption is "primarily a 'cultural' problem that will always take generations to address." She writes that there are examples of countries that have managed to make significant progress in addressing it in a relatively short time.

Finally, Lagarde says that in order to fight corruption, a "multifaceted" approach that promotes transparency and introduces economic reforms that reduce opportunities for illicit behavior would be wise.

"Perhaps the most important ingredient for a successful anti-corruption approach is the development of strong institutions centered on a professional civil service that is sufficiently independent from both private influence and political interference," she writes.

In order to fight corruption, Lagarde states that strengthening the rule of law is critical to increasing individual accountability, as well as creating the right incentives and implementing effective regulation.

On the back of this, the Organization for Economic Co-operation and Development announced Wednesday that Bahrain, Lebanon, Nauru, Panama and Vanuatu have now committed to share financial account information automatically with other countries. Panama and Bahrain had previously refused to commit to new standards of tax transparency that were due to come into effect in 2017 and 2018.

Lagarde's essay, "Addressing Corruption – Openly," will form a chapter of Cameron's anti-corruption book, to be released Wednesday.