Kleptocracy: a force against markets and democracy

February 9, 2023

The study of kleptocracy as a global phenomenon typically focuses on individuals who steal money from the state for personal gain. In this week’s #Forum2000online Chat, John Zemko and Andréa Ngombet joined Jessica Ludwig, Director of Freedom and Democracy at the George W. Bush Presidential Center, USA, to look at a broader issue of kleptocratic behavior channeled through public institutions and foreign governments as well as through individual kleptocrats. They explain what kleptocracy is, what corrosive capital is, and what the main strategies used by kleptocrats are as well as their impact and consequences. John Zemko is the Regional Director for Latin America and the Caribbean at the Center for International Private Enterprise (CIPE) in Washington, D.C. Andréa Ngombet is the founder of the Sassoufit Collective, a Paris-based organization advocating for democracy, human rights, and anti-corruption in the Republic of the Congo and elsewhere in Africa.

According to Andréa Ngombet, you will learn that:

  • Kleptocracy has always been — but now is gaining momentum— an opposing force against the rules-based international order. It is shaping a world order based on violence, stealing money, and killing. The world order is being dismantled by this negative force.
  • Kleptocracy works with international companies and multilateral organizations to avoid being condemned, but it will corrupt and destroy any kind of institution blocking its action.
  • Kleptocrats use the money as a powerful resource to buy their way in democratic societies to corrupt the officials and to launder the image using techniques such as “green washing” and “gender washing”. They can also buy scholars to influence public opinion and even launch anti-corruption campaigns.
  • Corrosive capitals can cause problems on the environmental field: illegal logging and illegal mining are some examples.

According to John Zemko, you will learn that:

  • The term “corrosive capital” describes the phenomenon of investments that come from authoritarian countries with the destination of democratic countries, particularly those that have weak institutions or that are just launching into building their democratic institutions. Corrosive capital has a negative impact on how institutions function.
  • Corrosive capital undermines transparency and accountability and, when the public sees the misuse of funds that comes from kleptocracy, they lose faith in the institutions. There are also national security implications, particularly when kleptocracy enters into communications, natural resources and financial institutions.
  • Regarding market economies and their relationship with democracy, corrosive capital also undermines capital markets, the environment of fair competition and even manages to avoid procurement laws and systems.
  • Kleptocrats channel money oftentimes through offshore banking centers and then find their final destinations in Western countries. There are many ways to do this, but it is important to note that the standard enterprise structure is quite common.
  • The ultimate beneficial ownership is a powerful tool for identifying where the money is coming from and who really owns it. The more we know about where investments are coming from, the more we can control them and make sure that they apply to best practice standards.

This interview was recorded on January 23, 2023, and it is tied to the paper Kleptocracy and its Global Impact on Markets and Democracy. It is the result of a cooperation between Forum 2000, the Center for International Private Enterprise (CIPE) and the Raoul Wallenberg Center for Human Rights who met during the 26th Forum 2000 Conference in Prague. Read the full document here.