Distorted, Misleading, Just Plain Wrong

September 16th, 2011

Have you ever heard someone really intelligent say something really wrong? I certainly have. It happens all the time. Smart people aren’t always right. Well, apparently, that’s also true of publications.

The Economist, which self-identifies as a magazine for the highly intelligent, has (with perhaps a touch of good humor) claimed in its advertisements that it “makes white collars brighter” and called itself the “leaders digest.” This may be a bit self-inflated, but generally speaking The Economist is a thoughtful publication. While I don’t agree with many of its convictions, I more often than not respect its point of view. At the very least, I believe its articles are well-researched, carefully considered, and supported by facts.

Not today.

Today, The Economist has published an article with a conclusion that is not only biased and misled; it is riddled with factual errors. Riddled.[1]

The basic thesis of the article is that the FCPA, the flagship U.S.legislation that makes it illegal to bribe a foreign official, is an inferior counterpart to the British anti-bribery law because it is too cumbersome on U.S.businesses. Heather Lowe, Legal Counsel and Director of Government Affairs at Global Financial Integrity, has already responded to many of the misleading statements and factual inaccuracies in the article by publishing the several comments and clarifications on The Economist’s website (which Clark Gascoigne also reposted on this blog). I’ll let you read that post in full rather than recapping her points here, because her entire comments deserve your attention.

Lowe notes that she could make other points on this “surprisingly skewed” article, but knows we all have other important tasks to turn to. Well, I’ve got a few of those points to add on.

The Economist notes: “A study by KPMG, a consultancy, found that a third of British and a quarter of American companies would simply steer clear of corruption-prone countries to avoid the risk of being prosecuted.”

This sounds an awful lot like an argument that I’ve heard before. It goes something like this: American companies are at a competitive disadvantage when competing internationally because they aren’t allowed to pay bribes, which ultimately means less money in American pockets. Luckily for all of us, actual economists have studied this question. According to a paper published in the Journal of International Business in 1984 when the U.S. was the only country in the world with such a law, “the FCPA has not negatively affected the competitive position of American industry in the world marketplace” (emphasis mine).  Even at this time, when the American industry was the only one worldwide facing these kinds of restrictions, anti-bribery laws did not negatively impact their export performance or market share.

The Economist article also implicitly portrays the Chamber of Commerce and its statements as though they represent the cohesive voice of American business. Describing the organization only as a “business lobby” the article then presents several of its anti-FCPA positions as if they are factual, rather than biased.

Busting Bribery Report

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In reality, the Chamber represents a small subset (in 2008 about 50% of the Chamber’s $140 million in contributions came from just 45 donors) of American businesses, some of which have an incentive to weaken the FCPA because they have violated it themselves. Moreover, not all members of the Chamber agree with these ideas. For example, as Timothy Smith, a representative for several businesses against the Chamber’s fight against the FCPA, argues, for 25 years IBM has had “a very strong policy on bribery and people would be fired if they tried.  Their position is strongly stated by top executives in the board.  Now, at the same time, the Chamber is trying to lobby to reduce the impact.”

Luckily there are several other resources for those of us who are interested in a more factual perspective. Today David Kennedy, a Law Professor at Harvard, and Dan Danielson, a Law Professor at Northeastern, have published a report called “Busting Bribery: Sustaining the Global Momentum of the Foreign Corrupt Practices Act.” Global Financial Integrity, Global Witness, Open Society Foundations and others are also holding a congressional briefing on this report and this discussion on the FCPA. Panelists, which include both of the studies’ authors, will discuss the report’s findings, including a critique of the U.S. Chamber of Commerce’s five proposed amendments to the FCPA; views on how the FCPA affects U.S. businesses; and how changes to the law would affect global anti-corruption efforts.

As we consider this issue, we should not allow misleading information, biased statements by the Chamber, and poor reporting to muddle the issue. It’s actually extraordinary simple. Congress should not weaken the FCPA. Period.


[1] I was actually planning to go through the errors one by one in this blog post, but such a task would take pages of writing and I’m sure we all have better things to be reading.

Written by Ann Hollingshead

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