[Congressional Record (Bound Edition), Volume 152 (2006), Part 13]
[House]
[Pages 18477-18478]
[From the U.S. Government Publishing Office, www.gpo.gov]




            COMBATING CORRUPTION REQUIRES EXPANDING FREEDOM

  The SPEAKER pro tempore. Pursuant to the order of the House of 
January 31, 2006, the gentleman from Florida (Mr. Stearns) is 
recognized during morning hour debates for 5 minutes.
  Mr. STEARNS. Mr. Speaker, according to the State Department, 
international corruption costs American companies that play by the 
rules many billions of dollars in lost exports. Corruption impedes 
government efforts to deliver basic efforts to citizens, weakens 
confidence in democracy, and is often linked to international criminal 
activity. It causes rampant economic inefficiency, interferes with 
capital markets, and obviously contributes to poverty.
  Transparency International is a global not-for-profit organization 
dedicated to the fight against corruption. Transparency puts out annual 
reports on the state of corruption worldwide, trying to measure whether 
we are winning or losing that fight.
  This fight is a top priority for the U.S. Departments of State, 
Justice and Commerce. My colleagues, since 1979, the Organization for 
Economic Cooperation and Development, OECD, has had a convention 
against corruption and continues to see it as a top global priority. 
All this reflects a growing international consensus that corruption is 
a problem that we must confront. That much is true. But working on 
anticorruption campaigns, all these entities treat the symptoms rather 
than the disease. The disease is oppression and lawlessness. The cure 
is freedom and the rule of law.
  The annual Index of Economic Freedom, compiled by the Heritage 
Foundation and the Wall Street Journal, provides a simple framework for 
understanding how open countries are to competition; the degree of 
state intervention in the economy, whether through taxation, spending 
or overregulation; and the strength and independence of a country's 
judiciary to enforce rules and protect private property.
  One of the indicators in the index is the size of a nation's 
``informal,'' or black market economy, which helps to measure this 
corruption. Charting the relationship between economic freedom and the 
size of the informal economy as a percentage of GDP, the Heritage 
Foundation found a positive correlation between these two factors. They 
reported, ``as economic freedom vanishes, the informal economy takes a 
larger share of GDP. The size of the informal economy in economically 
unfree and repressed economies is almost three times the size of the 
informal economy in free economies, and almost double the size of the 
informal economy in mostly free economies.'' The Heritage calculations 
demonstrate the perverse effect of economic repression on the moral 
behavior of simple, ordinary people and the continuation of the cycle 
of poverty that entraps them.

[[Page 18478]]

  Access to credit in most developed countries is the key to a better 
standard of living. That access is incumbent upon proving income or 
property, for which you need a formal job and a legal title to that 
property.
  When it is difficult for people to invest in business, whether a 
corner grocery store or a major factory, formal jobs are hard to come 
by. Jobs can be more easily had in the informal economy, where small 
and medium entrepreneurs can negotiate salaries and benefits, and tie 
them to performance. In cases like this, the government bureaucracy 
encumbers legal businesses, encouraging employers and employees to 
operate in the shadows.
  Without a formal job, you can still get credit if you have titled 
property to offer as collateral. But while Peruvian economist Hernando 
de Soto has shown that most of the poorest people in the developing 
world own property, they face innumerable bureaucratic hurdles in order 
to actually title that property as their own. In Peru, he says, ``to 
obtain legal authorization to build a house on state-owned land took 6 
years and 11 months. To obtain a legal title for that piece of land 
took 728 steps.'' Other countries are similarly ridiculous. In Egypt, 
it takes 77 steps in 31 government offices and anywhere from 6 to 14 
years. In the Philippines, it takes 168 steps through 53 offices and 
anywhere from 13 to 25 years to get legal title to this property.
  An oppressive government system perpetuates the poverty of its 
citizens by making it impossible to claim their property rights and 
pursue legal employment. Equally important, the Heritage Foundation 
says that the resulting black market economy ``creates a culture of 
contempt for the law and fosters corruption and bribery in the public 
sector as a necessary means to navigate the bureaucracy.''
  Mr. Speaker, when those folks, particularly international elites, 
take on corruption, they see it as just one more corporate scandal to 
be uncovered and think that will be that and we can fix it. One more 
capitalistic crime, they call it, that must be prosecuted. That is not 
it. That is not it at all. In reality, corruption indicates a simple 
lack of freedom and, more importantly, a consistent rule of law.

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