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CPI and Global EconomyEssay

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History Of Quantification

Corruption Quantified

Country comparisons serve many purposes: Economic, political, social, educational, and so on. Many countries -- and likely all of the developed countries -- conduct country comparisons that are focused on international trade and overall national economic status. The collection of international economic data has been increasingly influenced by sophisticated strategy and technique, largely because national fiscal markets are globally linked and multinational corporations engage at high rates with foreign supply chain vendors (Podobnik, et al., 2008). Measures such as the gross domestic product (GDP), the consumer price index (PCPI), general government gross and net debt, and purchasing power parity (PPP) are all used to understand the economic status, monetary exchange, and other fiscal dynamics in different countries ("WEO," 2014). Discourse among economists is strongly skewed toward ratios, curves, slopes, and derivatives -- each carefully constructed to reveal patterns and trends that would not otherwise be accessible or interpretable ("WEO," 2014). Indeed, it is because the data is quantitative that it is so comparable; moreover, statistical procedures are used to weight difference that might inadvertently skew the outcomes, and to calculate the relationships between various measures, such as the CPI and GDP (Shao, et al., 2007). For example, to accomplish surveillance of other countries, the WEO produces a country database that contains: data on each country's currency; the type of national account used, and the historical and latest data on national accounts, whether chain weighted methodology is used; and the historical and latest data on the consumer price index (CPI). The Consumer Price Index (CPI) is a term used by economists to reflect the changing monthly data on "prices that urban consumers pay for a representative basket of goods and services" ("Bureau of Labor Statistics," 2014).

Another organization that uses country-based data is the Organization for Economic Co-operation and Development (OECD). OECD is known for examining patterns related to international trade and business. The mission of the OECD is to "promote policies that will improve the economic and social well-being of people around the world" ("OECD," 2014). The OECD takes measure of national productivity and the flow of global investment and trade. An additional output of the OECD is the setting of international standards on things as disparate as agriculture, taxation, pension systems, and chemical safety.

From their policy experience and the country facts the OECD collects, policies are designed and recommended that can improve quality of life. At the core of OECD work is "a shared commitment to market economies backed by democratic institutions and focused on the well-being of all citizens" ("OCED," 2014). Tandem objectives of OECD work are substantially making "life harder for the terrorists, tax dodgers, crooked businessmen and others whose actions undermine a fair and open society" ("OCED," 2014). To these goals, the OECD holds a Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Each participating country agrees to treat foreign bribery as a crime for which individuals and enterprises are held responsible. As such, the Convention is instrumental in curbing the export of corruption globally since roughly two-thirds of global exports and nearly 90% of foreign direct investment outflows are directly tied to the 41 signatory countries. To increase its influence and effectiveness, the OECD Working Group on Bribery conducts a follow up reviews of nine to ten countries annually. While the OECD emphasizes fact-based policymaking and implementation, an organization known as Transparency International serves as an aggressive watchdog.

Transparency International is one of many non-governmental organizations (NGOs) that monitor and publicize the performance of political groups and corporations. The type of performance that Transparency International focuses on is the level of corruption in countries and territories around the world. The instrument used by Transparency International to measure and communicate perceived levels of corruption is the Corruption Perception Index

What Is the Corruption Perception Index?

The Corruption Perceptions Index (CPI) 2013 measures the perceived levels of public sector corruption in 177 countries and territories ("Transparency International," 2014). It is important to take note of the word "perceived" as it holds considerable importance with respect to the data collection and data analysis procedures used to generate the CPI. When the CPI was first developed, pubic opinion surveys were used to gather corruption data -- this information was truly based on people's perception. Over years of application, the CPI drew on different sources, which made it difficult to make year-over-year comparisons. However, the current CPI utilizes up to 12 institutional sources to build the case for each country -- though most countries use far fewer data sources (See Table 2). Currently, the institutions providing assessment or survey data include: the African Development Bank, the Bertelsmann Foundation, the Economist Intelligence Unit, Freedom House, Global Insight, International Institute for Management Development, the Political and Economic Risk Consultancy, the Political Risk Services, the World Economic Forum, the World Bank, and the World Justice Project. These organizations are described in more detail below, with the survey or assessment included in parentheses just after the name of the institution:

1. Africa Development Bank- Country Policy and Institutional Assessments 2009 (AFDB 2009)

2. Asian Development Bank -Country Performance Assessment Ratings 2009 (ADB 2009)

3. Bertelsmann Foundation- Bertelsmann Transformation Index (BF 2009)

4. Economist Intelligence Unit -Country Risk Service and Country Forecast 2009 (EIU 2010)

5. Freedom House -Nations in Transit 2009 (FH 2010)

6. Global Insights, formerly World Markets Research Centre- Country Risk Ratings 2009 (GI 2010)

7. Institute for Management Development - World Competitiveness Report 2009 and 2010 (IMD 2009 and IMD 2010)

8. Political and Economic Risk Consultancy, Hong Kong - Asian Intelligence 2009 and 2010 (PERC 2009 and PERC 2010).

9. World Economic Forum - Global Competitiveness Report 2009 and 2010 (WEF 2009 and WEF 2010)

10. World Bank - Country Policy and Institutional Assessments for IDA Countries (WB 2009) ("Transparency International," 2014).

Survey and assessment rigor has increased during the interim since the CPI was first introduced. The strength of the current aggregated index is that a more reliable and more robust measure of a phenomenon is achieved when the measures are taken from a combination of sources than when a measure is taken from each source independently. Current CPI data is derived from performance assessments from an analyst group, from surveys of business people, or standing assessments and reports. It is generally understood that the CPI must measure the perception of corruption since it would not be possible to measure corruption in absolute terms -- incidences of corruption or corrupt behaviors. In the section below entitled How Is the Data Collected and Analyzed, the discussion is more detailed and provides examples of the sources of data that are used to determine country rankings.

The purpose of the Corruption Perceptions Index (CPI) is to make transparent the undesirable behaviors that are integral to the economic, political, and social functioning of countries around the world. These behaviors include abuse of power, bribery, and secret dealings of officials and non-officials in positions that impact capacity of societies to conduct business and administer government ("Transparency International," 2014). As a Turkish citizen, I am saddened by the corruption that is slowly taking over my country with the new government, which is why I gravitated towards the idea of looking into the CPI.

The rationale behind the Corruption Perceptions Index is that reform begins with transparency. But in addition, the Index makes salient the importance of cracking down on corruption as the category includes much more than simply greasing the wheels of a society. Anti-corruption efforts include halting money laundering and a relentless pursuit of the stolen assets in order to return them to their rightful owners ("Transparency International," 2014). Anti-corruption efforts also include fundamental political finance clean up and ordinary initiatives to establish higher levels of transparency in public institutions ("Transparency International," 2014). Huguette Labelle, the chairperson of Transparency International, has underscored the need to move from exposure to termination:

"It is time to stop those who get away with acts of corruption. The legal loopholes and lack of political will in government facilitate both domestic and cross-border corruption, and call for our intensified efforts to combat the impunity of the corrupt" ("Transparency International," 2014).

What Do the Rankings on the Index Mean?

The ranking of countries and territories on the Corruption Perceptions Index is dependent upon public sector corruption. The rankings indicate the level of public sector corruption on a scale of 0 to 100 (see Appendix I, Appendix II, and Appendix III). A ranking of zero (0) on the Corruption Perception Index represents perceptions that the country or territory is highly corrupt. A ranking of one hundred (100) on the Corruption Perception Index represents perceptions that the country or territory is, in the terminology of Transparency International, very clean. The scores convey the positions of the countries and territories in relation to each other. The indices are produced annually. The 2013 index shows the rankings for 177 countries and territories. It is important to realize that a perfect score is never given,… [END OF PREVIEW]

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