Chapter 4: Common Market institutions, fraud and informal networks
1 Carolyn M. Warner INTRODUCTION International politico-economic organizations such as the EU are expected to lower barriers to trade, raise the efficiency of economic exchanges as well as promote economic and political development and cooperation. Yet it is possible that international organizations are just as likely to promote, as sideeffects, various forms of fraud. Recent instances of possible fraud (and corruption) in the EU’s main administrative body (the Commission) serve to highlight the vulnerability of international organizations to illicit financial practices. Is fraud the result of national patterns being brought into the international arena, or a negative externality inherent in any international organization? How do we analyse the occurrence of fraud in the EU? Is the EU, in this regard, one of several instances of international organizations or is there something about the EU’s particular institutional configuration – for example the diffusion of informal governance mechanisms – which makes it particularly prone to fraud? This chapter will explore answers to these questions by looking at various policy areas, but particularly at agricultural and cohesion policies. DEFINITIONS AND HYPOTHESES To study fraud, we need to know what it is. Fraud is usually defined as the wrongful appropriation of funds in the private sector, or by a private actor against public funds, while corruption is defined as ‘behavior by a public servant, whether elected or appointed, which involves a deviation from his or her formal duties because of reasons of personal gain’ (LaPalombara 1994, p. 328; see also Klitgaard 1988, pp. 20–24). Corrupt...
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