Foreign Policy Meets Main Street

As part of reengaging the United States in supporting democracy, human rights, and the rule of law globally, President Joe Biden recently issued a policy memorandum that identifies combatting corruption as a core national security interest and resolves to bolster U.S. anti-corruption efforts. For a policy area that was gaining ground in the first half of the last decade but then suffered serious neglect during the presidency of Donald Trump, this is a major, heartening step.

Many ideas and recommendations for how to take this initiative forward are already emanating from domestic and international NGOs dedicated to anti-corruption. No doubt many of these proposals will be highly useful. But Biden and his team will be looking to go beyond standard thinking on anti-corruption to build a revitalized international anti-corruption agenda that squares with their pledge to “place the American people—and especially working families—at the center of our national security strategy.”

Abigail Bellows
Abigail Bellows was a nonresident scholar in the Democracy, Conflict, and Governance Program at the Carnegie Endowment for International Peace
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This commitment grows out of recent pioneering work by the Carnegie Endowment for International Peace’s Task Force on U.S. Foreign Policy for the Middle Class, led by current State Department Director of Policy Planning Salman Ahmed and National Security Adviser Jake Sullivan. The task force’s final report, issued in September 2020, recommends that the U.S. government promote middle-class interests “by fostering greater stability and lowering the risks of living in a more open and integrated world, by leading a global economic system that promotes growth but also fair play, and by investing more in economic resilience efforts at home.” As Sullivan has said, “Everything we do in our foreign policy and national security will be measured by a basic metric: Is it going to make life better, safer, and easier for working families?”

Imagining a New Anti-Corruption Agenda

The task force’s final report—grounded in field work in Colorado, Ohio, and Nebraska—identified a number of long-running challenges, particularly related to security and mobility, that spur anxiety among middle-class Americans. It also outlined several valuable ways in which U.S. foreign policy could better address these challenges. However, an important arena seems to have been overlooked: fighting international corruption. Given the task force’s attention to American concerns with fairness, transparency, stability, and competitiveness—all of which could be bolstered by fighting corruption—more direct treatment of the topic is warranted.

Viewing the U.S. anti-corruption agenda through the lens of a “foreign policy for the middle class”—which this article seeks to do—has significant implications for which policy areas receive emphasis. New priority topics, as discussed below, could be real estate transparency, foreign bribery, health governance, and the weaponization of corruption for geopolitical ends.

Elevating the interests of ordinary Americans in this way would resonate with existing research on the problematic divide in the anti-corruption field between policy elites and grassroots actors. When elites exclusively define the agenda, the resulting priorities may not reflect the population’s needs, producing an insular discourse suspended in the technocratic stratosphere. And even if the government makes laudable strides against corruption, a lack of connectivity between government and citizens may mean that policy progress fails to produce trust dividends. If democracy rings out internationally but no one is around to hear it, does it make a sound?

In spite of the considerable rationale for applying this middle-class lens, and the U.S. administration’s buy-in for doing so, crafting and executing such an approach will not happen automatically. Bureaucratic inertia elevates the influence of a known set of Washington-based experts, who are oriented primarily toward international rather than domestic affairs. Limited bandwidth at the National Security Council and the Domestic Policy Council (plus differing perspectives between the two) hamper coordination. Weak linkages between domestic advocacy groups and international ones, plus the lengthy agenda of long-established policy priorities, all create formidable headwinds against pivoting in a new direction.

This article aims to jump-start such a pivot by exploring areas of international action on corruption that may be most relevant to working Americans. In doing so, the focus is on corruption in the international arena rather than strictly in the United States, without diminishing the seriousness of the latter. In practice, the distinction between the foreign and domestic domains is becoming increasingly blurred, especially with regard to transnational corruption. U.S. markets are providing a safe haven for assets stolen abroad. And U.S. credibility to fight corruption overseas is damaged by failures to confront democratic shortcomings at home. Nonetheless, the emphasis here is on global engagement—both to make the analysis readily accessible to internationally focused policymakers and to close an apparent gap in the application of an American middle-class lens to the international arena, compared to domestic issues where ties to constituents are more immediate. The concerns of those constituents need not—and likely should not—be the only factor guiding U.S. action abroad, but their interests reflect a worthy lens for consideration.

New Areas of Emphasis

Economic elites benefit most from corruption, and in that sense, all anti-corruption work indirectly advances the middle class. And all Americans reap the security, economic, and political dividends of fighting global corruption, at least indirectly. But in considering what priorities most directly benefit the American middle class, the following four topics rise to the surface. Progress in these areas could make U.S. housing more affordable, strengthen the competitiveness of American businesses, improve health outcomes, and shore up American democracy.

Increasing the Transparency of the U.S. Housing Market

Amid the nighttime bustle of Armenia’s capital, Yerevan, observers will notice one disquieting phenomenon: lots and lots of empty buildings. According to residents, Russian oligarchs have bought up massive properties to stash their assets, often not even bothering to connect them to the electrical grid.1 These dark caverns in the heart of the city consume valuable residential and commercial space, while driving up prices for those who live in town.

Armenia is hardly alone in this dilemma. A New York Times series documented the prevalence of money laundering via high-end U.S. real estate, enabled by anonymous shell corporations. When foreigners seek to squirrel away stolen assets in a safe locale—or enjoy a luxury getaway while their economy withers—real estate in Western countries is often the first place they turn to. Long overlooked by financial regulators, the sector lacks sufficient due diligence requirements.

The disturbing use of real estate to harbor stolen assets is unfolding amid an escalating housing shortage across the United States. Inventory remains at record lows, and home prices are up 15.8 percent compared to last year. According to David Sanchez of the National Community Stabilization Trust, “Supply is extremely tight due in part to competition from international investors.” Now more than ever, America needs housing for those living in America. And measures to curb money laundering in real estate would help.

U.S. regulatory steps, led by the Financial Crimes Enforcement Network (FinCEN), have been successful, but they have been temporary, piecemeal, and focused on select metropolitan areas. To fully address the problem, transparency and due diligence requirements should be made national and permanent and be robustly implemented. This effort should start with the Treasury Department revoking the regulatory exemption for real estate agents, so that they would be required to identify their ultimate customers and report suspicious activity, as is already required of U.S. banks. New standards should apply to both residential and commercial properties to counteract the damage being caused in cities like Cleveland, where recently sanctioned Ukrainian billionaire Ihor Kolomoisky and his associates have become the biggest commercial real estate holders in the city. Their negligence as landlords has reportedly contributed to the economic plight of Cleveland and other Rust Belt cities, bringing the dangers of kleptocracy home to Middle America.

To be most effective, U.S. actions should be taken in tandem with those of allies, in order to harmonize disclosure requirements and to avoid simply shifting the problem to cities such as London. Momentum for joint action exists, with the G7 committing in June 2021 to “curtailing the ability of illicit actors to hide wealth, including in real estate.” The U.S. State Department could push for a set of shared commitments on this topic as part of upcoming G7 or G20 meetings or as a deliverable of the Biden-proposed Summit for Democracy. This is an arena where multilateralism could make a big impact on Main Street.

Expanding Fair Competition Overseas

The U.S. government has long confronted the problem of foreign bribery—in which companies bribe foreign officials to, for example, win contracts, secure oil concessions, and obtain operating licenses. This practice undermines competition overseas for U.S. firms who play by the rules. And the competitive disadvantage is often borne disproportionately by small and medium enterprises (SMEs), who typically do not have the resources for hefty risk analysis divisions or the type of exhaustive compliance programs needed to navigate lucrative but high-risk overseas markets.

To scale up the fight against foreign bribery and help U.S. businesses compete, new approaches are needed. First, the issue should be elevated on the bilateral diplomatic agenda with key allies who are lagging in their implementation of the OECD Anti-Bribery Convention. According to the advocacy group Coalition for Integrity, “About half of the Convention countries have failed to prosecute any foreign bribery case since they joined the Convention.” Countries like India and China, who are not yet part of the Convention, should be pushed to both adopt and enforce equivalents of the U.S. Foreign Corrupt Practices Act (FCPA). A recent step forward in this regard was the new commitment at the UN General Assembly Special Session Against Corruption in June 2021 that all countries would criminalize foreign bribery by 2030.

Second, the United States should bolster its own approach to countering foreign bribery. Increased resources for the Justice Department units handling FCPA cases could unilaterally deter foreign corruption, given the broad scope of U.S. jurisdiction. In addition, Congress will soon debate the Foreign Extortion Prevention Act, which would enable the United States to build cases against foreign officials who demand bribes rather than just against the American companies who pay them. These officials could then be arrested and prosecuted if they travel to the West to spend their stolen assets.

Third, to encourage positive behavior, the U.S. administration could explore offering a preference in U.S. public procurement based on documented compliance with anti-bribery standards. Foreign bribery could also be elevated within the renewed U.S. emphasis on promoting environmental, social and governance (ESG) standards for investment decisions. The Commerce Department could celebrate companies taking part in collective action initiatives, in which businesses self-regulate anti-bribery compliance in a particular sector, region, or project.

These steps would help level the playing field for all U.S. companies and could complement more robust anti-corruption requirements in new trade agreements. But how could a push on foreign bribery be of particular benefit to the American working class beyond just the profit margins of large multinationals? What is good for the country in terms of GDP is not the same as what is good for the median income earner, especially given U.S. wage stagnation and widespread corporate tax evasion. As commentator James Traub put it, foreign policy for the middle class is not foreign policy “for the winners of the globalization sweepstakes.”

Part of the answer lies in the campaign already underway by the Biden administration and the G7 to advance a global minimum tax for corporations—so that the benefits of increased American prosperity overseas flow back into the U.S. tax base. A necessary complement to this effort, as U.S. Senator Sheldon Whitehouse and U.S. Representative Tom Malinowski have argued, would be for the Treasury Department to prioritize ending offshore financial secrecy and illicit tax havens so that corporations cannot skirt their tax obligations.

Another angle could be to reevaluate how the Commerce and State Departments engage in commercial diplomacy. Sullivan asked bluntly in 2018, “Whose interests are we serving by putting diplomatic muscle into helping companies like Walmart open stores in India?” The Biden administration could reorient its commercial diplomacy toward helping SMEs as well as businesses that pay a living wage to U.S. workers. This support could be complemented by educational outreach to help those companies avoid foreign bribery risk. Together, these actions could create a more level playing field and give American workers a head start.

Curbing the Next Pandemic

In April 2020, COVID-19 was just beginning its deadly march through Brazil—where it has since claimed the lives of 1 in 395 residents and brewed a variant that migrated to the United States. In those pivotal early days, Brazil’s fight against COVID-19 was set back when 15,000 coronavirus diagnostic tests and more than 2 million personal protective items were stolen in São Paulo. Around the world, mounting stories of theft, embezzlement, and fraud have kept pace with the pandemic’s spread.

Corruption in health systems accelerates the spread of disease, as the resources needed to detect and treat illness are diverted for private gain. Over time, corrupt governments lose the legitimacy to convey urgent public health messages, which slows containment measures. And the same corrupt forces that generate this quagmire also undermine attempts to address it, as foreign aid becomes another potential income stream for unscrupulous officials. These challenges are severe in the best of times. But during a pandemic—when budgets balloon and oversight plummets—the risks become even more grave.

The more the United States can reduce corruption in health systems overseas, the safer all Americans will be. The same applies to reducing corruption in pharmaceutical supply chains and product safety bodies around the world. However, pandemics impose particular costs on the economic and health well-being of low-income Americans disproportionately, making it a key arena for action. It is also a domain in which the United States is poised to make massive new investments in the coming years.

Given USAID Administrator Samantha Power’s focus on anti-corruption, potential exists for integrating anti-corruption approaches more deliberately into the $9.5 billion U.S. global health assistance budget. The administration could set benchmarks for this work, in line with calls from Senate Democrats, and direct a substantial share of health assistance (perhaps 25 percent) toward health systems strengthening. That work should encompass both improving the fiscal management capacity of governments as well as investing in the civil society, media, and parliamentary mechanisms needed to sustain accountability. In addition, greater attention should be given to the need for corruption risk analysis as part of all health programming decisions to avoid inadvertently fueling state capture. To succeed, officials will need to overcome the bureaucratic silos that separate governance and health experts. The anti-corruption energy of the current administration may be just enough to deliver on this important agenda for American families.

Beyond COVID-19, overseas corruption also contributes to another massive public health problem in the United States: the opioid crisis, which has dramatically worsened during the pandemic. Supply chains for heroin and fentanyl, which originate almost exclusively from other countries, are greased by bribery and collusion. The proceeds of narco-trafficking, including $100 billion a year from American drug users, are then distributed back to international criminal networks via a web of money laundering enabled by Western banking systems. Tackling corruption’s role in international drug smuggling and associated financing could yield real benefits to families in the American heartland.

Safeguarding Democracy

Americans have an interest in knowing that their public officials are operating in the public interest rather than at the behest of a foreign oligarch. This basic notion, which is core to U.S. sovereignty, is threatened by the strategic corruption now deployed by authoritarian kleptocrats. Lax lobbying and campaign finance rules allow foreign officials to buy their way into U.S. policymaking and even skew U.S. elections via covert foreign funding. Working families may be most vulnerable to this new form of corruption, as their civic voices are already too often drowned out by wealthy interests. Democracies around the world also are vulnerable to this new form of weaponized corruption, as discussed previously.

The United States should join with other allies for a concerted offense against those deploying strategic corruption (through sanctions and law enforcement, backed by increased intelligence). At the same time, the U.S. administration can increase the country’s resiliency to such attacks—while helping others do the same—through increasing campaign finance transparency, strengthening lobbying oversight, and supporting investigative journalism. The president’s recent National Security Study Memorandum already resolves to counteract strategic corruption, including “by closing loopholes exploited by these actors to interfere in democratic processes in the United States and abroad.” Such actions can shore up U.S. democracy against this pernicious form of transnational corruption. As Biden stated in June 2021, “Fighting corruption is not just good governance. It is self-defense.”

Further Frontiers

In addition to applying the middle-class lens to thematic areas, the administration could explore its applicability to specific geographies. For instance, corruption in the Democratic Republic of the Congo (DRC) may undermine the U.S. supply of minerals used for electric car batteries and other green technologies, thus raising costs for American consumers and threatening the ambitious job-creation plans of U.S. companies. That reality could elevate the profile of anti-corruption on the State Department’s bilateral agenda with the DRC and other mineral-rich countries.

Closer to home, it is vital to continue addressing corruption as a root cause of illegal migration into the United States. This could be complemented by an initiative to curb the flow of stolen assets flooding across the border, which is driving up Texas real estate prices. And at the subnational level, U.S. reformers and advocates seeking to overcome a pattern of corruption scandals—such as in New York State—may benefit from international exchanges via the Open Government Partnership Local initiative.

Another means of applying this lens would be to explore the aspects of corruption that most directly threaten the safety of U.S. service members—drawn mainly from America’s inner cities, rural South, and Midwest—and the success of their missions. In Iraq, crime and corruption were considered a much-neglected “second insurgency.” In Afghanistan, the United States’ focus on curbing corruption has waned in recent years in spite of continued massive U.S. spending, jeopardizing the American legacy as troops pull out. In hybrid warfare contexts like Ukraine, analysts are just starting to grapple with the role of strategic corruption in undermining sovereignty and weakening military readiness. If inadequate attention to corruption in the battlespace persists, it could mean more lives upended, wars prolonged, and mounting veteran’s benefits—producing a staggering drain on current and future taxpayers.

The Way Forward

Implementing a new set of “anti-corruption for the middle class” priorities will naturally require deprioritizing some existing activities. Such decisions are always difficult and should involve weighing a range of considerations. One possibility in the foreign aid domain would be to shift resources from longer-term support of anti-corruption institutions toward more targeted investments in places experiencing a brief window of opportunity for reform, where U.S. support could be a game-changer. With regard to global health, it may mean directing some attention away from treating specific diseases and toward strengthening the transparency, accountability, and resilience of local health systems. In the sanctions arena, it may mean concentrating on those individuals engaged in the type of strategic corruption that harms the United States and other democracies. Hopefully the anticipated expansion in attention, personnel, and resources for anti-corruption from the Biden administration will mitigate the severity of trade-offs required to elevate this new middle-class lens.

To help identify and weigh these trade-offs, it would be valuable for the National Security Council and the Domestic Policy Council, alongside relevant agencies, to develop mechanisms for coordination on anti-corruption that bridge the divide between foreign and domestic policy. One component of this work would be to jointly convene external consultations with constituency groups representing the needs of working families and small businesses in order to validate the ideas above and hear new ones. This type of direct dialogue with working families would enrich policymaking and be well timed as part of development of the next U.S. Open Government Partnership plan in 2022. Targeted engagement could be complemented by a broader messaging and outreach campaign to educate Americans about how the United States is seeking to advance their interests abroad in the anti-corruption realm. Such a campaign could help increase public resonance with what can be a highly technical domain.

When communicating with Americans about this topic, practitioners may confront dueling definitions of corruption. Foreign policy practitioners tend to use the term selectively to refer to a discrete set of illegal acts. By contrast, everyday Americans often use the term to refer to a much wider range of frustrations about economic hardship and political disenfranchisement—feeding a view that the system is rigged to benefit political elites, corporations, or bureaucrats. Finding a common definition of corruption—or drawing out the links between what the foreign policy establishment sees as corruption and broader forms of injustice and inequality—will be an important component of future work.

As policymakers take on the challenge of prioritizing the long anti-corruption to-do list, the needs of the American working class could be a valuable filter. In reflecting on how particular policies would advance the interests of Americans outside the Washington halls of power and New York City financial corridor, practitioners should consider both Americans’ economic interests as well as their interests in secure, well-governed, and open societies. The insights that emerge from this reflection should be factored into U.S. anti-corruption strategies and measured through dedicated indicators. Throughout this process, policymakers and practitioners should engage directly with working Americans to help shape the future agenda, convey progress, and win the public trust that a healthy democracy requires.

The author gratefully acknowledges the valuable perspectives and contributions of Dan Baer, Frances Brown, Tom Carothers, Rozlyn Engel, Gary Kalman, Ben Press, Zoe Reiter, Lisa Rosenberg, Josh Rudolph, David Sanchez, Josh Silver, James Traub, Jodi Vittori, and Alexandra Wrage.

Notes

1 Author communications with residents during fieldwork conducted in March 2019.