Bribing Foreign Officials

by Jeffrey Miron on April 16th, 2010
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The U.S. has joined German and Russian authorities in investigating whether Hewlett-Packard Co. executives paid millions of dollars in bribes to Russian officials to win a contract in Russia, according to people familiar with the matter.

The U.S. Justice Department and Securities and Exchange Commission are investigating whether H-P committed any violations of the Foreign Corrupt Practices Act, these people said, as part of a widening probe into the company’s activities. The law bars American companies from bribing foreign-government officials anywhere in the world.

I do not see a good argument for this law. It puts U.S. companies at a competitive disadvantage, and it probably hurt the residents of countries where bribery is standard practice. Bribesry allows U.S. companies to circumvent regulation that protects incumbents, so bribery is likely to generate increased competition, greater investment, and higher wages.

See also Tyler Cowen on this issue in the context of economic development in Haiti.

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  • Cliff Nelson

    Standard practices can not – by itself – be a support, grounds and/or justification for conduct.

    If “standard practices” were to be such grounds, of course, nothing would ever change.

    Also, since the German and Russian authorities are also investigating, it does seem like the “standard practices” and competitive disadvantage arguments are misplaced.

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