How Corrupt Is America?

Source: Flickr, www.stockmonkeys.com

The Land of the Free has been getting a lot of flak lately. From penny-pinching politicians to Big Bank blunders, corruption in the United States is center stage. But how corrupt is our country, actually? Here's what you need to know.

Calculating corruption

International watchdog Transparency International is the world's leading organization on corruption. Since 1995 , it has published an annual Corruption Perceptions Index (CPI), pulling data from more than a dozen respected institutions, organizations, and businesses , to answer a seemingly simple question: How corrupt is my country?

With 177 countries and territories in the mix, no nation is safe from scrutiny. And while the worst offenders are to be expected (Afghanistan, North Korea, and Somalia), the United States is hardly in the clear.

Land of the Free corrupt?

Out of 100 possible points (with 100 being perfectly pure and 0 being perfectly corrupt), the United States scored a 73, ranking it as the 19th least corrupt country. That puts it just ahead of Ireland, on the same level as Uruguay, and a step behind Japan . It also places the United States solidly above the 50-point mark, meaning that survey respondents generally viewed our nation as "less corrupt" than most.

But above-average isn't what the United States is known for. So why isn't the United States hanging out in top spots alongside Denmark, New Zealand, and Finland ?

Source: Transparency International 

Nine sources gave their two cents on corruption in the United States. The Bertelsmann Foundation Sustainable Governance Indicators scored the U.S. as an 89, while The Economist Intelligence Unit Country Risk Ratings awarded America an 88. A score like that would've put the United States in third place . But the World Economic Forum's Executive Opinion Survey put its perception at 64, and Transparency International added on a 50 from its Bribe Payers Survey .

Contradicting corruption

It's easy to understand how opinions can be so erratic. On the one hand, the United States has some of the largest and smoothest-running regulatory bodies in the world. Accountability in America is hitting all-time highs, with regulators slapping fines on all sorts of offenders.

In fiscal 2013, the Securities and Exchange Commission filed a whopping 686 enforcement actions, pulling in a record $3.4 billion in fines . SEC Chairman Mary Jo White noted that the commission's results show it is ready to "tackle the breadth and complexity of today's securities markets ."

And while the SEC snagged a $200 million fine – one of its largest ever-from JPMorgan Chase & Co. (NYSE: JPM  ) for its $6 billion "London Whale" oversight error, it's not only financial companies that are catching flak .

Source: Wikimedia Commons, Steve Jurvetson; Jamie Dimon at the JPMorgan Chase & Co. Healthcare Investment Conference 

Ongoing fines against BP plc (NYSE: BP  ) for its 2010 Deepwater Horizon Gulf of Mexico disaster now add up to an astounding $18 billion . The Clean Water Act allows the U.S. government to charge up to $4,300 a barrel for companies found guilty of gross negligence  – and BP plc spilled a lot of barrels.

The U.S. Environmental Protection Agency is also finding ways to keep natural gas "fracking" companies in check, despite various exemptions from different environmental acts . Cheseapeake Energy Corporation (NYSE: CHK  ) agreed in December to pay a $3.2 million fine, in addition to spending $6.5 million to restore 27 sites damaged by "unauthorized discharges" of fill material in West Virginia.

The U.S. government obviously does its fair share of governing – but the crux of corruption is what goes unreported. There are no fines for unfound corruption, and several signs point to a less-than-clean country.

Source: Wikimedia Commons, Erifnam

An investigative experiment by NPR's Planet Money revealed that it was almost as easy to set up a tax haven in Delaware as it was in the Cayman Islands. The entire process took one day and three emails, with no documentation needed .

Corruption certainly isn't synonymous with breaking laws, and Washington is full of knowing winks and secret handshakes where nothing illegal ever occurs.

At the political level, federal lobbying in 2013 clocked in at $3.21 billion. And while lobbying serves its purpose to put ignored ideas on the table, $3 billion is more than a polite prod to most politicians. Before you take your next bite, consider the $39.5 billion that the food processing and sales industry spent on lobbying last year .

Possibly most indicative of quiet corruption is the United States' high inequality. While the United States ranked third on the United Nation's 2012 Human Development Index, the inequality-adjusted index dropped our nation down to 16th – behind countries like Slovenia and the Czech Republic .

Stopping Corruption

Corruption is a global problem. The United States isn't the most corrupt – but it's a world leader that's still got a long way to go.

Luckily, you can help cut corruption. When you put your money in a savings account, banks can invest those funds anywhere in the world – and with anyone. Unfortunately, that can sometimes mean your piggy bank is funding corruption in with the world's worst countries and companies. The simplest way to keep your cash clean is to choose your own investments – and if you invest wisely, you'll even be rewarded with substantial profits. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.


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