Fiscal Futures: Do Artificial Intelligence and Big Data Present Opportunities or Challenges to Fiscal Accountability?

Fiscal Futures: Do Artificial Intelligence and Big Data Present Opportunities or Challenges to Fiscal Accountability?

This post is part of the Fiscal Futures blog series exploring some of the biggest issues that fiscal accountability enthusiasts are likely to encounter over the next 10 to 15 years. Learn more about the Fiscal Futures project and download resources here.

My answer to the question asked in the title of this post – do artificial intelligence and big data present opportunities or challenges to fiscal accountability – is both. Depending on the time of day, the weather, the news, etc., I find myself oscillating somewhere between two extremes:

  1. A justified concern that we are witnessing a second enclosure movement, where vast digital arcologies like Google and Facebook are creating walled gardens stocked with roving predatory apps in which you are the product. Here’s a compelling version of that vision.
  2. Hoping for a ‘Digital Enlightenment’ where the values of the original Enlightenment – tolerance, openness, and rationality – win out.

Participants in the Fiscal Futures project imagined four scenarios of what public finance would look like in the year 2040. The fun of the exercise wasn’t in extrapolating extremes, but in deciding what could have tipped us in that direction and what the warning signals were. This post presents some of the key challenges and opportunities we saw and discussed in terms of artificial intelligence, big data, and digitization in general – and what we should be doing about them.

Challenge 1: Information rights in the digital age

An immediate red flag for our fiscal future was the massive and sustained collective failure of the imagination in setting a vision that would govern the stewardship and use of data. This point has been made repeatedly by Martin Tisné from Luminate, who argues that we are stuck in a counterproductive silo of thinking about ownership.

Instead, we should be thinking about a framework of rights, and thinking more about whose rights we are safeguarding (or violating) in the way we manage data. Although Martin’s ideas speak most obviously to topics like privacy, they have implications for any data that could be in the public interest and data that satisfies the impulse to “be in control” of one’s life. In public procurement, for example, myths of commercial confidentiality and a transparency ‘gap’ in contracted-out government services constrain access to critical information that is in the public interest, like fire defects in a public-private hospital. The public may not own the data, but they should probably have a right to it.

Public information needs to be embedded in a new data and information architecture that is not about who owns it, but who is entrusted with it by the public, and what accountability measures are in place to protect its appropriate use.

Challenge 2: Data architecture that facilitates transparency

One key element of our fiscal future, especially with the rise of artificial intelligence (AI) and machine learning, is how we design an architecture of transparency that will enable and support the outcomes we want to encourage in society. And, equally important, the culture changes it could lead to.

At the Open Contracting Partnership, we work on transforming public contracts – a US $9.5 trillion market that is vital to delivering critical goods and services. We aren’t just after transparency for its own sake: we want public contracting systems that are 10 times better – 10 times more efficient, fair, responsive, and accountable – than before.

Transparency is currently seen by many as a compliance-based chore. Governments shuffle paperwork to satisfy legal mandates and I am constantly surprised about how little procurement data is used to measure or improve frontline services. Data that improve public accountability should be routinely used and consumed by the government to manage transactions and improve internal efficiency. Designing for government data use is a key channel for creating feedback loops that improve data quality for all users. This is what Americans call ‘eating your own dogfood’. As data volumes increase, analysis should prove ever more useful for internal purposes (with machines to help process).

When the UK’s second biggest contractor Carillion imploded, there was a scramble up and down the country to assess exposure. However, only 33 out of an estimated 450 of Carrillion’s contracts were in the UK’s official contracts portal. Because the portal was regarded as a dumb pipe for the public to use, there was little attempt to improve its data quality or usefulness. However, had these efforts been made, perhaps alarm bells would have been raised much earlier.

Applications like the UK’s contracting portal should be designed for government use and then leveraged through open data to feed other use cases. These portals should become platforms, clearly shaped around tangible performance goals. This is where open data and taking an open-by-design approach can add so much value: one of the reasons for the success of Ukraine’s procurement revolution was that Ukrainian civil society organizations helped design business intelligence, red flag tools, and a complaints mechanism in the government’s Prozorro procurement system. The architecture was designed to plug into each user’s specific role, including meeting the government’s transactional and auditing needs. The system also enabled a wider ecosystem of users, including a citizens: half of the issues flagged by citizens currently get fixed. The data are granular, specific, and support targeted policy interventions.

AI may promise a quick fix to deep insights into data, but IBM’s Watson will not provide the right answers if there are no clues as to the problem or if driven by the wrong assumptions, and if there is no culture of asking questions to begin with.

Challenge 3: Moving from paper to data to digital services

The future of fiscal governance will also involve rethinking topics like procurement, budgeting, and building user-centered digital services as opposed to putting paper-based processes online.

It’s not about technology, but what we want the technology to do. Procurement is a great example, as it connects many of the government’s fiscal tasks: from the budget to the contract, to the spending, to the registration of all parties. Why does a vendor have to fill out personal and business information multiple times if it already exists in a parallel database? Why can’t citizens follow a procurement process from the problem it wants solved — often initiating in lofty campaign promises — to the solution and service contracted?

Warren Smith, Director of the UK’s Digital Marketplace, has been thinking hard about how to support this shift. As he said at the International Open Data Conference 2018 in Buenos Aires, “User-centered design should be the norm. This requires first understanding what the problems are that you’re trying to solve, for whom, and who needs to be engaged. Fundamentally, open contracting is about how procurement data can help solve people’s felt needs.”

Designing for use also involves deconstructing the black box of political will and thinking much harder about the incentives of different actors to engage with transparency and accountability interventions. As Mushtaq Khan from SOAS — who is running a huge new anti-corruption evidence program — put it: if you can’t say who will do what with your intervention (and why it is in their interest), you don’t have an anti-corruption strategy.

So, our positive fiscal future sees a change in culture toward openness, engagement, and results. This change process will involve sustained, repeated interaction. Think of open contracting, budgets, extractives, etc. as a long (and winding) journey rather than a single destination. Over time, the more that users are engaged in designing these processes, and the more that government responds to that engagement, the deeper insight and reform will go. It will take political leadership and changed incentives to embed data, monitoring, and feedback into our fiscal future and to shift the equilibrium of interests so ordinary people and businesses win. But, when they do, they will have a stake in defending the progress.

Impact-focused transparency and accountability interventions will involve engaging new allies, such as public information regulators who are mandated by governments to steward data and information in a big data age. And there will be new challenges, such as the bias coded into artificial intelligence and machine learning applications.

Thinking this way about fiscal governance will identify use cases for AI as opposed to just thinking about how AI will change fiscal governance. Are we enabling a shift from interacting with government that is slow, confusing, and frustrating to one that is fast, simple, and [relatively] empathetic? It’s not about the interface, but the interaction. It’s not about the process itself, but its beneficiaries. It’s not about mining big data for problems, but identifying what data is needed to generate solutions.

We are still a long way from asking the right questions for AI and machine learning to make the best use of the data that is becoming available. It means thinking through the problems first and involving the right people in that process. How can we improve the quality of the meals we provide as a city in schools and prisons and support local business, for instance? How can we provide more affordable health care for citizens?

Of course, the pace of change as the machines take over will be a challenge for many fiscal governance experts. To borrow (brazenly) from Matt Levine, one can imagine a conversation at The Open Contracting Partnership (OCP) in 2022 that goes something like this:

OCP Director: Awesome. We have a new machine learning algorithm that can evaluate all our OCDS user interventions to maximize our impact.
Frontline advocate: Great, that will be very useful to me.
OCP Director: You mean you will be very useful to it.
Advocate: What?
OCP Director: It’s your boss now.
Megatron 3000: Greetings.
Advocate: What?
OCP Director: Don’t worry, it’s my boss now too.
Megatron 3000: Thank you. Please have one million use case mappings, technical architecture reports, and user-centred design consultation plans for me to evaluate on my desk by close of business today…

Fortunately, before Megatron, we still have some time and a lot of work to do to get us on the right path. Now get to work Humans!

Gavin Hayman is the Executive Director of the Open Contracting Partnership, a silo-busting collaboration across government, businesses, civil society, and technologists seeking to open up and transform public contracting, the world’s largest marketplace. Before that, he was Executive Director for Global Witness where he oversaw their ground-breaking and award-winning investigative, campaigning, and advocacy work uncovering secret deals, corruption, and conflict around the world.

Further Reading

Fiscal Futures: Financial Transparency in the Era of Financial War

This post is part of the Fiscal Futures blog series exploring some of the biggest issues that fiscal accountability enthusiasts are likely to encounter over the next 10 to 15 years. Learn more about the Fiscal Futures project and download resources here.

The widespread protests that rocked Iran in early 2018—catching both the government and political analysts by surprise—had an unlikely trigger. When Iranian president Hassan Rouhani unveiled his budget for the forthcoming Iranian year, he for the first time made public aspects of government expenditure that had long been kept hidden. Rouhani was hoping to boost his credentials as a reformer by exposing how significant state funding was being provided to religious and quasi-state institutions – many of which were controlled by his political rivals. But the gambit backfired, and the Rouhani government and the wider Iranian state came under criticism. Thousands of Iranians participated in loosely-organized protests around the country, with some mobilizations reportedly encouraged by Rouhani’s political rivals to express their anger that the state had long allowed such transfers while ordinary people saw their standard of living fall due to growing inflation and unemployment.

Though the protests eventually subsided, public anger at financial mismanagement and fiscal governance in Iran has been a consistent feature of domestic politics. Nationally representative polling demonstrates considerable concern about the lack of transparency in Iran’s economy among the public. Nearly 60 percent of Iranians believe that Iran’s “economy is currently run by a few big interests,” rather than for “all the people.” About the same proportion attribute “the greatest negative impact on Iran’s economy” to “domestic economic mismanagement and corruption,” rather than “foreign sanctions and pressures.” But the proportion of respondents who blame sanctions as the primary driver of the country’s economic downturn has been increasing, from 26 percent in May 2015 to 36 percent today. This shift in public sentiment is one example of how sanctions have complicated the domestic politics around financial reforms and fiscal transparency in Iran.

In May 2018, the Trump administration withdrew from the Joint Comprehensive Plan of Action (JCPOA), reimposing sanctions that had been lifted as part of the nuclear deal. The United States has subsequently pursued a “maximum pressure” campaign on Iran, seeking to starve the Iranian government of budgetary resources and to induce an economic crisis to stoke an internal political crisis. Iran’s trading partners have been caught in the sanctions crossfire. European leaders have lamented the impact of extraterritorial sanctions on European companies and banks, decrying a challenge to Europe’s economic sovereignty, while Iran’s oil buyers sought waivers from the Trump administration to allow them to continue buying Iranian crude. Iran’s economy has begun to contract as episodes of currency devaluation, inflation, and rising unemployment take root.

In the face of these intensifying internal and external pressures, the Rouhani administration has nonetheless continued to push for greater financial reforms, most notably in the context of the action plan set forth for Iran by the Financial Action Task Force (FATF), a global body that establishes standards for anti-money laundering and combating financing of terrorism controls. Other initiatives, such as the adoption of International Financial Reporting Standards (IFRS) and an effort to cleave the Revolutionary Guard, part of the country’s armed forces, from its business activities, have also featured as part of these reform efforts. But the intense politicization of what are essentially technical and regulatory reforms, spurred by both domestic political dynamics and the broader fate of Iran’s nuclear deal with the world powers, have hobbled these efforts. As a former finance executive lamented to the Financial Times in January 2018, “Mr. Rouhani is unable to make the budget transparent. His first step to make hardliners more accountable was answered by the unrest.”

The present circumstances in Iran make it a cautionary tale for domestic and international stakeholders seeking to improve financial regulations, fiscal governance, and government accountability in developing economies. The specific ways in which a combination of domestic political rivalries and international sanctions have combined to stymie reform suggest that advocates of reform need to develop more robust interventions to ensure that both the incentives and means necessary for reform are preserved.

When the Rouhani administration launched its efforts to clean up the finances of the central government, state enterprises, and the private sector, the incentives were widely understood—if Iran was going to successfully attract much needed foreign investment, having been deprived during its decade under international sanctions, it would be necessary to raise transparency and governance practices to conform more closely with international standards. But the re-imposition of sanctions, and the characterization of those sanctions by the Trump administration as part of a “financial war,” have not only eliminated this incentive, but also allowed opponents of financial reforms to oppose new regulations and transparency measures on the basis that such measures compromise Iran’s national security. Nowhere has this been clearer than in the intersection of the FATF action plan requirements and issues of fiscal transparency.

Iranian foreign minister Javad Zarif, whose mandate to repair political and economic ties with the international community depends in large part on the FATF process, has complained of a campaign to stop the reforms, telling reporters, “those places that do launder thousands of billions are certainly financially capable of spending a few hundred billion on propaganda and psychological operations in the country.” These “psychological operations” were highly targeted. When Iranian parliamentarians were preparing to vote on a new law related to global standards for combating the financing of terrorism, supporters of the law received death threats.

In a sign of real political leadership, parliament passed the law. But the ultimate ratification of these laws depends on Iran’s non-elected government bodies, which serve as arenas for consternation and compromise among Iran’s political factions. Mohsen Rezaei, the secretary of one such body, the Expediency Council, has suggested that final ratification of the FATF laws will depend on Europe continuing to support trade and investment with Iran in a “constructive manner.” The Assembly of Experts, an influential body comprised of jurists, has described the Rouhani governments’ pursuit of FATF compliance as “response to the enemy’s demands” and “a strategic mistake,” a likely allusion to the impact of new transparency and CFT rules on Iran’s ability to provide funding to proxies such as Lebanon’s Hezbollah. Rouhani has countered these arguments by suggesting that failure to meet the FATF action plan would be a form of self-sanctioning, imploring “everyone, no matter their political party or faction, not to build walls around the government because this wouldn’t be to the benefit of the people.”

Cognizant of these internal battles, the FATF has repeatedly extended the deadline for Iran to complete its action plan, despite protests from the U.S. It is in the interest of the FATF, as a technical body, for Iran to remain engaged in the action plan process, even if reforms are slow to materialize. But a second challenge for external proponents of reform is that those Iranian stakeholders who—despite political headwinds—continue to labor towards greater transparency and accountability lack sufficient technical assistance.

In most emerging markets, technical assistance, whether delivered by consultants or non-governmental advisers, plays an important role in developing capacities within both governmental organizations and commercial enterprises. But in Iran, the United States’ primary and secondary sanctions have made it near impossible for consultants and advisers to operate in the country. On one hand, U.S. officials have continually warned businesses to conduct “extra due diligence to keep them from being caught in Iran’s deceptive web.” But U.S. sanctions mean that no entities with a “U.S. nexus” can conduct business with Iran unless generally or specifically licensed to do so by the U.S. Department of Treasury. Given the significant costs and operational challenges associated with establishing completely self-contained teams to pursue engagements in Iran, only a handful of consultancies and non-governmental organizations undertook projects there. The Iranian government therefore lacked much of the expertise and support that has been instrumental to financial and fiscal transparency efforts in so many other emerging markets worldwide.

The situation led some compliance professionals to wonder “If Iran cannot access the very tools that it needs in order to reform, is it being set up to fail?” Iranian bankers think the answer is yes. A board member of a major Iranian bank stated in an interview, “If the objective was to promote greater transparency… it would have been simple to pave the way by encouraging specialized international firms to advise and assist the Iranian government and financial institutions to develop and implement the necessary legislation, procedures, and programs.”

These sanctions-induced failures of reform, which arise from ruined incentives and restricted means, are unlikely to remain unique to Iran. Sanctions are typically targeted at countries that have weak regulatory environments, where either the state or political elites generate rents from activities such as money laundering, and divert those rents for the purpose of political patronage, sometimes including terrorist financing. In other words, sanctions target precisely those countries where interventions focused on financial reform and fiscal transparency are most in need. Aside from Iran, an expanding program of sanctions targeting Russia and Venezuela, as well as recurring calls to impose sanctions on Turkey, threaten further complications for supervision of the global financial system.

Many stakeholder groups in Iran, including political parties, business organizations such as the chamber of commerce, and civil society groups such as teachers unions, continue to push for greater fiscal transparency. Iran’s newspapers regularly feature sharp commentary about the state of the country’s economic mismanagement, and how nontransparent practices and poor regulation contribute to rentierism and graft. Encouraged by this broad campaign, Iranian reformist parliamentarian Mohammad Sadeghi recently stated, “Transperancy has become a discourse and ongoing demand.” However, alluding to political pressures introduced in part by sanctions and the securitization of the national budget, Sadeghi also noted that “the complexity of the transparency issue has created obstacles in some sectors.”

Unless stakeholders committed to fiscal transparency develop strategies to account for the increased use of sanctions, global reform efforts could be seriously compromised. It may be necessary for stewards of global financial integrity to take a more assertive stance on the responsible use of economic sanctions lest years of progress in improving global regulations and supervision be undone in an environment of financial warfare where global financial integration is tantamount to entering a blast radius, and where domestic reforms, such as increased budget transparency, become akin to exposing the location of a piece of critical infrastructure and leaving it vulnerable to attack.

Esfandyar Batmanghelidj is founder and publisher of Bourse & Bazaar, a project dedicated to the free exchange of information and ideas related to commercial opportunities in Iran. Follow him on Twitter @yarbatman.

Further Reading

Fiscal Futures: Media’s Role in Reporting Fiscal Topics is a Matter of Relevance

Fiscal Futures: Media’s Role in Reporting Fiscal Topics is a Matter of Relevance

This post is part of the Fiscal Futures blog series exploring some of the biggest issues that fiscal accountability enthusiasts are likely to encounter over the next 10 to 15 years. Learn more about the Fiscal Futures project and download resources here.

Topics such as fiscal policy, accountability, and fiscal justice do not usually generate sweeping media coverage. Fiscal issues are among the kinds of stories that media producers would probably rather leave to economists and academics, or NGOs specialized in this field. Why? Because these topics are complicated, not easy to break down, and hard to visualize – in short, they’re not “sexy” stories. For these and other reasons, journalists and the media have largely stayed on the fringe of fiscal accountability research. Yet recent exposés such as the Panama Papers show that the media can still make powerful contributions to the greater fiscal transparency cause.  The question is whether, given current digitalization and ownership trends, the media can consistently rise to this challenge.

The “media” is a commercially driven industry and therefore has its own strengths, weakness, and idiosyncrasies. Let’s break down the “media” and look at journalism as the primary source of news. Journalism is still considered the intellectual backbone of today’s media industry, but like most other media products, journalistic products are considered content that has to sell, and therefore favors storytelling over — allegedly — dry facts.

Journalism usually only covers bits and pieces of fiscal issues and rarely covers the whole picture. Stories about corruption and other sorts of white-collar crime touch on one aspect of fiscal accountability, because obviously there is a market for that line of reporting. Beyond that, the business journalism niche covers complex topics like public budgets, tax, corporate finances, central banks, and the markets. However, this type of journalism is tailored to decision makers and professionals who work in these fields and understand the context and jargon. While business journalism covers fiscal decision making and public budgets, for example, these stories go mostly unnoticed by the larger audience.

There’s hardly anything in between those two approaches. Public budgets, public spending, or tax policies often seem to be a blind spot for mainstream reporting. Politicians often are not interested in advertising where public money goes, or how it is redistributed within the fiscal system, and journalists are often not chasing down that information.

Maybe too many media outlets have come to think that there is no merit in emphasizing that kind of coverage – because, supposedly, there is no larger market for it. As a New York Times columnist put it in a column called “Fiscal Ecstasy:” “Budget deliberations in Congress aren’t the most exciting topic in the universe.”

Media headlines from the LuxLeaks investigation. Source: International Consortium of Investigative Journalists

Even though the work of investigative journalists conducting large cross-border investigations such as Luxleaks, the Panama Papers, or the Paradise Papers has led to increased attention on the kinds of stories that touch on fiscal accountability, journalists reporting on them inevitably face a certain dilemma. Audience is often measured digitally, and losing audience, no matter how important the story, can mean instant loss of revenue. Journalists increasingly have to ask themselves: how much detail can the audience be expected to digest? How much fiscal literacy is required to understand the topic? For example, can complex tax matters be broken down without losing the story’s meaning? In struggling with those questions, media has — more often than not — remained on the fringes of fiscal accountability rather than emphasizing it.

Journalists might just be missing opportunities, but it’s not as if there haven’t been any wake-up calls. The most recent came in January 2019 but might as well have gone unheard. A Dutch academic, Rutger Bregman, spoke at the World Economic Forum in Davos, Switzerland, and made headlines by telling a room full of billionaires: “Want to fix the global economy? Then dig deeper. Pay up. Tax the rich.” One does not need to agree with his opinions, but he touched on an important fiscal issue that is a core problem in many countries that were represented in Davos: the so-called “top one percent” of the income pyramid do not pay taxes according to their wealth.

His passionate appeal went viral and drew lots of responses from a larger audience. Why? He made it personal. He challenged people face to face, pointing to a major lack in accountability, transparency, and fiscal justice. He gave injustice a face that, at the same time, made for good storytelling.

The lesson for future media reporting about fiscal accountability: make it personal! It’s important to note that journalists can do this without becoming campaigners or sacrificing their independence and credibility. Fiscal accountability is an abstract notion that is hard to associate with real tangible impact. However, a lack of fiscal accountability translates into a whole chain of tangible consequences: fiscal mismanagement, austerity, corruption, and poverty, just to name a few. And poverty, for example, does have a face. Millions of faces, to be exact, and behind those faces are millions of stories – personal and emotional ones that have winners and losers, fighters, heroes, and victims.

The stories needed to portray the big picture of the inner-workings of fiscal systems and their impact (“fiscal ecstasy”) that deliver exciting and in-depth insight are out there.  They may have been dwarfed by other concerns, but that doesn’t mean they’re not there.

There’s another lesson we can take from Rutger Bregman’s viral success: don’t be afraid to chase down the root cause. In an age in which stories need to become short in order to attract the even shorter attention span of the audience, there is often too little time or space to mention and track down the causes of the problems being reported. That, too, has become a blind spot in many reporting formats. Finding and defining causes for fiscal opaqueness or lack of accountability may require a lot of effort to track down money or chase paper trails, and, eventually, people. This task might involve building new knowledge and making more use of sources and experts who deal with fiscal matters in various fields. But more than anything else, it might mean departing from the traditional agenda and overcoming old habits and blind spots in order to emphasize background, explanatory reporting, and the bigger picture instead of “news only.”

While the latter might seem tantamount to renouncing basic journalistic instincts, the effort is worth it — and it might not only be a “nice to have” — it might be a “must.” In times of enhanced skepticism regarding media, fake news, and an ongoing struggle against declining relevance of quality media reporting, what could be more relevant than shedding light on the public budgets that impact peoples’ lives, peoples’ tax bills, the public goods (roads, schools, hospitals) people use, as well as illicit financial flows which deprive citizens of the very same. While journalists face more and more challenges of press freedom in many countries and regions, it’s vital to remain relevant to their audiences and supporters.

The good news is it can be done, and has been done increasingly in recent years, particularly in cross- border investigations in which journalists are joining forces rather than competing with each other. With the backlash against democracy and anti-press sentiment growing, the need for investigations around issues like corruption and accountability continues to rise. Cross-border investigations have shown that if journalists join forces they can create momentum – even for complex matters and stories. The Panama Papers and Paradise Papers shifted public opinion on tricky issues like tax avoidance, corruption, and illicit financial flows. In the wake of the Panama Papers, heads of state had to resign, millions of unpaid taxes were recovered by states around the world, and tax offenders in many countries turned themselves in. Tax evasion is not considered a trivial offense anymore and tax havens — particularly in Europe — have suffered severe damages to their reputations when it became clear that they were instrumental in the industrial scale of abusive tax conduct.

However, there are substantial challenges ahead for the media. Revenues from advertising, a classic pillar of the business, are declining steadily and irrevocably in many countries around the world. Digitalization will continue to be disruptive and continue to change the face of journalism as well as distribution. Further concentration of media ownership will inevitably follow, which might curb journalists’ ability to serve the public interest and tackle issues such as fiscal accountability. Media integrity is at risk when media becomes more and more commercially driven, or when outlets are primarily loyal to sponsors, or even governments. Like any other industry, media needs healthy, market-based competition – which is eroding and will continue to do so.

Where does this leave us? If journalism is still “printing what someone else does not want printed” and “everything else is public relations,” as George Orwell is often quoted, tackling stories that grow out of fiscal injustice could well be a promising strategy and a way forward. Many recent leak-based financial investigations such as Swissleaks, Luxleaks, the Panama Papers, and the Paradise Papers drew fierce criticism – not from consumers of media, but from those who have been held accountable in the wake of ground-breaking revelations that came to light because of the media.

Petra Blum is an independent journalist working for WDR, a public broadcaster in Cologne, Germany. In 2015, she was part of the Swiss Leaks investigation, studying secret bank accounts and focusing on tax fraud. During the Panama Papers, Petra was part of the team which unearthed the hidden money of people closely associated with Russia’s head of state. During Paradise Papers, Petra helped unravel corruption cases in resource-rich countries like the Democratic Republic of the Congo.

Further Reading

Fiscal Futures: Overcoming Hurdles to Citizen Activism for Fiscal Governance

Fiscal Futures: Overcoming Hurdles to Citizen Activism for Fiscal Governance

This post is part of the Fiscal Futures blog series exploring some of the biggest issues that fiscal accountability enthusiasts are likely to encounter over the next 10 to 15 years. Learn more about the Fiscal Futures project and download resources here.

Policy and programs seeking to advance transparency and accountability in public budgets have tended to focus on the state apparatus. Whether it be new laws that require greater openness or punish malfeasance or entirely new commissions and regulatory agencies to strengthen checks and balances, many initiatives focus internally on the state – the civil service, the courts, the legislature, or the executive.

These efforts are critical for enhancing accountable fiscal governance, but they are insufficient for producing lasting change or surmounting some of the tallest reform hurdles. Oftentimes they are simply subverted or coopted by persons in power. As a result, they have limited ability to reduce corruption, which in turn means they cannot stem the continued loss of government funds necessary for public investments nor the political destabilization and potentially violent conflict-inducing effects of an increasingly aggrieved and frustrated citizenry.

Reform, however, is not always the result of technocratic tinkering and innovation but can be driven by popular, broad-based citizen action. Whether it be labor or environmental policies or various human and civil rights issues, social movements deploying various nonviolent tactics have consistently demonstrated the ability to achieve genuine – sometimes transformative – shifts in policy and government performance. The underlying dynamic involves grassroots organizing to amplify citizen voices and wield power.

Credit: Social Justice Coalition

Can such bottom-up citizen initiatives be fostered to advance fiscal governance? Based on a series of interviews and focus group engagements with transparency and accountability reform advocates in Kenya, Nigeria, and Ukraine conducted as part of a United States Institute of Peace (USIP) project funded by the U.S. Agency for International Development, activists recounted two major challenges in mobilizing grassroots citizens for fiscal governance, and some lessons from our own initial research approach revealed a third challenge.

Challenge 1: Fiscal governance issues are technical and not immediately accessible for average citizens

The topic itself is arcane and technical, and therefore not immediately accessible for average citizens. As one activist in Kenya noted, there already is quite a bit of information on budgeting and spending available in Kenya, but “the question is how do you channel these things in an understandable ways that then create the [popular] action that is required” to pressure for more reform. In Ukraine, an anti-corruption advocate lamented that a new technological initiative to increase access to budgetary details of one oblast administration “gave citizens a tool to control budget funds but the other problem is that people don’t really understand it.” Another Ukrainian activist echoed the same sentiment, saying that the “end user [i.e., citizen] doesn’t really understand new anti-corruption terms and we have to explain in detail.”

Surveys of individuals’ experiences with bribery and corruption in Europe and Central Asia reinforce this notion of a substantial learning curve to actively mobilizing citizens in efforts to improve transparency or accountability. In most countries, difficulty in reporting incidents due to a lack of knowledge of how, where, or the associated costs to do so were consistently cited as the top reasons individuals did not report bribery or corruption, more so than fear of retaliation or a sense that there would be no consequences for the perpetrator.

Challenge 2: Maintaining mobilization after bursts of activism

Activists in Nigeria, Kenya, and Ukraine also cited sustainability as a challenge. Fiscal transparency and accountability are ongoing struggles, and maintaining mobilization after bursts of activism is difficult. A scandal might briefly grab headlines and galvanize popular support around the investigation of a specific individual, but it is hard to prolong citizen participation in the budgetary process or to monitor outputs and projects. Likewise, disillusionment can set in after grand victories that do not immediately result in perceptible accountability gains, such as the 2010 constitutional referendum in Kenya or recent electoral transitions in Nigeria. In Ukraine, many citizens were encouraged by the slew of dramatic, positive reforms that emerged following the Revolution of Dignity in 2013-2014, but, one activist noted, by 2018 “people began to lose confidence in reforms and that these reforms are being implemented effectively…there are doubts regarding how it is all going and whether it’s the right way or not.”

Challenge 3: Transparency and accountability activists rely heavily on support from external actors

Many of the activists and organizations we encountered were heavily reliant on financial assistance from external actors. Our research sought to understand the effects of this support on the impact and effectiveness of transparency and accountability campaigners. To do so we endeavored to interview and engage domestically funded organizations and activists and compare their experiences and approach to foreign funded groups. It proved difficult. Attempts at snowballing from foreign funded groups as well as outreach to in-country representatives of external actors produced few candidates. We did try reaching out to labor organizers and activists within religious organizations, given that these often have reliable domestic resources, but they typically did not work directly on transparency and accountability issues. Some independent or newer activists were referred to us, but they also did not always work on these issues, and some actually did obtain grants or foreign support over the course of our research.

Although our research has not yet concluded, a few factors seem to be at play. In some countries, there may just be limited activism around transparency and accountability that isn’t reliant to some extent on foreign funding, or such activism may be of such a different nature that it would be difficult to compare to externally financed organizations and groups even if we were able to identify and research it. Alternatively, initial groups and key informants we contacted may be so detached from domestically resourced movement actors that snowballing was not a viable technique for reaching them. For instance, there have been notable citizen- led and -funded efforts in other countries, such as the Mazdoor Kisan Shakti Sangathan’s experience in India, discussed by Nikhil Dey in a previous Fiscal Futures post.

How can activists overcome these challenges and mobilize citizens?

First, take cues from the grassroots. As was the case with the Indian Right to Information movement profiled in the aforementioned blog post, the entry point is not rallying the public around abstract fiscal transparency issues and technocratic measures, but linking these directly to immediate problems. “We would like to have proper toilets, fit to be used by humans, disabled people and children,” declared Bukela Gincana, a social audit volunteer in South Africa. Insufficient, substandard sanitation afflicts marginalized communities and can lead to gender-based and communal violence. Up to 50 people share one toilet, many with no locks, and women have been raped at night, reported residents in informal settlements in Cape Town. From 2015-2016, the Social Audit Network (SAN), Social Justice Coalition (SJC), the International Budget Partnership South Africa, and citizens engaged in two social audits focusing on sanitation service outsourcing. SJC, a “membership-based social movement” also launched a campaign to include the poor in budget decisions. Nonviolent tactics ranged from research, community organizing, education/training, engagement with locals/sanitation workers/officials, and advocacy, to physical inspections, protests, stunts, and citizen-state public forums. Finally, residents flooded the municipality with 3,000 formal submissions concerning the draft Cape Town budget, a creative mass action combining institutional and extra-institutional pressure. In 2017, SAN, IBP South Africa, and Planact conducted sanitation social audits in Wattville, near Johannesburg. Working with residents, elected officials, administrators, and civil society organizations, these efforts led to faulty portable toilets being replaced, improved relationships between government and residents, and a commitment to a collaborative approach to social accountability.

A more recent example comes from Ciudad del Este, Paraguay. ReAcción, a youth-led hybrid civil society organization, has been mobilizing students for several years to map and monitor disbursements for public school infrastructure from FONACIDE (National Public Investment and Development Fund) in order to impact corruption and channel funds to marginalized schools prioritized by the Ministry of Education. After David Riveros García, reAcción’s founder, encountered difficulties building anti-corruption awareness amongst high school students, in 2013 he and friends latched on to public discontent over FONACIDE’s weak transparency and monitoring mechanisms and ensuing scandals.

Second, it may not be love at first sight. Even when their grievances and problems are central to the civic initiative, citizens won’t be clamoring to jump on the fiscal transparency bandwagon. Apathy, low self-confidence, and sometimes fear can be common obstacles. Nonviolent action initiatives cultivating collective responsibility, collective ownership, and collective identity help to overcome these challenges. ReAcción underscored to fellow students that they should be FONACIDE’s beneficiaries; corruption affected them and their schools; and they could make an impact. High-schoolers had a role in planning and decision-making, and through peers learned useful skills not only for monitoring but also for their own development, including dialoguing with elites, data visualization, and computer programming.

Third, spice it up. To get citizens involved in fiscal transparency, civic initiatives have added contextually-relevant culture, humor, fellowship, and social recognition into communications, skills,  leadership-building, engagement, and nonviolent tactics. In Wattville, community volunteers canvassed fellow residents. They wore easily recognizable in T-shirts with slogans such as, “Sanitation is dignity” and “Sifuna Ukwazi Iqiniso (We Want to Know the Truth).

Fourth, invest in education. IBP not only helped to gain documents from Cape Town’s municipality, it carried out local trainings in public finance, budget analysis, and procurement. The fiscal governance field can also support capacity building in effective grassroots engagement. At present, there seems to be an over-emphasis on “sustaining mobilization” and an under-investment in community-organizing, movement building, and leadership.

Fifth, develop incremental goals with tangible outcomes. According to scholar-practitioner Marshall Ganz, “without clear outcomes, neither leaders nor participants have any way to evaluate success or failure, to learn, or to experience the feedback essential to motivation.” How does this play out for fiscal transparency? Over two years, the Wattville social audits yielded new toilets, improved employment conditions for janitors, citizen input into the subsequent tender document, and more generally, improved citizen-state communication. Moreover, in 2018, SAN, IBP, Planact, and the Wattville and Thembelihle communities joined forces to expand social audits to ten informal settlements. The objectives are not only to improve fiscal governance and direct sanitation service, but to change government systems. In Paraguay – through annual mapping and visualizations of the administrative process, cross-data research and visualizations, and monitoring of selected schools – reAcción’s volunteers contributed to increasing FONACIDE’s transparency from the Ministry of Education down to Ciudad del Este. Recently, reports Riveros García, the General Auditor’s report sent to President Abdo Benítez included the youth group’s 2018 Annual Report on the management of FONCIDE funds.

Fiscal governance poses unique challenges for activists. Annual budgets, government accounting, and procurement regulations are unlikely to turn average people to the streets. But dedicated efforts to punch through these more abstruse procedures and link them to citizen’s immediate well-being can help mobilize popular support for fiscal responsibility.

Shaazka Beyerle is a Senior Research Advisor at the U.S. Institute of Peace. Davin O’Regan is Senior Program Officer for Nonviolent Action at the U.S. Institute of Peace. They oversee several research initiatives that examine the impact of foreign donor support for activists and social movement organizations in Nigeria, Kenya, Ukraine, Guatemala, Zimbabwe, and Burma.

Further Reading

Fiscal Futures: When the People Demand Transparency for Accountability

Fiscal Futures: When the People Demand Transparency for Accountability

This post is part of the Fiscal Futures blog series exploring some of the biggest issues that fiscal accountability enthusiasts are likely to encounter over the next 10 to 15 years. Learn more about the Fiscal Futures project and download resources here.

There has been growing skepticism about the impact of transparency initiatives on fiscal accountability issues. India provides an outstanding example of how social movements have creatively and effectively used the People’s Right to Information (RTI) to enforce a form of fiscal accountability that demonstrably connects allocations, expenditure, and policy with people and their priorities. How did this transformative process get initiated, and what lessons does it have for the future, and for its use in other parts of the globe?

In 1996, after a series of public hearings exposed systemic corruption across Rajasthan, the MKSS announced a strike in the city of Beawar and began a historic 40 day protest to demand the Right to Information. Image via Twitter / @mkssindia

Thirty years ago, a peasant and workers organization in Rajasthan, India — the Mazdoor Kisan Shakti Sangathan (MKSS) (Association for the Empowerment of Labourers and Farmers) — began their grassroots struggles with some very mainstream demands that are commonly made by the poor across the world: land and minimum wages. These were both issues of access to, and distribution of, resources. It was in the course of their struggles that the people realized that it was impossible to show the where, the how, and by whom they were being denied their most basic rights without access to records – more specifically, accounts of expenditure incurred in their name. Thus rang out the first, and soon to become, defining slogan of India’s energetic and robust right to information movement: “hamara paisa, hamara hisaab” (our money, our accounts). In many ways this concept defines fiscal accountability succinctly, powerfully, and from the point of view of a social movement in an entirely relevant way.

Another popular slogan from the movement, “the right to know, the right to live!,”  points to the strong connections between transparency and the battles for survival of marginalized communities. What began as a demand for details of local expenditure soon grew into a widespread demand for a share of state and national resources. Campaigns emerged that not only demanded details of expenditure on public works, but put forth a cogently argued demand for the right to work and employment. In a situation of competing fiscal priorities, social movements realized that they had to be armed with information that could establish their entitlement, and also ensure delivery. Information was empowering individuals and communities to demand justice and their share of resources, and social movements, who had once seen these issues as elite and esoteric debates, now began to see them as essential weapons in their battles for justice. It was not transparency for itself, but transparency for accountability. It was not only to look at, and publicly audit expenditure, but also to demand an equitable share of resources for education, health, food, employment, social security, and even to redefine ‘development’.

The demands for transparency and accountability from grassroots movements led by the MKSS and others in India resulted in the passage of landmark legislation in 2005: the Right to Information Act. This law has changed the governance landscape in India, where millions of people use the law to request information from government on a variety of issues that impact their lives. Many of the same progressive forces that championed the enactment of an information law also successfully advocated for the passage of the National Rural Employment Guarantee Act in 2005 that entitles every rural family in India to 100 days of employment from the government. This multi-billion dollar program currently supports tens of millions of low-income Indians each year. The program is also designed in a way that allows beneficiaries to audit the use of the monies allocated to it. These rights-based laws have now spread to other sectors such as education, food security, and pensions for the elderly –  and provide a model for how a rights-based framework can be adopted across sectors in a country.

Transparency when demanded and extracted by people is not easy to take back, even when the people face an autocratic political regime hostile to the idea of “development and democratic rights.” Once transparency becomes an integral part of the democratic lexicon, the demand for fiscal transparency and accountability presents an opportunity to strengthen other democratic battles – of speech and expression, equal access and inclusion, and participatory decision making.

Are there similar stories of the spread of such processes from other parts of the world, or can such success even be repeated?

While every story is unique, and Indian socio-political conditions have certainly been a contributing factor, it is the universality of the appeal for transparency and accountability that makes clear the potential for these issues to exist everywhere. The nature of their use and applicability might be modified in different places and countries, but following certain basic principles would result in empowering people to be able to make use of the democratic paradigms of transparency and accountability – even under hostile conditions.

For instance, social audits in Kenya, Mexico, Indonesia, Bhutan, Afghanistan, and South Africa have produced the same degree of excitement and involvement as has been seen in the Indian states where social audits were born and took root. This is because communities are allowed to frame their own questions. They are involved in the effort to access, analyze, and present the documents. And  they are a part of the exercise as users and potential beneficiaries of the programs and their funds. Social audits have also had an affect far beyond their immediate and specific context.

Social audits are only a manifestation of principles that can be applied in very different ways. If people are allowed to frame their questions, and platforms can be created where they can demand answers, they will fight to support such a process from end to end, including the demand for access to information, as well as the demand for fiscal accountability that will likely arise from such access.

More importantly, there needs to be an understanding of the political nature of this set of demands. This is not something that can be donor-driven or controlled. Even worse is when a donor or set of donors waits to apply a “results framework” of some kind before providing support, or pulling the plug. It would be better to not support the effort at all than be the one to decide that the results are not commensurate with the support.

Speaking from our own experience in India, we only achieved what we did because there was no donor to ask us how much we achieved at each step along the way. It was the people who shaped and defined the questions, and who put in time, money, and courage to struggle against the resistance to transparency and fiscal accountability that exists everywhere. In fact, if there isn’t resistance, it means the vested interests are still secure and unconcerned.

These are also not campaigns that can be shaped by technocrats. There is a great need for technical support – but primarily to assist in demystifying and making comprehensible the financial transactions that have been deliberately placed in a technocratic framework of elite debate. This needs to be done with humility and solidarity from the “experts,” so that they see themselves as supporters in a cause defined by those most affected. This will allow the ordinary citizen to decide the nature and extent of the steps to be taken.

In some countries and situations citizens will use the platform of local self government, and in other places it might be part of a nationwide anti-corruption or anti-inflation movement. Questions related to fiscal accountability must, and do, permeate all such debates, but it is only when they are defined and shaped by the poor and marginalized that they will truly live up to their potential of  becoming a part of the struggle for justice, development, and democracy.

Nikhil Dey is a social and political activist and a founding member of the Mazdoor Kisan Shakti Sangathan.

Further Reading