Corruption Loves Company
NEAL CONAN, host:
This is Talk of the Nation. I'm Neal Conan. We're broadcasting today from the Knight Studio at the Newseum, Washington, D.C.'s newest museum devoted to journalism and the news business.
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CONAN: There's no shortage of corruption in the world today. In government, in business, here in the United States and abroad, there are stories in the news every week about bribery, extortion, favoritism, nepotism, embezzlement, and fraud. In Boston, there's a scandal about Albert Arroyo, a fire inspector in the Boston Fire Department. Drake Bennett, who writes for the Boston Globe, summarized it simply. Arroyo claimed to have fallen downstairs and suffered a back injury that left him permanently disabled, unable to work, eligible for a full, tax-free disability pension. Six weeks later, he finished eighth in a professional bodybuilding competition.
It's part of a bigger story, Bennett points out. In recent years, Boston's fire department has had twice the disability retirement rate as those in comparable cities, and between 2001 and 2006, 102 Boston firefighters were granted inflated disability pensions because they reported suffering career-ending injuries while filling in for a superior, sometimes for a single day.
So, what causes corruption? Who or what is to blame? Leaders, institutions? Is it an economic problem, a social one? How do you get rid of it? And can you get rid of it? We want to hear from you, and here's an interesting question. Have you ever taken a bribe? Have you ever been tempted? Wink, wink, nudge, nudge, tell us your story. Our phone number's 800-989-8255. Email us, firstname.lastname@example.org. You can also comment on our blog at npr.org/blogofthenation.
Later in the hour, we'll talk with two journalists who have covered race in the context of the presidential campaign about whether their race matters. But first, cultures of corruption. Joining us now from the studios of member station WFCR in Amherst, Massachusetts, is Ray Fisman. He is a professor at Columbia University's business school and coauthor of the forthcoming book, "Economic Gangsters: Corruption, Violence, and the Poverty of Nations," which is due out this fall. And Ray Fisman, nice to have you on Talk of the Nation today.
Dr. RAYMOND FISMAN (Social Enterprise, Graduate School of Business, Columbia University; Coauthor, "Economic Gangsters: Corruption, Violence, and the Poverty of Nations"): It's great to be here.
CONAN: And I was interested to read that corruption is very hard to do alone, not impossible, but very difficult.
Dr. FISMAN: Well, we differentiate between two types of corruption. One, there's a front end and a back end. There's a reciprocal relationship where I pay a bribe and you pay me back, I guess, by doing me a favor as a public officeholder. So, you know, I pay a city councilman in order to obtain a permit for me. I pay a policeman in order to have him let off my - let off a speeding ticket. Alternatively, you can think of the lone bandit, if you like, someone who's just embezzling his way to corruption, just stealing from the coffers, so to speak.
CONAN: But the larger question seems to be that there needs to be a culture of corruption within an organization - say, the Boston Fire Department, the case we were just talking about - or within a larger societal group, or within a country.
Dr. FISMAN: Yeah. So, in that sense as well, it's not a lone act, in that, you know, the social sanction, like - the extent to which it's costly to me psychically to take a bribe or to give a bribe is going to depend a lot on what people around me are doing. So, if you think about, you know, a standard justification for doing things that we know, in our heart of hearts, aren't quite right, it's that everyone else is doing it. So, if everyone around you is giving and taking bribes, why not do it yourself?
CONAN: An interesting example, diplomats to the United Nations, how they deal with parking tickets from the New York City Police Department.
Dr. FISMAN: Yeah. So, this is a study that I did with my colleague, Edward Miguel, some years ago, at this point, where we looked at the situation for diplomats in New York City in the '90s, and actually for decades preceding that, was they could get as many parking tickets as they liked and they were protected from having to pay them through diplomatic immunity. So, what we looked at was the relationship between home-country corruption and the number of these unpaid tickets that various diplomats racked up. So, for example, the Nigerians racked up many, many, many per person, whereas the Scandinavians, I think, had a total of three in the course of, I don't know, half a dozen years, and those were all from one bad Finn.
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CONAN: He probably got sent back, persona non grata, PNG.
Dr. FISMAN: Yeah, we actually didn't find that he got sent back. But you know, three, you could tell all sorts of stories as to why that might happen. It's harder to tell stories unrelated to abuse of public office for racking up, you know, dozens a week.
CONAN: And as you look at this phenomenon, it becomes a societal norm. Again, going back to that question of getting out of the speeding ticket, if you're pulled over by a police officer in, well, to take your example, Nigeria, he's probably expecting a bribe. If you're pulled over by a police officer in Finland, he's probably not.
Dr. FISMAN: Yeah. So, if you at the date on bribe-paying and bribe-taking across countries, just based on surveys, what you find is that very often, business owners either report, for the most part, that they don't have to pay bribes, or they report, for the most part, that they do have to pay bribes. And if you think about this interaction between the policeman and the driver, it kind of makes sense, in that, you know, you have to have mutually consistent expectations about this transaction you're about to enter into. It's very costly to try to pay off a Massachusetts patrolman, given what the consequences will likely be. Similarly, the Massachusetts patrolman is taking a big gamble by trying to shake me down for a bribe.
Now, you transport yourself to Nigeria. I'm actually taking a big gamble by trying to not pay a bribe. The policeman is likely going to anger and annoy drivers by trying to get them to actually pay their tickets rather than getting off just with a cheaper bribe. So, it's all about mutual expectations. So, you can think about there's having two equilibria. There's the bribe-paying, bribe-taking equilibrium and then the one that's corruption-free.
CONAN: Let's see...
Dr. FISMAN: And the trick is, in thinking about culture, the culture of corruption, a lot of it is thinking about how we get from this so-called corrupt culture to the no-bribe culture.
CONAN: Let's see if we can get a caller on the line. And this is Bill, Bill with us from San Francisco.
BILL (Caller): Hello?
CONAN: Hi. You're on the air, Bill.
BILL: Yeah, I called in to confess, actually.
CONAN: You took a bribe?
BILL: Ah, pardon me?
CONAN: Did you take a bribe?
BILL: Well, what I did was I let a contract to someone I knew, knowing that I could get kickbacks during the course of the contract, which I did. And so, on probably a half-million-dollar contract, I got about 40 grand in hundred-dollar bills over the course of it, because I gave the contract to someone who I made clear to that I expected that.
CONAN: And they were happy to pay out the money?
BILL: Extremely happy.
CONAN: And is this...
BILL: And the job came out good, I didn't get caught, and the project made a lot of money for the developer I was working for. But you know, when I heard you introduce the show, I thought, I'm not sure how I feel about it.
CONAN: Well, richer.
BILL: Pardon me?
CONAN: Richer is one of the ways you feel about it. You're 40,000 dollars to the good. I assume you didn't tell the IRS about that.
BILL: Not even.
(Soundbite of laughter)
CONAN: And as - is this something that is endemic in your industry? Is this something that commonly goes on?
BILL: Yes, it is.
CONAN: So, it...
BILL: Much more common than people would believe.
CONAN: So, it's not unusual. The contractor was not surprised that this arrangement was proposed.
BILL: Not even remotely surprised. In fact, before I left the contract, we had an agreement. We met for lunch, and you know, in so many words, if he'd been wearing a wire, I'd be in deep trouble.
(Soundbite of laughter)
BILL: So, we - it was perfectly clear before I let the contract to him how it was going to work.
CONAN: And have you done it again?
BILL: No, but - and I hate to say it - but I've never been in position to do it again.
CONAN: So, you might be tempted if the same situation cropped up.
BILL: Ah, absolutely.
CONAN: All right.
(Soundbite of laughter)
BILL: Now, I will say that I'm doing smaller contracting work now, and realtors get me a lot of work, and I send them on weekends to spas and such. And I think there's a quid pro quo, but there's never any discussion about it.
CONAN: Do you think anybody was hurt by the arrangement you made?
BILL: Well, I mean, short answer, sure. The investors got 40 grand less than they would've.
CONAN: So, there was a price to be paid there by somebody, not you, obviously.
BILL: Exactly. And yet, the project did extremely well. In fact, I got a bonus for having performed as well as I did after it was all over.
CONAN: A bonus to boot!
BILL: There wasn't an extreme pain, but there was 40 grand that disappeared from the ultimate dispersal of profits.
CONAN: Bill, thank you very much. That's a fascinating story. Appreciate it.
BILL: OK. By the way, I love your show.
CONAN: Well, thank you.
(Soundbite of laughter)
CONAN: Your check is in the mail.
(Soundbite of laughter)
BILL: Thank you.
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CONAN: Joining us now is Robert Klitgaard, president of the Claremont Graduate University in Claremont, California, the author of "Corrupt Cities: A Practical Guide to Cure and Prevention." He's helped dozens of governments in countries around the world curb corruption, and he joins us now from the studios of KSPC at Pomona College in Claremont, California. And Robert - Bob Klitgaard, nice to have you on the Talk of the Nation.
Dr. ROBERT KLITGAARD (President, Claremont Graduate University; Author, "Corrupt Cities: A Practical Guide to Cure and Prevention"): Hello, Neal.
CONAN: And I just wondered, if you listened to that caller - well, he's clearly an individual who works in a business that, he says, this happens all the time. Did that call surprise you in any way?
Dr. KLITGAARD: There are great temptations in situations where somebody has monopoly power over a good or service or a contract and has the discretion to decide how much or whether you get it or not, and there's very little accountability. And in this case, apparently, there was very little accountability, and so the caller, Bill, could get away with it. In the Boston case you cited, notice how the prevalence of good information enabled the newspaper, if not the accountability officers, to follow up and find these examples of corruption that existed.
CONAN: That was the fire inspector who retired on a disability to win a weight-building contest, or finished high in a weight-building contest a couple of weeks later...
Dr. KLITGAARD: Yes.
(Soundbite of laughter)
CONAN: And we laugh about it because, well, in a way, it's funny, but in a way, if this corruption is pervasive, well, all kinds of bad things can happen.
Dr. KLITGAARD: You know, once I was working with Aristide when he was president of Haiti for the first time, and he's a Catholic priest, and he asked me to help him think about the various economic challenges facing his country. And I told him there're some kinds of challenges that are like mortal sins. You're dead. Other kinds, it might be like going to Purgatory. You might get some time in Purgatory, but you get out. And other kinds, you might be able to confess on Sunday and basically be forgiven. So, some kinds of corruption are mortal sins, and some kinds are, although immoral, are not economically damaging.
CONAN: We're talking about corruption today, who does it, why, and about how to stop it. And we're asking you, have you ever given in to the temptation? Have you taken a bribe? Tell us your story, 800-989-8255. Email us, email@example.com. Stay with us. More after the break. I'm Neal Conan. It's the Talk of the Nation from NPR News.
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CONAN: This is Talk of the Nation. I'm Neal Conan. We're broadcasting today from the Knight Studio inside the Newseum in Washington D.C.
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CONAN: And Washington, of course, has seen its share of corruption over the decades. Some argue politics often breeds a culture of corruption, but no industry or organization is immune to someone bending the rules. Our focus today is on who is corrupt, and who's to blame, and maybe on some ways to stop it. If you have ever taken a bribe, if you've ever bent the rules, give us a call, 800-989-8255, or you can email us, firstname.lastname@example.org, and you can read what other listeners have to say at npr.org/blogofthenation.
Our guests are Ray Fisman, Lambert Professor of Social Enterprise at the Columbia University Graduate School of Business and coauthor of "Economic Gangsters: Corruption, Violence, and the Poverty of Nations." Also with us, Bob Klitgaard, president of Claremont Graduate University and an expert on corruption.
And I want to read an email we got from Daniel in Louisville, Kentucky. I'm not in any way justifying the actions of the firefighter, but when you mentioned the large number of people doing that, maybe faking an injury for benefit points to different - maybe faking an injury points to bigger or different problems, maybe lower job satisfaction, poor work conditions, even poor recruiting. It seems statistics like that would go in hand with faking injuries for monetary gain. I just wonder if your guests would be able to speak to that. And what do you think, Bob Klitgaard?
Dr. KLITGAARD: That is true. Generally, these kinds of systematic issues arise in poorly managed organizations with poor recruitment, poor incentives, and poor oversight.
CONAN: And Ray Fisman, doesn't it also depend on leadership of an organization?
Dr. FISMAN: Sure. I guess I would add also to the point on incentives that to the extent that people who are well-motivated by higher salaries, for example, good benefits, that's one of the most common prescriptions, that if you pay people more - this is speaking about neuroeconomic incentives - then they are better motivated to do a good job, they're afraid to lose this very good job. So, there are both the psychological incentives as well as the neuroeconomic ones.
CONAN: And we're going to go get a question from somebody here on the microphone at the Newseum.
Ms. CAITLIN HAMILTON (Audience Member): Hi, my name is Caitlin Hamilton (ph).
Ms. HAMILTON: I am living in D.C. I have a story. It's about a little unethical internship incident. When I first moved to D.C., I was working in a very small NGO, and my supervisor had organized an eBay auction of murals dedicated to high-profile people, Bill Gates, David Beckham. So, one of my projects was to try to contact Bill Gates directly and get his - you know, stir up some brouhaha for the auction. Didn't happen. We weren't getting any bids, so I was asked to bid. It was about 5,000 dollars that I bid on eBay.
CONAN: Oh, to prime the pump?
Ms. HAMILTON: Right, right, right, right. Long story short, I'm banned from eBay now.
(Soundbite of laughter)
Ms. HAMILTON: So, yeah...
CONAN: We have the FBI waiting at the door.
(Soundbite of laughter)
Ms. HAMILTON: I know. I really hope that my supervisor isn't listening.
(Soundbite of laughter)
CONAN: Did it work? Was the - you got caught by eBay?
Ms. HAMILTON: Yes, eBay found me out, but I, you know, I think it was kind of a no-harm-no-foul because there were no other bids after me anyway.
CONAN: So, that's how you got caught. They wanted the 5,000 dollars?
Ms. HAMILTON: Yeah, yeah.
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Ms. HAMILTON: That was it.
CONAN: Interns don't make a lot of money, do they?
Ms. HAMILTON: No, none at all.
CONAN: Ray Fisman, that seems to be a little bit more on the innocent side.
Dr. FISMAN: I suppose that depends on how important you think these cultural components are, because if you think it's part of a general culture of permissiveness, that's kind of the broken-window approach to dealing with the corruption problem, in that smaller - these smaller, petty crimes, if you like, can snowball into bigger problems. The other thing that I think is worth mentioning here is, to the extent that we want to be careful about what we're talking about when we talk about corruption, what your audience member just described certainly wouldn't fit the dictionary definition of corruption, which is the misuse of public office for private gain. She wasn't a government employee, a public officeholder, when she put in her sham bid on eBay.
CONAN: Now, let's see if we can get a caller, and this is Karinsky (ph) - I hope I have that right - in St. Louis.
KARINSKY (Caller): Yes, that's it.
CONAN: Go ahead, please.
KARINSKY: My background is I'm a military officer, and I've never accepted any type of bribes or used my position to be biased or deny opportunity or resources to anyone. However, I do acknowledge that there is a necessity for a certain level of corruption in order to minimize some of the bureaucratic protocols in order to make timely decisions and make timely actions.
CONAN: So, you see it as a lubricant of sorts?
KARINSKY: At times, it is definitely a requirement.
CONAN: Can you give us an example of what you mean?
KARINSKY: Example of what I would mean is, let's say for a second that you have funds that are available to you to disperse or allocate to another host or country, the (unintelligible). Say you're only stipulated to build a hospital or clinics. However, you identify that what the basic needs on the ground is a well, and water is a large facet of health and just general hygiene. What do you do? Do you write it up as a clinic? Or do you let your - you're the guy on the ground making a true ground-truth assessment. Do you say, I'm not going to do it, build that clinic?
CONAN: And what - have you been in that situation?
KARINSKY: No. However, if I am in that situation, then I think that the best call to make is on the ground. I mean, yes, there's sometimes you have to make your own assessment, sometimes loose or strict in order to circumvent the Ivory Tower, than from that your hire may have. Sometimes, maybe you don't have time to send up a (unintelligible) rep and explain to them, this is exactly what I see. It does not fit the bill for what you set down. There's no time for that dialogue. And you make things happen and you still meet the intent of hire.
CONAN: Bob Klitgaard, does that represent the definition of corruption in your book?
Dr. KLITGAARD: Yes, it could be called corruption, but that's of the kind that you confess it on Sunday to somebody and you're forgiven. The kind that's fatal is when the corruption infects the basic institutions of an economy, the justice system, the banking system, and the system of property rights. So, when judges - not just one or two random judges, but a lot of judges - are corrupt, it inhibits all sorts of economic activity, the making of contracts all over the economy. And this is the situation in many developing countries, so that even though there's corruption everywhere, it's the where it is and how severe it is that varies across countries and has a huge impact on economic and social health.
CONAN: Karinsky, thanks very much for the call.
KARINSKY: Hey, thank you much.
CONAN: Bye-bye. Here's an email we got from Eleanor in Topeka, Kansas. I'll tell you who was hurt by your caller who took the 40,000-dollar kickback and didn't report it to the IRS. I was, and so were all of the other taxpayers who honestly report all relevant facts on their returns every year.
And this email from Ronda. I have two different bribe anecdotes. My husband and I live in the Chicago area. When he was younger, he was not as good at avoiding the police while driving as he is now.
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CONAN: Not that he drives more slowly now. He's just learned to watch the area better. Nonetheless, it was common practice at that time for him to ask the officers if they could hold court right here. Back then, 25 dollars would buy them a good dinner, and it was done. And I wanted to ask you, Bob Klitgaard, when you advise governments, like the Haitian government, about how to change the culture of corruption, how do you do it?
Dr. KLITGAARD: Well, I try to show them examples. I think real examples of improvement - when, for example, a system of extortion in school grading is cleaned up, or a local tax system is improved, or a system of a hospital allocation of medicines is cleaned up, people can actually see real examples. And those examples always start with the insight that these are economic crimes with an institutional context. The general theory in most countries is, oh, it's a few bad guys, and if you just get rid of that bad guy, put another guy in, things will get better. And that has some limited truth, but I try to approach it from an institutional perspective and try to give them real examples to motivate them.
CONAN: And has it been successful?
Dr. KLITGAARD: Yes, I think there are many examples around the world that show the reduction of corruption with strong leadership and the involvement of people from outside the government who can report on those facts - for example, lawyers, accounting groups, and even citizens who know where corruption exists - if you give them a safe place to report it.
CONAN: Ray Fisman, in the example of political leadership, though, don't people have to be willing to take on, well, their own friends?
Dr. FISMAN: I think it's important to send a signal to the populous that you are quite serious about taking on the problem. And in that sense, it can be very motivating to take on - to pick off someone high up in government, but I think it's as much as signal of your seriousness about changing the culture. What's certainly clear is that none of this - it's just impossible to think about successful transformations without buy in from the very, very top of government.
CONAN: Without - and they are, by definition, in power and thereby in position to succumb to some of these temptations themselves.
Dr. FISMAN: Sure. I think one of the great disappointments I've had in anti-corruption efforts over the last decade or so was the Kenyan government which recent - which some years ago came to power on an anti-corruption platform. Now, their anti-corruption minister, John Githongo, who I think is a really inspirational guy, found that the senior members of this government, who, remember, had come to power on this anti-corruption platform, were just as corrupt as those that came before them. So, he ended up in exile and is kind of fighting his battle from abroad. But his was hopeless task without support from those above him.
CONAN: And interestingly, in the country next door, in Tanzania, there used to be considerably less corruption.
Dr. FISMAN: Yeah. So, this does allude to the importance of leadership, because, you know, it seems like these two countries started out relatively similarly, but they diverged at some point in the past, largely, it seems, because of the leadership, or lack thereof, of government some decades ago.
CONAN: Jomo Kenyatta in Kenya enriched himself and his friends. And Julius Nyerere in Tanzania was a, well, (unintelligible)...
Dr. FISMAN: A bit of an ascetic.
CONAN: Yeah, yeah.
Dr. FISMAN: Yeah.
CONAN: Interesting. Let's get a question from here in the audience at the Newseum.
Ms. KUJA OSA (Audience Member): Hi, my name is Kuja Osa (ph). I'm a second-year medical student from Chicago. And I'm in Washington, D.C., as a summer intern. My question is related to cheating in academics that I think is pretty prominent and I have personally witnessed in several classes that I took as an undergrad. So, is that - I mean, I know it doesn't fall in to the definition of corruption, because it's not being done by a public servant, but at the same time it's something that happens at the roots and, I think, at a very low level that leads people to be ethical or unethical with their definition of right and wrong.
CONAN: Bob Klitgaard, you're the president of Claremont Graduate University.
Dr. KLITGAARD: I think cheating is different from corruption most of the time. There can be cases of academic corruption. For example, in Mozambique, they had a system where teachers at schools would, if you failed your exam, would give you a chance to pay them - the teachers - to pass the exam. Then the teachers realize, you know, I can even try it on the people who pass the exam.
Dr. KLITGAARD: Ended up with a systematic corruption going on there for grades. But generally, when you cheat on an exam or cheat on - by copying your exam, no one's getting paid off. So, it really isn't an example of corruption, in most cases.
CONAN: Bob Klitgaard of Claremont Graduate University. Also with us, Ray Fisman, the Lambert Family Professor of Social Enterprise at Columbia University Graduate of School of Business and coauthor of the new book, "Economic Gangsters." You're listening to Talk of the Nation from NPR News. And let's see if we can get a caller on the line. Robin, Robin with us from Marin County in California.
ROBIN (Caller): Yes, thank you. I'm a longtime listener, and this is the first time I've called in. This issue pushes a hot button for me. As a healthcare provider for 40 years now, it's a natural part of practicing psychology to make a certain number of referrals. And oftentimes when I referred to other practitioners, I've received a little kickback card in the mail saying, here's a dinner for you, or here's a free treatment for you. And I always send the cards back, saying - wanting to help maintain the integrity of the referral - that I do make my referrals based on my respect for the practitioner and the need for their quality service provided.
CONAN: Yet, the receiving unsolicited benefits like that suggests that this is a widespread practice.
ROBIN: I believe it is.
ROBIN: I believe it is, and I think that it's, when that happens, it's an opportunity to remind one another why we are practicing and to maintain a high level of recognition for good service and the integrity of that.
CONAN: And Ray Fisman, again, this is on a minor level, but minor things, as you suggest - the broken-windows analogy to policing, fix the broken windows and the rest of it will take care of itself - this can snowball.
Dr. FISMAN: Yeah. I think the other thing that we do want to differentiate between, though, as Bob Klitgaard has already mentioned, is the things that cause a major social unraveling and those that don't. I think it's important to note that there are lots of countries, and this is kind of an uncomfortable truth, that there are many, many countries around the world that are widely acknowledged to be extremely corrupt. And yet, they've been - these are some of the great economic-growth miracles of the last few decades. Indonesia, where I've done most of my work, is a chief example among them. So, there is this ambiguity in that, to come back to the caller's question, I can't say that what she's describing is going to cause a great social unraveling. So, I do think we want to be careful about this absolutist's stance.
CONAN: Robin, thanks very much for the call.
ROBIN: Most welcome.
CONAN: Thank you. Here's an email from Patty. I've never taken a bribe, but as a teacher, I've given in to extortion. In May, an irate father who's a prominent lawyer threatened to get me fired if I didn't give his son an A. The boy deserved a C, and I thought I was being generous to give him a B. If I hadn't given in, the grade would have been changed anyway by the administration, and I might have lost my job. Our administration always changes grades when parents pressure them. What did the student learn from this? That extortion works. Was I corrupt? At least I still have my job. Anyway, let's see if - well, we're running out of time here, but I did want to give Bob Klitgaard an opportunity to tell us if you see this problem of corruption, are people working hard enough to eradicate it? Or is it growing in the places that you visit around the world?
Dr. KLITGAARD: That's a hard question to answer, Neal. I think that when people address it systematically, it can be reduced. On the other hand, I also see a number of countries where interlocutors, such as international aid agencies, are reluctant to step up to corruption at the top, and instead, try to do things in the middle or bottom of an organization. And people quickly pick up that the old impunity still reigns, and therefore, the programs are not effective. So, I think my message would be the people that corruption is a bad thing, in most cases, and yet, there are things we can do to reduce corruption. The principles are economic in a context of leadership and effective institutions.
CONAN: Thanks to you both for being with us today. Robert Klitgaard, president of Claremont Graduate University, joined us from KSPC radio in Pomona College. Ray Fisman of Columbia University's Graduate School of Business has a new book that's due out this fall called corruption - "Economic Gangsters: Corruption, Violence, and the Poverty of Nations," with us from member station WFCR in Amherst, Massachusetts. And when we come back, we'll be talking with two reporters about the challenges of covering an election that, so often, has been focusing on race and politics. Matt Bai and Michel Martin join us next. Stay with us. I'm Neal Conan. It's the Talk of the Nation from NPR News.
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