Institutional Corruption and Countervailing Powers

by Donald W. Light

By its very nature, institutional corruption (IC) occurs in a force-field of countervailing powers. Corruption at the organizational or institutional levels inherently involves a larger constellation of stakeholders who participate in or are affected by the corruption being studied. Beyond them are other parties with other priorities who shape or are affected by different forms of corruption. These include public opinion and trust if its deterioration leads to organized responses. Doing research on how countervailing powers interact with the corruptors and shape either the forms of corruption or reforms for integrity to end it would strengthen IC studies.

Montesquieu1 first developed the idea of countervailing powers in his 1748 treatise about the abuses of absolute power by the state and the need for counterbalancing centers of power. In 1767, Sir James Steuart2 contributed ironic observations on how the monarch’s promotion of commerce to enhance its domain and wealth produced the countervailing power of the mercantile class that tempered the absolute power of the monarchy and produced a set of interdependent relationships. The Federalist Papers in 1787-1788 addressed the need to balance countervailing powers.

In modern times, “countervailing powers” was first conceptualized by John Kenneth Galbraith, who wrote “Power on one side of a market creates both the need for, and the prospect of reward to, the exercise of countervailing power from the other side.”3 This statement has four implications: that dominance by one party plays an important role; that dominance leads to imbalances, exploitations, or distortions; that a countervailing power may be latent in a given domain but organize into manifest forms in response; and that countervailing power is a dyadic relationship.

In contemporary economics, Galbraith’s concept has become rather narrowly construed to refer to the ability of large buyers to extract discounts from suppliers. In sociology, however, it has been substantially expanded to posit three or more latent or mobilized countervailing powers in a contested field or domain, whose boundaries and relations they shape over time.4 Each stakeholder also has its own rationale and basis of legitimacy.

This conceptual framework allows one to trace and diagram the historical changes among key stakeholders, take measure of their power, describe their alliances and contests for power, and document the effects on costs, products or services, scope, and culture. For example, in the early 20th century, American medical organizations came to dominate all other stakeholders through legal and economic rule-making which its members then exploited.5,6 This very dominance increasingly prompted stakeholders like employers, insurers, and taxpayers to develop increasingly powerful countervailing strategies to limit the legal and economic dominance of the profession. Now something similar is happening to the pharmaceutical industry.
The state as a countervailing power deserves special comment. The countervailing powers framework does not depend on any one view of the state. For example, after World War II, the East German state eliminated all professional associations as countervailing powers that corrupted its Communist mission. In West Germany, the democratic state allowed the organized medical profession to exploit universal health care to maximize its income and control until the 1980s, when the state and insurers as countervailing powers allied to harness professional practice to the needs of an affordable, universal health care system. In pharmaceuticals too, dominance has prompted countervailing responses.

A central tenet of countervailing power theory is that dominance by one party in ways that corrupt the mission of a social institution and societal function of other parties will over time prompt them to organize and alter the balance of power. This appears to be happening to the pharmaceutical industry, which has (1) abused patents by developing “innovative” drugs that are usually little better than existing ones, (2) compromised medical science and knowledge through conducting randomized clinical trials in biased ways and hiding negative results, (3) compromised the integrity of medical journals by ghost-managing “scientific” articles slanted in favor of the sponsor’s drug, (4) tainted medical education through commercial influences, (5) corrupted the fiduciary commitment of physicians to their patients with commercial inducements, and (6) threatened the ability of countries to afford universal health care by charging exorbitant prices.7

Over the past 15 years, stakeholders have organized to curtail forms of institutional corruption. For example, (1) India is beginning to lead the developing world in limiting product patents and excluding variations like the “breakthrough drug,” Gleevec, whose patent protection was denied. 2) Researchers have organized their voice against biased science and suppressed or distorted findings, leading to an ever more complete set of stipulations for transparency and registries. 3) Medical journal editors have taken several countervailing measures to protect the institutional integrity of their journals against institutionally corrupting practices. 4) Organized medical students have been pressing rule changes to de-commercialize medical education. Actual prescribing practices are changing,8 yet commercial influences and an informal culture persist.9 5) Medical and specialty associations have taken several measures to try to restore professionalism and public trust. 6) Most affluent nations and India increasingly assess the comparative effectiveness of new drugs and pay accordingly, thus countering the undermining effects of unaffordable prices on affordable, universal health care as a social institution. Through these countervailing responses, dominant financial, legal, and organizational practices that distort the goal of better health through universal access to beneficial services are being addressed with increasing force in ways that also contribute to defining what institutional integrity would mean.

One new countervailing power in institutional corruption is the organization of researchers and resources against it as an academic subject. Through the generous support of Mrs. Safra, the Edmond J. Safra Center for Ethics is developing a widening network of researchers across disciplines, a set of data tools, research methods, and substantive studies that together are inspiring other universities to follow its example of making institutional corruption an important subject of policy research.


1.    Montesquieu SCL. De l'Esprit des Loix. Geneva: Barillot & Sons; 1748.

2.    Steuart J. Inquiry into the Principles of Political Economy  Vol 1. London: Miller & Cadwell; 1767.

3.    Galbraith J. American Capitalism: The Concept of Countervailing Power. Boston: Houghton Mifflin; 1956.

4.    Light DW. The rhetorics and realities of community health care: limits of countervailing powers to meet the health care needs for the twenty-first century. Journal of Health Politics, Policy and Law 1997;22:105-45.

5.    Light DW. Ironies of Success: A New History of the Current Health Care 'System'. Journal of Health and Social Behavior 2004;45 (Extra Issue):1-24.

6.    Salter M. Lawful but corrupt: gaming and the problem of institutional corruption in the private sector. Boston: Harvard Business School 2009.

7.    Healy D. Pharmageddon. Berkeley: University of California Press; 2012.

8.    Epstein A, Busch S, Busch A, Asch D, Barry C. Does exposure to conflict of interest policies in psychiatry residency affect antidpressant prescribing? Medical Care 2013;51:199-203.

9.    Austad K, Avorn J, Franklin J, Kowal M, Campbell E, Kesselheim A. Changing interactions between physician traniees and the pharmaceutical industry: a national survey. Journal of General Internal Medicine 2013 (Feb).