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By Philip Levy : BIO| 04 May 2020
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Amidst all the salacious material emerging from the debate over whether World Bank President Paul Wolfowitz should stay or go, there is one curious and nagging point. Most of the coverage describes how Wolfowitz and his confidants have engaged in a lonely battle to attack corruption in developing countries. Pitted against him have been regular Bank staff and the Bank's Board. That raises the question: who are these staunch defenders of corruption and why are they opposed to goodness and truth?

There is a school of thought that corruption is good. The argument goes that in an economy stifled by regulation and bureaucracy, corruption may be a way to get things done. It would be a distinctly second-best approach (behind removing the stifling regulation) but may be better than nothing. The empirical evidence of studies that have addressed this, though, did not find that corruption had helped much. By making the regulation more lucrative for the bureaucrats in charge, the possibility of bribes increased the amount of red tape, rather than clearing away obstacles.

The most common uncharitable explanation of Bank staff opposition to the leadership's anti-corruption push is that the staff just want to push money out the door. This would not be so much an embrace of corruption as a willingness to look the other way. It sounds like callous indifference to a significant concern.

But it begs the question of whether corruption is an important problem, or whether it is the important problem.

There is a philosophical divide among development professionals about the relative importance of governance and where good governance comes from. The United States, particularly through programs like the Millennium Challenge Account, has argued for progress on corruption as a prerequisite to receiving large contributions. European counterparts have responded that corruption is important, but is a symptom of underdevelopment. The Europeans argue that assistance can play a role in addressing problems of poor governance (for example, by educating the populace).

So one argument against the primacy of corruption concerns could be that some countries are too important to abandon just because of corruption. In fact, this seems to have been the rationale behind the Bank leadership's support for assistance to Iraq, Pakistan, and Afghanistan. Transparency International in 2006 ranked Pakistan as 142nd out of 163 countries in corruption, while Iraq was 160th and Afghanistan dropped out of the index. These countries, though, have significant strategic importance along with major development needs.

The inconsistent application of an anti-corruption campaign is problematic. Before President Wolfowitz' arrival, the Bank already had programs to address corruption. The question under his leadership has been whether corruption trumped all other considerations. If it clearly does not in some instances, this threatens to make the withdrawal of assistance in other cases look capricious.

Even if there is a consistent commitment to attack corruption, the misdeeds can be difficult to observe. Corrupt officials usually try to operate discreetly. Uncovering or preventing corruption requires effort and red tape. For example, how many officials need to sign off before money is disbursed? If it's just one, it will be harder to prevent impropriety. If the answer is many, it may be hard to get anything done. There is an inescapable tradeoff between the risk of funding corrupt activity and the goal of providing meaningful assistance. Even relatively clean countries -- and developed countries -- have incidents of corruption. If assistance is to be provided, there will be a risk that corrupt activity results. Assistance is not unique in this regard; one could say the same of defense spending. There can be honest disagreements over how to strike the balance between these risks and the benefits of the assistance. This is not a question of whether corruption is good or bad, but how cumbersome anti-corruption efforts will be.

It is also worth noting that there are two kinds of corruption entangled in this debate: corruption in recipient countries and corruption in the delivery of assistance. The introduction of new measures at the Bank in response to the latter concern has led Bank staff begin to feel as though they've all been tarred. Beyond perceived injustice, unwieldy procedures can do more harm than good.

Finally, there is the practical question of whether the Bank leadership is striking out at actual corruption or observed corruption. If a recipient country has an active press full of corruption allegations, it can find itself the target of Bank corruption concerns. A neighbor with a stifled press may escape scrutiny. If the campaign against corruption is not pursued with great care, the result can be to reward countries for suppressing free speech.

The conflict at the Bank may not be the Manichaean struggle of a flawed hero against the forces of evil that has been portrayed in the press. If both sides share the objective of promoting development as effectively as possible, the explanation for the current remarkable levels of internal strife must lie somewhere else. Perhaps the members of the Bank staff association actually mean what they say.

The author is resident fellow, American Enterprise Institute.


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