Corruption in the World Bank


Craig Murray says corruption in the World Bank is pervasive and massive, and that Wolfowitz genuinely tried to end some of it, but only in non-Western areas.

How convenient for Wolfie and pals to focus on such corruption. Sounds like the whole place is a den of thieves, doesn’t it?

Murray’s primary point is that those in the World Bank wanting Wolfowitz gone are doing so “from the worst of motives.”

Our capitalist system appears rotten to the core.

[tags]Wolfowitz, World Bank[/tags]

  • Rotten to the core? You don’t say!

  • I knew you’d be shocked…

  • DJ

    I have yet to see a system that isn’t rotten to the core. (And for those who tout Cuba, I’ve heard plenty of sordid tales of their underground economy as well.) News flash: people are greedy. It can be controlled, but it can’t be eliminated.

  • Sue

    Yes, I belong to the “people suck” school of thought, too. Bob keeps saying, ‘but that doesn’t mean you can’t work for change.”

  • DJ

    Actually I don’t think people suck. We are both good and bad, and any system that thinks we’re either one or the other is doomed to fail. We should indeed work for change. But without ignoring human nature.

  • Joe Hartley

    I’ve read the Murray post, and it’s hard to determine what he actually is saying. While he certianly implies active corruption, his post is so brief that his case remains, as our Scottish cousins would say, unrpvoen. An equally descriptive commentary could be to quesiton whether the World Bank has a bias toward intensive, capital-intensive projects that mimic what the intellectuals at the bank see as “progress.” One thing one hopes we learned from the sixties is that curing ills like poverty is not simply a matter of throwing money at a problem or giving direct subsidies to the poor if you want a long-term solution.

    To take the Nigerian project as an example, what did the World Bankers expect when they poured such large sums of money into what is still in many aspects a tribal culture? (Note: no disrespect is intended or should be implied by the use of “tribal;” Iraq and Afghanistan are also intensely tribal, and it’s an important datum if one is going to be operating in such societies.) The graft and corruption is virtually fore-ordained.

    I understand that the Gates Foundation has studied the problem of the local elites skimming off the cream from development projects and has developed procedures which it thinks will minimize them. I don’t know the details, and if anyone here does, it would make for interesting discussion. There’s also an NGO,, that addresses the problem of corruption throughout the world.

    From a development standpoint, managers should be appropriately tight-fisted. Any payoffs from corruption diminish the benefits of development that should flow to the target population. Most people I know who are involved in development projects, whether abroad or domestic, are fairly far to the left politically, but almost all of them could pass for midwestern Republican bankers when it comes to fiscal management of their projects, since they are devoted to reducing overhead and getting the maximum percentage of their budgets to the populations to be assisted.

    The Cochabamba water privatization wars make an interesting case study. Most people I’ve read who are knowledgeable about the facts understand why the World Bank was demanding privatization, as the water compnay before 1999 was hopeless incompetent and corrupt. One can understand why the theoreticians at the World Bank might have thought that going private would improve things. There are certainly cases where going private CAN introduce a more efficient and, ultimately, cheaper operation. The water company had several factors that the pointy-heads at the WB (if I may borrowed from the late and unlamented George Wallace) didn’t consider. The major problem should have been obvious even to the most naive neo-classical student of economics: the water company was a utility which had a monopoly. Even Adam Smith didn’t expect monopolists to act in the best interests of the public. (Indeed, he has a widely-quoted passage that suggested that rarely would businessmen meet without soon beginning to conspire to fix prices and otherwise act against the public interest.) So not only did you have a monopoly, but one effectively independent from any kind of check or control. For those of us who are dubious about the ability of the species to act for the public good without some kind of incentive, the results should have been obvious.

    The reason that the economic intellectuals didn’t anticipate this development, I think, is due to a number of factors, the greatest of which is that they seem to have no concept of how things in the so-called real world deviate from reality. Harold Demsetz, a very smart professor of economics at UCLA and one of the grand old men of the grand old men of Chicago (neoclassical) School of Economics, wrote a piece in 1972 that it was unnecessary to regulate utilities because if they performed inappropriately, somebody would buy them and make them run efficiently, the market would take care of everything, etc. When I was rude enough at seminar to ask him where this group could raise the capital to buy so intensely-captitalized a company, he wasn’t very happy. And, of course, in the developing world where most of the capital is either consumed by the elites or exported for safer climes in Miami and Switzerland, the thought of a local group getting together enough captila to buy a utility is next to impossible. The capital just ain’t there.

    None of this means that corruption is not a problem, or that it should be ignored, whether at the World Bank where the president gets lucrative and unmerited contracts for his mistress, or in a developing country where the president looks at development projects as his discretionary consumption fund for to support a lavish lifestyle. Simply because Wolfowitz is corrupt and incompetent in so many ways does not mean that the local corrupt elites should get a pass on transparency. To do so would be demeaning to developing countries, the equivalent of saying that they are too debased to behave honestly, a concept which I reject. And besides, if you permit such corruption, you rule out the possibility of ever working effectively for change.

    Since Bob usually accuses me of refusing to work for change, let me try to formulate my approach by piggybacking onto DJ’s last and very cogent comments. I think most proposals for change are laughably simplistic and are about as likely to succeed as most of the Bush initiatives, and largely for the same reasons: no adult has sat down and seriously thought through the possible consequences. I do believe that change is difficult to achieve, in large part because inertia exists in the social realm as well as in the physical. But I think projects to effect change need to be focused, thorough, and limited, since anything more diffuse is likely to result in failure. Even then, I don’t expect success to exceed 50%. I can live with that. After all, most of the moviemakers, with all their research and focus groups, will usually admit that they could have done just as well by rolling the dice. Why should we expect things to be easier on effectuating social change?

  • I think Murray maybe was deliberately being vague and terse to avoid possible lawsuits.

    At Cochabamba, the water rates went so high after privatization that the populace couldn’t afford it. Plus the water quality got worse. I’d have revolted too. Hard to see how the World Bank was just clueless that their policies could lead to this.

    Local elites who siphon off money from aid projects have to be aided and abetted by the global elites, who prosper also, something Murray was implying too, I think.

    Yes, his post was much more elliptical than usual. No doubt for good reason.

  • DJ

    Thanks, Joe, for your post. I work with an organization in Sri Lanka called Sarvodaya which, like all organizations, has faults. However, they (temporarily) revolutionized the development world when, in 1958, the founder took some students to a village of untouchables and asked the question, “What do you want?” It appears to be the first time in history that development began with the question of what the “target” population wanted. Since the neo-con surge of the 1990s, development has largely changed direction again.

    To do development this way, you must gain understanding of who the people are, how they live, and what is important to them. I’ve been to that village, 45 years later. It is still poor, but well above subsistence level. A neighboring village, which rejected Sarvodaya’s help, is unconscionably poor, living in tiny palm huts and surviving by begging.

    It’s difficult to do this on a national level. Big projects require big ideas and big budgets. And who would control them but the local elite? It was said that Sri Lanka’s Gamini Dissanayaka became one of the richest men in the world skimming from the multi-billion-dollar Mahaweli Dam project. (That didn’t stop him from being assassinated by the LTTE in 1994, but that’s another story entirely.)

    To do development well requires something many development people don’t like to do: getting your hands dirty, sleeping in mud huts on beds without mattresses– or on the floor– eating nothing but pumpkin curry because that’s what your hosts are eating. Getting out of the air-conditioned Pajero and staying a while. There are people willing to do that. But too often, they’re not the ones with the money.

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