Wolfowitz: Africa is Top Priority for the World Bank: Newshour with Jim Lehrer Interview – 31 March 2005 (Video, Audio & Transcript). Jim Lehrer speaks to Paul Wolfowitz about his confirmation as the next president of the World Bank.
“…And so let’s, especially those of us from so-called the rich countries, developed countries, let’s hold a mirror up to ourselves and remember every corrupt transaction has two parties. (Applause.) If I can coin a term there is a corruptee and there is a corruptor. (Laughter, applause.) And if the African people and their leaders are stepping up to the challenge of dealing with the corruptees, we, if I can speak as a citizen of a developed country – those of us in the developed world, in fact anywhere in the world, have responsibility to address corruptors as well. And to help African countries, as the Nigerian as (sic) seeking to do now, to recover some of the stolen wealth that is sitting in bank accounts where it doesn’t belong. (Applause.) …” Corruption Takes Two, Wolfowitz Tells Business Leaders. Text of remarks by World Bank President Paul Wolfowitz at the Corporate Council on Africa’s US-Africa Business Summit Dinner, Baltimore, Maryland, USA. June 23, 2005.
“I think there is a real chance now that the poorest countries in Africa can turn the corner, that Africa can become a continent of hope…The responsibility to deal with corruption is not just something for African governments and African people…The developed countries have a huge responsibility as well. They have a responsibility I think to help the poor countries in Africa recover some of the assets that have been taken from them and deposited in banks in developed countries.” Wolfowitz said there must be a recognition that “every corrupt transaction has two parties to it.” “We all have a responsibility to try to crack down on both ends of these transactions.” Tackle African corruption, says World Bank boss. July 06, 2005
“…Building capable and honest states involves fostering transparency, accountability and voice, but also requires improving the performance of key state institutions. Strengthening effective in-country capacity building and governance—especially regarding budgetary expenditure and revenue management, as well as strengthening institutions that check corruption—are at the core of the Action Plan…”
World Bank Pages/Sites
Last year was celebrated as the “Year of Africa.” Tony Blair proposed a doubling of aid to the continent; the world’s rich nations promised debt elimination; and the Bush administration talked up its remarkably good record in boosting foreign assistance. But 2006 is shaping up as the year of “What to do with Africa?” as donors grapple with the challenge of making aid work. And unless the development institutions demonstrate that they can spend the money effectively, 2007 may be the year in which Africa is once again abandoned….Whatever the French bank’s role, Congo’s corruption appears not to offend the French government, which has led the charge to grant Congo debt relief even though the evidence of its unworthiness has been reported in the French press. In a detailed article in December, the French daily La Tribune explained how millions had been siphoned out of the national oil company and how yet more millions failed to make it from the national oil company to the national treasury. But, as La Tribune noted, President Jacques Chirac and Congo’s ruling strongman are old friends….
This is a scandal, and it’s hard to see why the rich world’s taxpayers should tolerate even a hint of debt relief for Congo. Last year the country earned more than $2 billion from oil, or $600 per person; if it spent that money competently, it would not have two-thirds of its people living below the $1-a-day line. But rather than send that message, the World Bank and the IMF have cut Congo’s debt payments and held out the hope of outright debt cancellation, provided that the country meets various anti-corruption conditions. In the past, Congo has mocked such conditions. It would probably mock them in the future the day after full debt cancellation went through.
Why does this seem likely? Because you don’t have to guess what Congo’s president thinks of the fight for transparent government. In an interview in February, he dismissed the critics of corruption as “people who search for lice in the heads of this country’s authorities.”
In the past few months, there have been hints of fresh thinking on corruption. Now the evidence has reached critical mass: The change appears to be genuine. ….Wolfensohn denounced the “cancer of corruption” in 1996; and the bank’s even bomb-happier chief economist, the Nobel laureate Joe Stiglitz, gave speeches attacking the narrow economic understanding of development and proclaiming the centrality of politics.
Speeches are one thing, action quite another. The Wolfensohn bank developed state-of-the-art corruption indexes, which are now used by the U.S. government to identify which countries deserve extra foreign assistance; it created a department to investigate malfeasance in bank projects. But the anti-corruption unit was understaffed and ineffectual, and the bank did not build on Wolfensohn’s cancer talk by cutting off corrupt borrowers consistently. Excuses were found. Lending frequently continued.
In a series of tough decisions, some of which have been widely reported and some of which have not, Wolfowitz has challenged this culture….
In sum, Wolfowitz’s World Bank presidency, which had seemed to lack an organizing theme, has acquired one. The new boss is going to be tough on corruption, and he’s going to push this campaign beyond the confines of the World Bank; on Saturday he persuaded the heads of several regional development banks to join his anti-corruption effort.
The new head of the World Bank is ruffling feathers, but his intolerance of crooked politicians should be applauded, writes Salil Tripathi. Paul Wolfowitz, who came to head the World Bank after working at another large bureaucracy – the Pentagon – has an insurgency on his hands. Dissatisfied bank staff are circulating emails complaining about new senior-level appointments and new procedures that change the old way of doing business. But compared with the streets of Baghdad, the area around Farragut North in Washington DC is calm because Wolfowitz’s target is corruption, which nobody defends. Wolfowitz has suspended loans to powerful countries, strengthened the internal department of institutional integrity, reshuffled officials, and brought in new staff with the aim of making the organisation – and its borrowers – accountable. But instead of cheering such well-intentioned efforts, some officials at the bank are crying foul. Officials are grumbling about outsiders being brought in and bemoaning the fact that some established experts are leaving.
However, Wolfowitz is on the right track on corruption. For too long, aid money has been squandered by unscrupulous officials and he appears to be keen to turn that around. In recent months, loans to Argentina, Bangladesh, India, Kenya and Uzbekistan have been put on hold. The bank’s disbursements to Chad have been suspended after the African country went back on its commitment to use revenues from a controversial pipeline with Cameroon only for agreed development targets. Some directors rightly pointed out that the bank could not impose new conditions. But as theatre, the move was impeccable and well-timed, and underlined the fact that many leaders from the developing world are not the misunderstood and well-intentioned leaders some would like us to believe.
...There is no question that Wolfowitz quickly learned to talk ‘left’ about unfair trade subsidies, meagre US aid and corruption. Whether this was merely superficial rhetoric, veiling the sinister agenda of the petro-military complex, would soon be tested….Surprisingly perhaps, this [Chad] case of petro-military alignment was resolved–temporarily–against the World Bank’s allies in a repressive regime and multinational oil corporations. Wolfowitz apparently required a dose of public credibility in what was Africa’s highest-profile financing dispute. Cynics might add, on the other hand, that the other crucial function of the clampdown was to impose Bank discipline on an errant country, in the process sending a tough lesson to others, that they must obey Washington’s orders……With these diverse examples, what can we conclude about the dire state of international financial governance? Wolfowitz cannot be trusted, and although his minor anti-corruption sweep is causing staff anxiety, there is no indication that deeper-rooted problems at the Bank will surface, through, for example, whistleblower protection that is now being widely called for by watchdog groups.
World Bank President, Paul Wolfowitz appears to be putting words into action, saying corrupt governments will no longer have access to aid money, according to World Bank sources. It is reported that in a short period of time, the World Bank boss would halt disbursement of aid money to a number of projects out of the uncertainty that the money would be well spent.
Uganda’s divestiture programmes have suffered a setback after the World Bank declined to extend its technical support to the Privatisation Unit. The Bank cites political interference, lack of transparency and the sluggish pace of disposal of public assets as the reasons for its decision.
BIC discusses Chad oil pipeline on NPR: Collapse of Bank’s “model” project offers lessons and exposes risks to the poor. Bank Information Center. March 07, 2006
The recent collapse of the World Bank’s “model” petroleum development project in Chad underscores the vulnerability of the poor as the primary bearers of risk and highlights the pitfalls of promoting extractive industries in countries lacking political stability, history of respect for human rights, or functioning mechanisms of public accountability.
John Githongo’s recent revelations about corruption in Kenya are timely and welcome. What most people do not realize is that in most 3rd world countries corruption is top-down-bottom-up i.e. it originates from the president, and over 95% of acts of corruption (by value) result in a large (typically 80%) share of the proceeds going back up the ladder directly to the president. The 20% share stays with the perpetrator of the corruption; and the 80% guarantees that the perpetrator enjoys protection at the highest level. The illegal income of the average 3rd world president is usually composed of many many such scams, some very large and others comparatively small. I state the above based on personal experience while working on World Bank and EU Projects in Uganda and Tunisia in 2005. …While we in the West are congratulating ourselves, we should consider the role of our oil companies (especially Shell), our mining companies, and of course the international diamond monopoly, de Beers. These people instigate and collaborate with corruption in order to make 3rd world presidents rich and their people poor; their top management of course benefit, and in some cases their shareholders.
When George Bush nominated Paul Wolfowitz to head the World Bank a year ago, plenty of people worked themselves into a tizzy. Would the former deputy defence secretary turn the world’s top aid agency into an arm of American foreign policy? Would the intellectual architect of the Iraq war make as much of a hash of fighting poverty as his former employers had made of governing Iraq?…
…Mr Wolfowitz rejects the view that Africa is for ever stuck in poverty because, unlike Asia, it does not have a history of commerce. He has seen everything change in Asia: “The other day I was talking to the 45-year-old foreign editor of a newspaper and he had never heard the phrase ‘oriental fatalism’. It’s gone – look at Korea, Taiwan, Indonesia, India.” If you can work on the civil society, he thinks, you can produce economic growth…
World Bank President Paul Wolfowitz is putting words into action: corrupt governments can say good-bye to aid money, reports Dutch daily Volkskrant. In a short period of time, Wolfowitz halted disbursement of aid money to a number of projects out of uncertainty the money would be well spent. Nongovernmental organizations are full of praise for his fight against corruption. “It is fantastic that Wolfowitz takes the fight against corruption so seriously,” says Huguette Labelle, the President of Transparency International.
…Students from the Institute of Mongo have everything they need to learn: desks, computers, professors, notebooks and inquisitive minds. The only thing missing is the school itself. Their country’s newfound oil wealth is supposed to build it in their hometown, about 275 miles east of here, but after three years it is still not ready. So they study in borrowed classrooms here in the dusty capital. ”It’s a long time we wait, but this is Chad,” said Abdelraman Choua, 22, a computer science major from Mongo. ”We are always waiting.” Such is reality under a World Bank-supported program that was supposed to harness this impoverished African nation’s oil wealth for the benefit of its poorest citizens. A $4.2 billion oil pipeline has generated $399 million for Chad since mid-2004, but the spending of the money has been seriously marred by mismanagement, graft and, most recently, the government’s decision that a hefty share can be used to fight a rebellion. And now the approach, once envisioned as a model for the development of other African countries, seems to be on the verge of collapse. In recent weeks, Chad seriously weakened a law that dedicated most of its oil revenue to reducing poverty and reneged on its deal with the World Bank. In response, the bank suspended all its loans to the country. What is happening in Chad, a Central African country twice the size of France, is an important test of the idea that international institutions like the World Bank can influence governments of poor countries to spend newly tapped riches on their people instead of using the money to further entrench themselves in power. The proposition is particularly challenging as oil prices surge, because now nations like Chad can attract investors who make few or no demands on how the profits are spent.
The Government Accountability Project (GAP) today released the “Vaughn Report,” commissioned by the World Bank as a blueprint to modernize that institution’s inadequate whistleblower protection policies….In the nine months since the World Bank received this blueprint for reform, it has refused to publicly release the report, consult staff on Vaughn’s recommendations, or accept any offers from experts to help implement Vaughn’s analysis. The World Bank rejected a direct request from U.S. Senate Finance Committee Chairman Charles Grassley (R-Iowa) who oversees the Treasury Department’s funding of and participation at the MDBs. Senator Grassley is widely recognized as the conscience of whistleblowers in the Senate. Senator Grassley reached out to new World Bank president Paul Wolfowitz, calling on him to join in the battle to prevent waste, fraud and abuse. All of this continues the pattern of the World Bank rhetorically promoting transparency while maintaining secrecy on management proposals to combat corruption.
Exxon Faces Dilemma In Chad – Agreement To Avoid `Oil Curse’ May Break Amid Royalties Fight
In the late 1990s, Exxon Mobil Corp., the World Bank and Chad hammered out a deal that was held out as a model for how to avoid the so-called oil curse, in which a poor nation’s newfound oil wealth often leaves its people no better off — and sometimes worse. But that deal is now crumbling, and Exxon finds itself caught in the middle of a fight between the Bank and Chad as the company debates what to do with as much as $50 million of oil revenue it owes the country, reports The Wall Street Journal.
The standoff has big financial stakes for the petroleum industry, the poor African country and others like it. Exxon has two choices, both bad: hold back the money, which could lead Chad’s government to shut down production at the company’s operations there, or hand it over, which could land Exxon in hot water with the World Bank and nongovernmental-agency activists. Chad recently signaled it would order Exxon to shut down production if it doesn’t release the royalties directly to the government, according to one person familiar with the situation. That would throw into question the future of the $4.1 billion oil project — one of the biggest private-sector investments ever in sub-Saharan Africa.
The World Bank and many advocacy groups want Exxon to stick to the original agreement, to underscore the importance of transparent handling of oil revenue in developing nations. Exxon and the oil industry have touted the deal as a model for fostering corruption-free natural-resources industries. Susan Reeves, an Exxon spokeswoman, said in an email response to a list of questions that the company is in discussions with the World Bank and Chad and is “hopeful that this dialogue will help resolve outstanding issues between the two parties.”
Taking on Corruption. Editorial. Washington Post. February 24, 2006
THE WORLD Bank’s board faces a decision on debt relief today that has broad ramifications for development. The Congo Republic, a small oil state, hopes to win approval of a reduction in its debt , and by some measures it may deserve that. Under the rules governing debt relief, a country whose debt is worth 2 1/2 times its government revenue qualifies for forgiveness, and a team from the International Monetary Fund has determined that Congo meets this standard. But Congo’s corrupt government keeps part of its oil revenue from showing up on its books, raising questions as to whether it deserves forgiveness. The World Bank’s president, Paul D. Wolfowitz, rightly argues that debt relief should be delayed. The governments that sit on the bank’s board, including African representatives and the Europeans who often support them, should accept Mr. Wolfowitz’s position.
Congo’s efforts to hide oil revenue have been amply documented. The British watchdog group Global Witness has described a network of shell companies established to keep money away from creditors. KPMG, the auditor of Congo’s state oil company, has refused to sign off on its accounts three years running. In a memo explaining the finding that Congo met the test for debt relief, the International Monetary Fund concedes that “oil revenues continue to be diverted for other uses and do not reach the treasury.” Congo’s supporters on the World Bank’s board argue that the country has met the objective test for debt relief and should not be kept waiting. It’s hard to take this seriously.
Mr. Wolfowitz’s proposed remedy is moderate. He suggests that Congo should adopt measures to reduce oil corruption, a position with which even Congo’s defenders concur. But rather than having this trigger an immediate and irrevocable $2 billion worth of debt relief, Mr. Wolfowitz wants Congo to implement the anti-corruption measures for three years before getting full debt reduction. In the meantime, relief would flow into a carefully monitored poverty-reduction fund. This would allow Congo to reap some development benefits while maintaining incentives to fight corruption, at least for three years. Given that Congo is benefiting in the meantime from high oil prices, this hardly seems draconian.
The larger issue behind this fight is the seriousness with which donors are willing to take on corruption. Big strides have been made over the past decade in acknowledging that corruption is a problem, but, too often, corrupt countries have been indulged by donors. If Congo’s allies on the World Bank’s board get their way today, the see-no-evil faction will have won. Better to proceed slowly on Congo — and send a needed wake-up call to other corrupt countries.
Anti-corruption organizations, such as Global Witness and Publish What You Pay (a coalition of 280 NGOs), oppose Congo’s petition for debt relief, because it is corrupt, impoverishes its people and probably no longer meets the definition of a “Highly Indebted Poor Country.” Congo claims it meets the definition based on 2003 income data; but most of its income derives from oil. Given the massive increase in oil prices of the last two years, shipping records show the country’s gross income is up about fourfold. If the IMF, World Bank, U.S. and European governments accept the 2003 data, they will be complicit in the Enronization of development aid.
The independent auditors, KPMG, cannot certify Congo’s accounts because the country will not provide access to books and records; and it appears about a third of the oil revenue has not been properly accounted for. Congo’s prime minister admitted after the London court judgments use of “unorthodox” accounting procedures (i.e., theft). To no great surprise, the French are behind the effort to certify Congo, because it is a French client state, the French oil company “Total” lifts most of the oil, and France has other strong commercial and banking interests there.
If the U.S. and European countries certify Congo for debt relief, the scandal is likely to play out as follows: There will be many more press stories about how a highly corrupt regime (and there may be others) was given debt relief, greatly undermining the anti-corruption efforts in development aid, while costing the European and American taxpayers tens of billions of dollars. (Another oil-for-food type scandal – but this time directly implicating the U.S. and European governments.)
Breaking Ranks at the World Bank. February 17, 2006
After years of promoting market deregulation, the World Bank finally admits the limited effects of these policies on reducing poverty. According to a World Bank report, Latin America’s high poverty and inequality can explain the region’s bad economic performance over the last few years. The report encourages governments to assure a more equal income distribution. However, it remains unclear if the World Bank will back up its new thinking with real action.
Discussing The World Development Report: Does Anyone Need It? Pambazuka News. October 27, 2005
Usually, the World Development Reports reflect the “most progressive face” of the World Bank. Still, the 2006 report, which focuses on “Equity and Development,” fails to mention how the Bretton Woods Institutions themselves caused inequality through strict privatization and deregulation policies. Furthermore, the report offers “unhelpful prescriptions” to address inequality in the future.
The world’s largest development agency, the World Bank, should end a culture of intimidating its whistleblowers and adopt smoother mechanisms for reporting wrongdoing within the institution, says an internal report leaked Friday by a watchdog group.
The rhetoric may be flying, with outbursts over “a fool’s agreement” and “neo-colonialist and imperialist behaviour,” but most observers believe the oil row between the Chadian government and the World Bank will end in a face-saving compromise. The stand-off began in December when Chad’s parliament passed an amendment to the law governing how oil revenues can be spent, prompting the World Bank to suspend $124 million in loans and cut the flow of petrodollars to the landlocked, impoverished country.
….World Bank President Paul Wolfowitz has sworn to crack down on corruption by governments and officials in developing world nations where the bank operates. He has also promised to examine any irregularities within the bank itself, vowing to tackle “difficult issues”. Speaking to employees worldwide, Mr Wolfowitz said the bank had to move “more decisively and energetically”. He said the bank was withholding loans worth $250m (£143m) to Kenya, which is embroiled in a high-level scandal. …”There has to be a lot of teething problems to go from a world where for 50 years the word corruption wasn’t uttered in this institution to actually doing something about it. It doesn’t happen by snapping your fingers,” he said. “I must say I think it was horribly overdue…
World Bank President Paul Wolfowitz on Monday promised a rigorous — and vocal — campaign against corruption in developing countries the bank lends to and inside the bank itself. In a 90-minute staff meeting, beamed to World Bank offices around the globe, Wolfowitz also defended the recent appointments of certain senior managers and advisers that have been criticised by some employees. Wolfowitz said the bank needed to move “more decisively and energetically” against corruption and staff members should be praised when they raised concerns about corruption in projects.
The more debilitating impact of development aid is what it does to the mentality of the African elite and to the democratisation and accountable governance process. Governments have developed the myth that their economies cannot survive without aid. In reality it is their governments and the patronage systems that maintain them which are under threat without the aid machinery.
The competition among African governments for inclusion in the club of favoured nations leads to wilful abandonment, to donors, of sovereignty won at the cost of lives in the anti-colonial struggle. The multi-donor budget support arrangement is one manifestation of this loss of sovereignty. Without a break in the aid dependency mentality Africa stands no chance of building democracy based on accountability to citizens. Worst still, the imagery that aid agencies – private and official – find necessary to deploy in order to sustain domestic political interest for aid is often an affront to the African personality and spirit, diminishes the African self-worth and perpetuates negative stereotypes. Whilst we cannot ignore aid, we should not be glorifying it.
Sometimes we in civil society contribute unconsciously to the erosion of sovereignty and the loss of self-worth. We are sometimes quick to demand or endorse “governance conditionality” where aid and debt relief is made conditional to progress in these areas. To monitor compliance often requires even greater involvement and power of donors in domestic governance. It is like saying that new forms of colonisation are acceptable on human rights grounds. This is dangerous. Yet, there are cases where human rights abuses, dictatorship and corruption are at such a level that the impact of debt relief and aid will be to strengthen repression and enrich a few than promote development. What do we do under this situation?
World Bank President Paul Wolfowitz, who has sought to cast himself as a champion of transparency, is facing accusations that his office is suppressing a report on a Bank-backed mining project in Africa that allegedly contributed to the deaths of dozens of people. Watchdog groups say that violence has marred the Dikulushi Copper-Silver Mining Project in the Democratic Republic of Congo (DRC) where the bank’s guarantee arm, the Multilateral Investment Guarantee Agency (MIGA), provided 13.3 million dollars of political risk insurance to the Australian company, Anvil Mining, running the mine….
Good News, Prime Minister, We’re Still Ranked Above Bangladesh. OfficialWire, New York, 1 February 2006
When in July 2005 the Group of Eight countries announced their decision to double aid and debt relief to Africa, they pontificated to the rest of the world about the importance of reducing corruption. Even a glancing peek at the hard data suggests they might have accomplished more by lecturing each other…. The chapter on ‘Myths and Realities of Governance and Corruption’ of the World Economic Forum’s ‘Global Competitiveness Report 2005-2006’ concludes it is a big mistake to believe that the governments of developing nations alone set ‘the rules of the game’. To the contrary, Daniel Kaufmann, Director of Global Programs at the World Bank Institute, points out, powerful private interests use their wealth to exert undue influence in shaping public policy. In extreme cases they achieve complete control of state institutions.
The World Bank has delayed the release of about $260-million in loans to Kenya over corruption concerns amid new graft allegations that have rocked the East African nation, officials said on Tuesday. The money, approved in October 2004 and earmarked for education, banking reform, budget support and HIV/Aids programmes, will not be disbursed until the institution is convinced that President Mwai Kibaki’s government is meeting commitments to fight corruption, they said.
Britain’s former envoy to Kenya is angry at a £68 million loan to a Government accused of corruption. Sir Edward Clay, the outspoken former British envoy to Kenya, let rip at the World Bank yesterday for lending $120 million (£68 million) to President Kibaki’s Government when it was embroiled in a massive corruption scandal. In a letter to Paul Wolfowitz, the President of the World Bank, Sir Edward accused the organisation of “toadying to a thoroughly corrupt administration” and said that last week’s loan made a mockery of efforts to stamp out high-level looting.
…On Wednesday, the World Bank urged Kenya’s president to take tough action against any cabinet ministers found to be corrupt. The warning came as the World Bank approved a new $25m loan to help fight corruption – a decision slammed by former UK Kenya envoy Sir Edward Clay. Sir Edward, who has condemned Kenya for not tackling graft, said the new loan would feed the “pig of corruption”. …
It’s not front-page news, but Paul Wolfowitz is taking on a dictator again. And liberals, many of whom were aghast last year that an architect of the Iraq war had been tapped to lead the World Bank, should be applauding. In fact, some already are.
Paul Wolfowitz, president of the World Bank, has triggered a bitter conflict with the bank’s senior career staff by empowering a group of close political advisers to pursue aggressively what he sees as widespread corruption surrounding bank projects.
Relative Corruption. Editorial. The Wall Street Journal, 09 Dec 2005 Relative Corruption
Don’t let the headline confuse you. We are not referring to the relationship between U.N. Secretary General Kofi Annan and his enterprising son, Kojo. Instead, we refer to the latest strategy from that famous economist and other-people’s-money philanthropist, Jeffrey Sachs, to pry more dollars out of U.S. taxpayers for corrupt African governments…. Recall that the G-7 leaders who gathered in Scotland last July spent most of their time on African poverty. They decided to forgive $50 billion in bad debts to poor nations and to double global aid to the poorest states — mostly African — by $50 billion a year by 2010 (and to $150 billion a year by 2015). To allay fears that these billions would wind up enriching another generation of crooked politicians and bureaucrats, a string was attached: Governments specializing in graft would be barred from new disbursements.
The contradiction between a pledge to increase aid to poor countries and a promise to cut off corrupt governments was immediately obvious, even to Sachs. Most of Africa would be automatically disqualified under any system that screens for corruption, as both the World Bank‘s governance indicators and Transparency International‘s annual index demonstrate. So Sachs set out to solve the problem.
And as Carnegie Mellon economist Adam Lerrick notes in a paper to be released today by Congress’s Joint Economic Committee, the Columbia University economist devised a new rating system to measure corruption in which “African nations are effectively compared mostly to each other.” The core of the Sachs argument — developed in his 2005 book The End of Poverty — is that poor countries suffer corruption because they are poor. Corruption must be measured not against some absolute standard of honesty but relative to poverty. If a country is less corrupt than should be expected given its level of poverty, it deserves a favorable rating in Sachs’s view.
Call this the Lake Wobegon effect for development: Most African countries core impressively under Mr. Sachs’s standards. Of the 33 countries surveyed, 26 earn anti-corruption Sachs rankings of “good” or “average.” Mr. Lerrick notes, however, that the equivalent rankings by the World Bank of the same 33 are “below average” (nine), “poor” (12) or “very poor” (12). Transparency International, which ranks most, gives them grades of “poor” or “very poor.”
All this matters because Mr. Sachs is also the director of the UN Millennium Project, and his favorable ratings for Africa are the intellectual muscle behind a recent report for the UN secretary general on why Africa qualifies for new foreign aid. The UN wants rich countries to spend 0.7% of national income ($250 billion) on aid to the developing world annually. The report also gives the dangerous impression that corruption is under control — as Irish rock star Bono also did recently on U.S. TV. “The bottom-line argument here in the U.S. is that people didn’t believe [aid] was getting to the people that it was supposed to, because of corruption and stuff like that,” he told Conan O’Brien this fall. “They didn’t want their tax dollars redecorating presidential palaces. We’ve covered that now.” Just like that. Lerrick puts it this way: “How to give wisely, cost-effectively and directly for the benefit of the poor remains the elusive goal.” The novel but slippery standard of relative corruption won’t help end African poverty.
Corruption is not just one of the causes of intractable poverty in Africa. It is the root cause. The long litany of contributing factors advanced by recent United Nations and UK government Commission reports to explain or excuse 40 years of economic failure— from war to famine; from rotting infrastructure to epidemic disease—are not causes but consequences of pervasive pillage by a long line of leaders gone bad.
The most accurate assessment comes from a rational private sector that is not swayed by promises nor by Ministries of Corruption and a few token severed heads on the city gates. While donors debate the fine points of “good governance”, which has been loudly proclaimed as the sine qua non of aid giving, Africa’s own are voting with their Cedis, Naira, Schillings and Francs and their feet. Forty per cent of African savings are held outside the continent, some US$ 700-800 billion. (In Asia the rate is 3-6%.) Skilled and educated workers emigrate at the rate of 70,000 a year. Foreign direct investment is attracted only by mineral wealth at a time of world scarcity. At the first sign of genuine reform, the private sector will be on the plane to Africa before the first UN discussion committee convenes.
Africa’s leaders have rational expectations. Since 1970, violent changes in regime have taken place 100 times in 30 countries and are still making headlines in the current news. What better strategy in a risky environment than to be short-term greedy, to grab with both hands at an accelerated rate?
The stolen dollars stashed away in private accounts in off-shore banks cannot be accurately tallied: At the low end, Prime Minister Blair’s Commission for Africa believes the sum to be US$ 95 billion or the equivalent of more than half of poor Africa’s external debt; others estimate the level in excess of US$ 500 billion. The taking has been streamlined. Royalties from oil wells and diamond mines; proceeds from government monopolies of agricultural exports; and aid monies were all neatly packaged to go. Records are conspicuous by their absence. Leaders that may not have a personal future leave nothing behind for national futures.
Columbia University’s Jeffrey Sachs, the moving force behind the UN Millennium Project, has found a way to open the door for massive giving. In the official report to the UN Secretary-General and in his 2005 best-seller The End of Poverty, he insists that corruption and poverty march in tandem (which leads and which follows is not clear) and that African regimes are no more venal than comparably poor nations. To this end, he reworks the judgments of two major indexes (the 2002 World Bank Governance Indicators and the 2003 Transparency International Index) and recalibrates African ratings to take account of relative poverty. In a circular reasoning, a new rating system is devised where African nations are effectively compared mostly to each other…
Twenty-six out of Sachs’ thirty-three countries who are at the bottom in the original reports move up to “good” or “average”. Abracadabra: Instant qualification for generous unrestricted aid. (See Table I.) Two more years of independent ratings show no cause for optimism. All Sub-Saharan nations languish at the bottom of governance and corruption assessments with no improvement to encourage confidence. (See Table II.)
Aid without Risk
Relative corruption is meaningless. Extenuating circumstances are irrelevant. Absolute corruption is the issue. There are no sterling success stories of poor but corrupt countries that have blossomed under aid. As the world contemplates an unprecedented transfer of taxpayer funds to faraway places, good governance on the receiving end must be convincingly demonstrated over time. In the interim, rich nations must underwrite more aid but in a meaningful manner: Grants that address the most basic needs of the poor, paid out only for performance; endowments that do not lend or spend but protect resources and draw upon income to leverage funds in the capital markets. It is naïve to send aid to Africa without strict supervisory strings attached.
Chad Backs Out of Pledge to Use Oil Wealth to Reduce Poverty. December 13, 2005
The World Bank agreed to finance one of the biggest oil projects in Africa, the pipeline through Cameroon and Chad, under the condition that governments would use oil profits for poverty reduction. The Chadian government plans to change the terms of this agreement; as a result, the Bank is ready to halt lending and investment. According to an oil expert at Oxfam, if the law is changed, the Chadian people will not “see any benefit from the billions of dollars Chad’s oil fields are likely to pump into the economy.” (New York Times)
The World Bank’s bombast about good governance, corruption and reducing poverty is a farce. In reality, the World Bank is supporting an oil pipeline project that allows a notorious dictator to fill his pockets and thumb his nose at the world. Meanwhile, the people of Chad are bleeding themselves dry to repay a monumental debt without enjoying the fruits of a natural resource that is rightly theirs….
..No tears yet from Wolfie, but he has begun saying things like “Nothing is more gratifying than being able to help people in need” and “A clear message from modern history is that this is a small world… and that leaving people behind is a formula for failure for us all.” Is this the same neocon zealot who, under the direction of Cheney, oversaw the drafting of the 1992 “Defense Planning Guidance” — a bellicose blueprint for establishing “world order” under American authority that included the toppling of Saddam Hussein (and which became the intellectual foundation for the preemptive invasion of Iraq)?…
Paul Wolfowitz: Americans Want Assurance On Corruption – But Support Investing More. In Global Aids, Malaria, Health. Corruption Is A “Global Disease” Rich Countries Must Also Tackle, He Says At Time Global Health Summit. Nov 3 2005.
…The biggest challenge in getting Americans to support the funding of health initiatives in underdeveloped countries is to persuade them that money makes a difference, Paul D. Wolfowitz, President of the World Bank, said today at the TIME Global Health Summit. Americans want to do more to save lives in poor countries. But the belief that widespread corruption exists “is holding donors back” Mr. Wolfowitz said on the final day of a three-day summit sponsored by TIME magazine and the Bill & Melinda Gates Foundation, which has gathered together national and international leaders in medicine, government, business, religion and the arts to develop actions and solutions to world health crises.Mr. Wolfowitz said that he was encouraged by new leadership in many of the countries of sub-Sahara Africa who are “making a difference.” He also pointed out that corruption is a “global disease” not unique to underdeveloped countries, saying that it takes “two partners,” including individuals from developed countries offering bribes, and that in a recently discovered corrupt transaction between an aide to a senior South African official and a corporation from a wealthy country, South Africa has already taken action against the aide, but the corporation’s home country has not.
World Bank: Foreign Firms Aid Corruption. Says 2006 ‘ll mark watershed for Nigerian anti-graft war. Kunle Aderinokun.14 October 2005
The World Bank yesterday said multinational companies from the European and latin American countries were still giving bribes to officials in Nigeria and several other African countries where they operate… Also, the bank said the war against corruption by President Olusegun Obasanjo’s administration was paying off and predicted that 2006 could be a historical year… Kaufmann said it was evident that the “resolute reforms” embarked upon by the administration in the past one year and a half was beginning to pay off… According to him, “it is becoming evident that the resolute reforms undertaken by the Nigerian leadership and government over the past a year and a half are beginning to pay off already, even though we know that there is always some delays in any measure.”
Nigeria winning corruption war. News24, South Africa, 14 October 2005
Nigeria’s government under President Olusegun Obasanjo is making progress in fighting corruption, a senior World Bank official said on Thursday… Daniel Kaufmann, head of global programmes at the World Bank Institute (WBI), made his remarks after a meeting with members of Obasanjo’s economic team…”Nigeria is changing for the better. In fact, if the current momentum is maintained and deepened, the progress made in the fight against corruption could become irreversible,” Kaufmann said.
When Paul Wolfowitz returned to the World Bank from a trip to Africa in June, he made a presentation to his staff. “I made the mistake of calling on the first questioner, somebody who was obviously even older than I am,” recalls the 61-year-old but freshly minted World Bank president in an interview. “And he said, ‘I’ve been around since 1972 and we’ve heard all this stuff before.'” Welcome to the soaring idealism of the world’s greatest “development” body. … He’s the idealist. The World Bank is the land of lifers and experts who’ve seen and heard it all before. His mission–since he’s been crazy enough to accept it–is to make the world’s largest development bank believe once again that it really can help the poor. It certainly would be one of history’s larger ironies if the man so reviled by the political left ended up helping more people than all of those who spend their lives attending U.N. conferences……Regarding his staff skeptic, Mr. Wolfowitz says he replied, “I don’t think so. I don’t think you ever really heard African leaders talking about the essential need to combat corruption. I don’t think you’ve seen African leaders, the way the president of Nigeria recently did, jailing the inspector general of police on corruption. I don’t think you’ve seen things like the president of South Africa dismissing the deputy president because his financial adviser took a bribe, by the way, from a company from a developed country.”…At the Bank, “they are, I think, overwhelmingly people who really want to see that their work makes a difference, and if we can set–if there is a culture of getting money out the door, I think we can change that culture and get people looking more at the results.” As I say, Paul Wolfowitz is nothing if not an idealist.
- CNN LIVE EVENT/SPECIAL: “CNN Connects”. Aired September 17, 2005. During UN World Summit 2005, featuring President Bill Clinton, Paul Wolfowitz, Bono, Jeffrey Sachs, Wangari Maathai, and others.
Excerpt from “Rush” Transcript
WOLFOWITZ: You know, I think it is very important to keep in mind, as we talk about particularly the situation of Africa, which is desperate that in the last 20 years have probably seen the greatest progress in a couple of centuries in reducing poverty. Hundreds of millions of people have been lifted out of poverty, particularly in China, increasingly in India and Latin America, by successful policies by the countries themselves that have produced spectacular economic growth, especially in East Asia.
And the danger, or the tragedy today is the 600 million people in sub-Saharan Africa have been left behind by that progress, and poverty’s actually increased in the last ten years.
But I don’t think you can cut the tie between development and governance. Absolutely, if you can deliver relief to people who need it, and President Clinton’s absolutely right, you meet poor people, they are desperate not primarily for themselves, but to give a better life for their children but if they’re trapped in a system where assistance is stolen by officials, it’s not going to work.
WOLFOWITZ: Christiane, just if I could say one thing, too, on what Queen Rania said, I don’t think it’s a choice between improving governance and increasing assistance. I think you have to have both. But when you talk about improving governance, it’s not just governments. It’s civil society. It’s the things that Gramin Bank has done on their own in Bangladesh or the things that Wangari Maathai — governance comes at all levels of society. ….
AMANPOUR: We’ve been talking about how to eradicate extreme poverty and how to hold governments responsible and accountable to their people. We talked a little bit about corruption, not just the corruption that exists in some governments around the world, but Western corruption, those who actually pay bribes and do similar things in order to get contracts…..
…WOLFOWITZ: Well, I think that’s their responsibility. But I would say one other thing, punishing corrupters is important but I think what we’ve found even more important is telling people where their money is going.
In Uganda there was an experiment — not an experiment, a project that showed local school districts how much money they were supposed to be getting. It turned out they were getting 10 percent of what they were supposed to get and as soon they began to publish those numbers the numbers turned around.
BONO: It’s called the Poverty Action Fund and it was where they ring-fenced monies, particularly in debt cancellation that we did with President Clinton’s administration and you can see where the money is going. And as a result of that improvement there are nearly three times as many children going to school in Uganda now than were five or six years ago.
This just is very real. It’s just an important thing because you think all this stuff goes on and on. There’s a real, concrete example of what smart strategy and money provide.
CLINTON: But at first, we didn’t know what to do, because that was part of the debt relief. They had to do it to get the debt relief. And they overnight doubled enrollment, and now it’s tripled, because they could follow the money. And that’s what we’ve tried to do with all this tsunami money. But Wangari’s right but I sort of side with Mr. Wolfowitz on this. I think for us to be pointing our fingers at people that have been used to getting this kind of money we look hypocritical unless we have really tough laws. America’s got better laws than most rich countries, and ours could be tougher.
Addressing an issue that is of major concern for the development of democratic governments and the rule of law on the continent — that of corruption, Wolfowitz said, “At the World Bank, we are working with [African] countries that request our help to strengthen legislation and institutions, so they can take charge of combating corruption. The burden of fighting corruption, however, cannot be placed on developing countries alone. Rich countries and development organizations alike must play their part in supporting developing countries to step up to this challenge.”
Adding that the World Bank is fully aware of the potential of corruption in impeding its own aid programs, Wolfowitz emphasized that, “we know very well that the projects the World Bank finances are themselves vulnerable to corruption — and we are doing something about it. We conduct regular audits and investigate allegations of fraud. An anti-corruption hotline has been set up for firms and individuals — including staff — to report bribes and misuse of funds. And we publicly blacklist firms and individuals that engage in bribery in our projects.”
Corruption cripples poor nations, especially in Africa. The money which could have given everyone a reasonable standard of living has instead made a handful unbelievably rich. The powerful nations are justified in seeking to discourage it. That’s the theory. In truth, corruption has seldom been a barrier to foreign aid and loans: look at the money we have given, directly and through the World Bank and IMF, to Mobutu, Suharto, Marcos, Moi and every other premier-league crook. Robert Mugabe, the west’s demon king, has deservedly been frozen out by the rich nations. But he has caused less suffering and is responsible for less corruption than Rwanda’s Paul Kagame or Uganda’s Yoweri Museveni, both of whom are repeatedly cited by the G8 countries as practitioners of “good governance”. Their armies, as the UN has shown, are largely responsible for the meltdown in the eastern Democratic Republic of Congo (DRC), which has so far claimed 4 million lives, and have walked off with billions of dollars’ worth of natural resources. Yet Britain, which is hosting the G8 summit, remains their main bilateral funder. It has so far refused to make their withdrawal from the DRC a conditionality for foreign aid.
…“Corrupt” is often used by our governments and newspapers to mean regimes that won’t do what they’re told. Genuine corruption, on the other hand, is tolerated and even encouraged. Twenty-five countries have so far ratified the UN convention against corruption, but none is a member of the G8. Why? Because our own corporations do very nicely out of it. In the UK companies can legally bribe the governments of Africa if they operate through our (profoundly corrupt) tax haven of Jersey. Lord Falconer, the minister responsible for sorting this out, refuses to act. When you see the list of the island’s clients, many of which sit in the FTSE 100 index, you begin to understand. The idea, swallowed by most commentators, that the conditions our governments impose help to prevent corruption is laughable.
When the World Bank’s new president, Paul Wolfowitz, presides over his first annual meeting, he will be confronted with a radical new report from his own organisation that sees ending inequality as a key to reducing poverty.
Outdated perceptions of Africa as “the dark continent” are giving way to a new image of Africa as a dynamic player on the global economic and geopolitical stage, says World Bank president Paul Wolfowitz. Speaking at a September 8 press conference jointly hosted by the World Bank and National Geographic magazine in honor of the magazine’s special September issue titled Africa: Whatever You Thought, Think Again, Wolfowitz stressed that “Africa is at the top of our [World Bank’s] development agenda.” The event also spotlighted both organizations’ collaboration in the production of the magazine issue, particularly with a specially designed wall-sized color map insert intended to raise awareness of the challenges to end poverty on the sub-Saharan continent. In drawing distinctions between the “old Africa” and the new, Wolfowitz said, “We hear often about an Africa that is ravaged by poverty, disease and conflict. News headlines and footage transmit images of starving women and children in Niger. They report on violence and suffering in Sudan’s Darfur region. They cite alarming statistics about the human toll of HIV/AIDS and malaria. “But there is another part of the story that we hear about all too rarely,” he added. “There is another face to Africa. One of hope, ambition and achievement which is captured so compellingly in this issue.” Wolfowitz praised National Geographic’s editorial staff for emphasizing this progressive view of Africa’s present and future potential.
Tackle African corruption, says World Bank boss. July 06, 2005
World Bank President Paul Wolfowitz said today that both African nations and developing countries had a responsibility to tackle corruption that is damaging the continent. Addressing a conference on African trade issues in Edinburgh as G8 leaders gathered in Scotland, Wolfowitz also said the World Bank had a “uniquely important role to play in Africa.” “I think there is a real chance now that the poorest countries in Africa can turn the corner, that Africa can become a continent of hope,” he said. “The responsibility to deal with corruption is not just something for African governments and African people,” he told the conference.
“The developed countries have a huge responsibility as well. They have a responsibility I think to help the poor countries in Africa recover some of the assets that have been taken from them and deposited in banks in developed countries.” Wolfowitz said there must be a recognition that “every corrupt transaction has two parties to it.” “We all have a responsibility to try to crack down on both ends of these transactions.”
…Outsiders can help to strengthen the hand of the poor, at modest expense. The World Bank is particularly proud of its efforts to track spending on Ugandan primary schools. Between 1991 and 1995, it discovered, only 13% of funds allocated for schools ever reached them. “Ghost workers” gobbled up about a fifth of the money meant for teachers’ salaries. These striking findings were widely published by schools and local newspapers: parents could find out how much money had been earmarked for a school, and how much had actually reached it. As a result, in 1999 and 2000, about 80-90% of funds reached the schools. The Bank’s survey, which cost $60,000, helped plug a leak in school spending worth over $18m
The new head of the World Bank, Paul Wolfowitz, has called for a big increase in US aid to Africa. Mr Wolfowitz’s comments came at the end of his first visit to the continent. He signalled that he was willing to put pressure on Washington to increase aid, even to the point of reaching the international target – 0.7% GDP. The move would mean more than trebling the US aid budget. Mr Wolfowitz also said he would like to see an end to farm subsidies. I’d like to see increased levels of US assistance by whatever means we get there, particularly for Africa Paul Wolfowitz Putting Africa on Bank map US subsidies on cotton in particular have caused severe hardship to African producers who have found it hard to compete.
New World Bank president Paul Wolfowitz has praised the new generation of African leaders for their commitment to tackling corruption. At the end of his visit to the region he praised South African President Thabo Mbeki for sacking his deputy over allegations of corruption.
New World Bank President Paul Wolfowitz, wrapping up a four-nation African tour, on Saturday hailed a new leadership in Africa that was fighting corruption. Wolfowitz was speaking at a news conference standing beside South African President Thabo Mbeki, who last week fired his graft-tainted deputy Jacob Zuma. “There is new leadership in Africa that is taking responsibility, that is taking on these decisions and it is one of the reasons why I agree with what (Nigerian) President (Olusegun) Obasanjo said to me; Africa is on the move,” Wolfowitz said. “I feel like it is on the move and I hope the World Bank can help it move faster.” Wolfowitz said there was increasing recognition that Africa’s debt load was due to corruption and bad governance. “I want to tip my hat to leaders of Africa, including particularly President Mbeki, as there is an increasing recognition that the reason we have these unpayable debts is because a lot of governments in the past did not spend money well and that is an understatement. “You know I’m talking about corruption and bad governance,” he added.
World Bank Says Transparency Key to Development in Resource-Rich Countries. March 17, 2005
World Bank President James D. Wolfensohn said today good governance and transparency are key to ensuring that resource-rich developing countries benefit from their oil, gas, and mineral wealth.
“Transparency is fundamental to good governance and an essential starting point but it does not do the trick alone. It is one critical ingredient in a system of oversight, accountability and sanction. It reduces the potential for waste, mismanagement, and corruption; fosters democratic debate on the use of revenues; and enhances macroeconomic management,” Mr. Wolfensohn told the London Conference on the Extractive Industries Transparency Initiative (EITI).
Mr. Wolfensohn welcomed the progress governments, companies, and civil society groups have made to date in promoting transparency over payments and revenues in countries where the extractives sector plays a significant economic role.
“The fact that the EITI participants are now ready to endorse measures such as regular publication and independent audits of payments and revenues is testimony to real progress that has been achieved,” Mr. Wolfensohn said. …Last year, the World Bank Group endorsed the EITI in its follow-up to the review of its own policies in extractive industries (Extractive Industries Review – EIR). Moreover, the Bank provides specialist staff resources to EITI and integrates the initiative into its country programs; it administers a multi-donor EITI technical assistance trust fund; and it set up and manages a website and knowledge management for EITI (www.eitransparency.org).
…Where countries have a workable baseline of civil service capabilities and a visionary leadership, possibilities exist for a comprehensive program of capacity building…In Africa the record of reforms has been mixed. A survey of World Bank operations in twenty-one African countries showed far-reaching gains in public administrative capacity only in countries with a strongly pro-development political environment. …Lessons from the last six years also show that the roots of corruption too lie in dysfunctional state institutions. Anticorruption campaigns can play a valuable role but only when used in tandem with institutional interventions…
Witnesses testified before Sen. Dick Lugar Thursday that as much as $100 billion may have been lost to corruption in World Bank lending projects. The World Bank itself, Lugar said, has identified corruption as the single greatest obstacle to improving the lives of the world’s poor, one billion of whom live on less than one dollar a day. Lugar, Republican of Indiana and Chairman of the Senate Foreign Relations Committee, held the first in a series of oversight hearings into the anti-corruption efforts of the World Bank and other multi-lateral development banks.
Do PRSPs Empower Poor Countries and Disempower the World Bank, or Is It the Other Way Round? (October 2003)
Frances Stewart and Michael Wang examined the policies and processes governments use to create the Poverty Reduction Strategy Papers submitted to the World Bank. They conclude that PRSPs give the appearance of civil society involvement, but international financial institutions really design and mandate the development policies.
A brief analysis by James Paul, Executive Director of GPF, about the relations between the World Bank (and other International Financial Institutions) and NGOs.
The Appointment of Paul Wolfowitz…..
Wolfowitz: Africa is Top Priority for the World Bank: Newshour with Jim Lehrer Interview – 31 March 2005 (Video, Audio & Transcript). Jim Lehrer speaks to Paul Wolfowitz about his confirmation as the next president of the World Bank.
World Bank names Wolfowitz to post. Financial Times. March 31, 2005
Mr. Wolfowitz and the Bank. Editorial. Washington Post. March 31, 2005
Paul Wolfowitz and the World Bank. The Economist. March 31, 2005
The Education of Paul Wolfowitz. Fareed Zakaria. Newsweek. March 28, 2005
World Bank Pragmatism: Wolfowitz’s Ideology Fits New Challenges. Sebastian Mallaby. Washington Post. March 28, 2005
Africa Will Be First On My List – Wolfowitz. Business Day (South Africa). March 29, 2005.
‘I have a record of working with people’. Interview with Paul Wolfowitz. Business Day (South Africa). 30 March 2005
Nominee to World Bank Top Slot, Bad News for Poor Africa. The New Times (Rwanda). March 28, 2005
Wolfowitz sees poverty, graft and economic growth as World Bank priorities. AFP. March 28, 2005
Practise what you preach, G-7. Joseph E. Stiglitz. Business Day (South Africa). March 22, 2005
Why Wolfowitz? Business Day (South Africa). March 24, 2005.
Neither a scholar nor a leader. Business Day (South Africa). March 24, 2005
Wolfowitz at the World Bank. Brett D. Schaefer. Heritage Foundation. March 22, 2005
World Bank: Wolf at the door? BBC News. March 18, 2005