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Tuesday, April 17, 2007

Wolf to Wolfowitz: The World Bank Must Regain the High Ground

Martin Wolf says it's time for change at the World Bank, starting at the top. I agree wholeheartedly, Wolfowitz needs to go and the sooner, the better:

The World Bank must regain the high ground, by martin Wolf, Commentary, Financial Times: “If you want to make poverty history you have to make corruption history.” Paul Wolfowitz, embattled president of the World Bank, cited this remark by Nuhu Ribadu, head of the Economic Crimes and Corruption Commission of Nigeria, in a speech made only last month. There he emphasised, once again, the guiding theme of his presidency: fighting corruption and improving governance.

How credible, after recent revelations, is the World Bank as a beacon of good governance and a scourge of corruption? “Much less than it should be” is the answer. ...

Corruption is ... the abuse of public position for private gain. Corruption, as Jim Wolfensohn, Mr Wolfowitz’s predecessor, said, is “a cancer on the development process”. ... Yet is it ... wealth that causes the low corruption or the low corruption that causes ... wealth? If it were solely the former, the World Bank’s anti-corruption campaign would be a waste of time.

Fortunately, as Daniel Kaufmann, the bank’s leading researcher on governance, argues, the relationship works both ways. “We estimate”, writes Mr Kaufmann, “that a country that improved its governance from a relatively low level to an average level could almost triple the income per capita of its population in the long term, and similarly reduce infant mortality and illiteracy.” ...

[E]ven though the quality of governance is far from the only cause of success in development, it is hugely important, particularly for many of the world’s poorest and least successful countries. The bank has been right therefore to make this one of its areas of attention. The question is whether anybody can do much about governance. The answer, again, is that it is hard, but not impossible.

In the significant case of corruption, it is a question of changing incentives and moral norms. Changing incentives involves: paying officials more; removing unnecessary and, above all, unnecessarily complex regulation; increasing transparency, not least through free media; and allowing citizens to exercise a “voice” through elections. Making such changes is hard technically and politically, since the beneficiaries of the corrupt status quo have the power to make progress difficult. But it is sometimes possible.

Can international financial institutions help? The answer, here, too, is yes. They can, above all, strongly support reformers when they come forward, as they often do. The bank group has, after much internal dissent, come up with what looks like a sensible, seven-point programme...

[So] I agree with Mr Wolfowitz that fighting corruption matters. But the institution must lead by example. Using his office to obtain what seems an extraordinarily favourable deal for his girlfriend is not, by the standards of our world, more than a venial sin. But his position as leader of the world’s most important multilateral development institution and, above all, one dedicated to the fight against corruption makes it so. ...

The moral authority of the bank is in the dust. Only one decent outcome of this tragically unnecessary affair exists. The cause on which so many rightly agree is bigger than the fate of one man.

[Note: The link above is to Martin Wolf's Economists' Forum rather than the Financial Times. If you haven't been there, it's worth a look. Prominent economists often leave comments in reaction to Martin's columns - recent examples here and here.]

    Posted by on Tuesday, April 17, 2007 at 02:43 PM in Economics, Politics | Permalink  TrackBack (1)  Comments (24)


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