World Bank Structures Breed Corruption

Published on 14th May 2007

Patricia Adams is an economist and Executive Director of Probe International, an independent think-tank and watchdog over environmental issues. Her books include In the Name of Progress: The Underside of Foreign Aid, (Doubleday 1985), and Odious Debts: Loose Lending, Corruption and the Third World's Environmental Legacy (Earthscan 1991), which exposes the jeopardy of years of loose lending for both the Third World's environment and their economies. She talks to Josephat Juma of The African Executive on why she thinks the Wolfowitz saga is stage-managed.


AE: You hold that World Bank staff are determined to oust Paul Wolfowitz because his campaign against corruption threatens their overpaid jobs, what is your take on the fact that he also engaged in an act of corruption?


Patricia: I assume you are referring to the allegations against Mr. Wolfowitz about the pay and promotion package for his girlfriend when you refer to his own corruption?


AE: Right.


Patricia: I've reviewed all the documents dealing with this case that have been released so far, and must say that I did not behave improperly in any way. He declared his conflict of interest early on, tried to recuse himself and was told he couldn't. The Ethics Committee said Ms. Riza had to go and suggested a promotion and pay increase which ended up being high by normal standards (but not by the Bank's. The Wall Street Journal estimates that well over a 1,000 people in the bank are earning more than Condolezza Rice). So, Mr. Wolfowitz implements the Ethics Committee's recommendations and then gets criticized for doing so.


As one lawyer in Nigeria sees it, Wolfowitz declared his conflict of interest and thus showed good faith early on. The various options for Riza's future were all preexisting options in the career pay-scale and code, and Wolfowitz dealt with the Ethics Committee at all times.


While critics are entitled to take exception with the pay awarded to Ms. Riza (about average for professional staff in the Bank), the way Mr. Wolfowitz has managed the Bank, and Mr. Wolfowitz's history in the Iraq war, none of that provides evidence that Mr. Wolfowitz has acted unethically in this case. Rather, I think this whole story shows the internal administrative and ethical rot within the Bank.


A.E: As World Bank watchdogs since 1980, what is your assessment of the world money body?


Patricia: We have learned that the World Bank is above the law: it is immune to legal action by those whose livelihoods, environments and homes have been lost to its projects and to Third World citizens who have had to repay an estimated $100 billion in Bank loans lost to corruption. As it is not subject to the rule of law, the Bank's own internal management has developed without anchor and without accountability to the most fundamental principles of good governance and fairness. Paul Wolfowitz case illustrates this in spades: what kind of an institution forces a staff member to resolve a personnel matter with someone with whom he had a personal relationship? This is elementary bad governance. The Board of Executive Directors and its Ethics Committee erred in directing him thus, and must accept responsibility for doing so.


A.E: What else ails the World Bank?


Patricia: The World Bank is inherently unaccountable, politically and legally and, as such, should be shut down. With respect to Paul Wolfowitz, he hasn't gone far enough, fast enough in fighting corruption, which we believe is endemic in World Bank's projects.


Wolfowitz understands the extent of the corruption and the need to stop it better than his predecessors have. I also think he understands the importance of stopping the accumulation of odious debts (witness his statement about Iraqis not being responsible for Saddam's debts that were used for palaces, instruments of repression, and weapons) more than any other public authority. His method (cutting off loans) is the most powerful and effective way to deliver the message that the Bank is serious about stopping the corrupt use of its loans. But I don't have any confidence that he can truly reform the World Bank because of its shareholding structure and Articles of Agreement. Nor do I have any confidence that the staff could or would stop the corruption that they must witness. They haven't done it in the past and the very structure of decision-making, rule-setting, and enforcement within the Bank is inscrutable, above the law, and all the foxes are in charge of the hen house without any meaningful accountability to taxpayers (in both the financing and borrowing countries). The Bank's structure provides a perfect environment for corruption to thrive.


A.E: What is your take on the EU clamor to remove Wolfowitz and the convention of the US appointing the President of the World Bank?


Patricia: As long as the Bank exists, I would argue for an American appointee. The American Congress is the only legislative body that has ever seriously taken responsibility for the way the Bank operates (numerous Congressional and GAO investigations over the years have produced insightful and crucial information about the ill workings of the World Bank, the Congress directs their Executive Directors to vote against bad loans -- and usually they do so alone, and US involvement in the World Bank is transparent).


Meanwhile, the rest of our countries' legislatures, which provide succor to the Bank, sit on their hands, do nothing, and say nothing. Worse, as in the Acres International case (the Lesotho corruption trials), Canada's former government tried to subvert the Bank's anti-corruption efforts by actively lobbying to stop the Bank from debarring Acres. It was shameful.

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