The World Bank and Corruption

The Wall Street Journal has a long front-page article about the World Bank and corruption today, by Neil King and Greg Hitt. I think it's worth supplying a little bit of background, however, since a lot of people I talk to don't seem to really understand the issue here.

The question is how -- not whether -- the World Bank should deal with corruption. One way to do so is to engage the issue, and work on plans which aim to reduce corruption in countries which suffer greatly from it. The problem that many Bank staffers have with Wolfowitz is that he seemed to be more keen to not engage the issue, and simply walk away from countries which suffer greatly from it.

Corruption is something which grows slowly and has deep roots. It can't be eradicated by fiat -- not by the governments of the countries in question, and certainly not by the World Bank. It does make sense for World Bank projects do deal, if at all possible, with the less corrupt parts of the governments they have to work with. It serves no purpose for the Bank to simply pick up its ball and go home whenever it smells corruption -- all that does is guarantee that corruption will continue in that country unabated.

And in any case it's worth remembering that eradicating corruption is both a very long-term project and also a means to an end, rather than an end in itself. The true goal of the Bank is poverty reduction. And that can be achieved in very corrupt countries: see Dennis de Tray, for instance, on poverty reduction in Indonesia during the reign of Suharto.

A lot of people seem to think that although Paul Wolfowitz must go, it's a pity that the Bank's anti-corruption initiative might be weakened at the same time. I think the opposite is true: that without Wolfowitz's moralizing about corruption, the Bank can actually be more effective on the issue.