Corruption

For multinationals, bribery enables companies to gain contracts (particularly for public works and military equipment) or concessions which they would not otherwise have won, or to do so on more favorable terms. Every year, Western businesses pay huge amounts of money in bribes to win friends, influence and contracts. These bribes are conservatively estimated to run to US$80 billion a year—roughly the amount that the UN believes is needed to eradicate global poverty.

As Western governments and the World Bank and IMF shout ever more loudly about corruption, their own policies are making it worse in both North and South. Particularly at fault are deregulation, privatization, and structural adjustment policies requiring civil service reform and economic liberalization. In 1997, the World Bank asserted that:

any reform that increases the competitiveness of the economy will reduce incentives for corrupt behavior. Thus policies that lower controls on foreign trade, remove entry barriers to private industry, and privatize state firms in a way that ensure competition will all support the fight.

The Bank has so far shown no signs of taking back this view. It continues to claim that corruption can be battled through deregulation of the economy; public sector reform in areas such as customs, tax administration and civil service; strengthening of anti-corruption and audit bodies; and decentralization.

Yet the empirical evidence, much of it from the World Bank itself, suggests that, far from reducing corruption, such policies, and the manner in which they have been implemented, have in some circumstances increased it.

Rich country politicians and bank officials argue that because dictators like Marcos, Suharto, and Mobutu were kept in power with western arms and were given loans to squander on ill-judged and repressive schemes, that the people of those countries—who often fought valiantly against those dictators—cannot be trusted not to waste the money released by debt cancellation. This may seem confusing to people not familiar with the logic of the IMF and World Bank. In summary:

• Creditors colluded with, and gave loans to dictators they knew were corrupt and who would squander the money.
• Creditors gave military and political aid to those dictators—knowing arms might be used to suppress popular opposition
• Therefore, successor democratic governments and their supporters, who may have been victims of corruption and oppression, cannot be trusted.

To many people in the South, this seems irrational and illogical—the logic of blaming the victim. It is the logic of power rather than of integrity, and is used to benefit the rich rather than the poor in developing countries.

A similar logic argues that if the World Bank and government export credit agencies promoted inappropriate and unprofitable projects, then southern governments proved their inability to control money because they accepted the ill-advised projects in the first place. Thus, if money is released by debt cancellation, it must be controlled by agencies which promoted those failed projects.

This is the logic that says if people were stupid enough to believe cigarette advertising, then they are too stupid to take care of themselves and the reformed cigarette companies should be put in charge of their health care.

The same institutions who made the corrupt loans to Zaire and lent for projects in Africa that failed repeatedly are still in charge, but their role has been enhanced because of their success in pushing loans. Can we trust these institutions to suddenly only lend wisely; to not give loans when the money might be wasted?

Preventing new wasted loans and new debt crises, and ensuring that there is not another debt crisis, means that the people who pushed the loans and caused this crisis cannot be left in charge.

The creditors or loan pushers cannot be left in charge, no matter how heartfelt their protestations that they have changed. Pushers and addicts need to work together, to bring to an end the entire reckless and corrupt lending and borrowing habit.

Structural adjustment programs cover most of a country’s economic governance.

… The most striking aspect of IMF/World Bank conditionality [for aid, debt relief, etc] is that the civil servants of these institutions, the staff members, have virtual dictatorial powers to impose their whims on recipient countries. This comes about because poor countries must have IMF and World Bank programs, but staff can decline to submit programs to the boards of those institutions until the poor country accepts conditions demanded by IMF civil servants.

There is much talk of transparency and participation, but the crunch comes in final negotiations between ministers and World Bank and IMF civil servants The country manager can say to the Prime Minister, unless you accept condition X, I will not submit this program to the board. No agreed program means a sudden halt to essential aid and no debt relief, so few ministers are prepared to hold out. Instead Prime Ministers and presidents bow to the diktat of foreign civil servants. Joseph Stiglitz also notes that reforms often bring advantages to some groups while disadvantaging others, and one of the problems with policies agreed in secret is that a governing elite may accept an imposed policy which does not harm the elite but harms others. An example is the elimination of food subsidies.