Wall Street Journal

Corruption? Ho-Hum
September 25, 2006; Page A14

REVIEW & OUTLOOK

You might think the biggest objections to a World Bank anticorruption push would come from, say, corrupt poor countries in danger of losing international aid. In fact, it's such donor nations as Britain, France and Germany -- and bureaucrats at international aid agencies -- that seem to be complaining the loudest.

Welcome to the upside-down world of development aid, where a country's actual use (or misuse) of money is much less important than how much it receives. Paul Wolfowitz, who took over as head of the World Bank last year, wants to change this paradigm, which won't be easy. At an annual meeting of bank officials in Singapore last week, European elites let it be known that they much prefer a lending system that gives lip service to ending graft but in fact turns a blind eye to corrupt government officials on the receiving end of billions of dollars in foreign aid.

British Development Secretary Hilary Benn threatened to withhold $94 million in funding next year to protest the transparency and accountability conditions that Mr. Wolfowitz is implementing. Mr. Benn, along with his French and German counterparts who serve on the bank's board of directors, finally relented after assurances from Mr. Wolfowitz that the board would play an oversight role. So the same countries that say Americans need to throw more taxpayer money at the developing world don't seem to care how much of it is siphoned off by corrupt governments. The only word for this is bizarre.

Mr. Wolfowitz has said that this anticorruption drive "is about making certain that money goes to schools and textbooks for children, medicines for mothers and creating job opportunities for the poor -- not to line the pockets of the rich and powerful." These days as so often in the past, the latter is the norm.

Throw a dart at a map of Africa, and chances are high that you'll hit a place like Cameroon, where autocrat Paul Biya has been in power since 1982. According to The Wall Street Journal-Heritage Foundation 2006 Index of Economic Freedom, "the ruling party's long domination has encouraged corruption and cronyism" and "corruption is widespread in the government and the judiciary." Our guess is that the more than 40% of government revenue that Mr. Biya receives each year via foreign aid isn't doing much for the average Cameroonian, but it is helping Mr. Biya maintain power.

The World Bank says it has uncovered more than 2,000 instances of fraud, corruption and other misconduct related to its projects since 2001, a situation that led Mr. Wolfowitz to suspend more that $1 billion in loans to countries including Kenya, India, Bangladesh and -- yes -- Cameroon.

Through its lending arm, the International Development Association, the Bank issues on average between $7 billion and $9 billion each year in credits and grants to the poorest nations. And overall, Bank loans totaled nearly $23 billion in 2005. Mr. Wolfowitz recognizes that he has a fiduciary obligation to make sure money isn't being wasted or misused. He also understands that anticorruption is an integral part of reducing poverty and promoting growth.

That's a lesson many multilateral agency planners have yet to learn. And it's no surprise, since success at places like the World Bank is measured not by results but by how much money is pushed out the door. Hence, extreme poverty in Africa is growing, even as taxpayers in the West are importuned to throw more and more foreign aid at the continent.

Mr. Wolfowitz's detractors characterize his anticorruption efforts as "obsessive." The Financial Times went so far as to imply that he doesn't grasp the "complexity" of the problem, as if theft and bribery are difficult concepts.

Mr. Wolfowitz is being attacked precisely because he understands the situation all too well. As he put it last week, "better governance . . . is the key to reduction of poverty." We'd go further and add that corruption tends to accompany too-powerful governments that give politicians and bureaucracies control over investment and other economic decisions. The World Bank's own annual "Doing Business" survey documents this problem, even if some on the bank's board apparently don't read its own work. The last thing the world's poor need is international aid organizations that indulge their oppressive governments.