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May 13, 2004
Power Corrupts, UN Corrupts Absolutely

Instapundit links to a breaking story regarding an important international organization that may have lost $100 billion or more to corruption. No, it's not the UN per se, but the UN subsidiary World Bank, which supposedly exists to combat poverty and provide development support for third-world countries. Senator Richard Lugar set off warning bells at the Senate Foreign Relations Committee this afternoon:

Corrupt use of World Bank funds may exceed $100 billion and while the institution has moved to combat the problem, more must be done, the chairman of the U.S. Senate Foreign Relations Committee said on Thursday. Sen. Richard Lugar, an Indiana Republican, charged that "in its starkest terms, corruption has cost the lives of uncounted individuals contending with poverty and disease." ...

He cited experts who calculated that between $26 billion and $130 billion of the money lent by the World Bank for development projects since 1946 has been misused. In 2003, the bank distributed $18.5 billion in developing countries.

Jeffrey Winters, an associate professor at Northwestern University, said his research suggested corruption wasted about $100 billion of World Bank funds, and when other multilateral development banks are included, the total rises to about $200 billion.

Lugar and Winters recommend that those banking institutions that do business with the World Bank implement stricter controls on audits and lending practices. World Bank executives testified that anti-corruption efforts are under way but that they have a long way to go until they effectively counter the apparently rampant problems. Winters countered that those efforts had resulted in "minimal effects". In an echo of UNSCAM (well, the first UNSCAM), Winters testified that "the lion's share of the theft of development funds occurs in the implementation of projects and the use of loan funds by client governments."

Governments skimming the loans and contracts from a UN agency? Nahh.

The World Bank website, by the way, states that one of its primary missions is to fight the trillion-dollar corruption problem that it says weighs down the economies of developing countries. The article on their site describing the problem sounds somewhat akin to what Lugar and Winters described as problems with World Bank itself:

More than $1 trillion dollars (US$1,000 billion) is paid in bribes each year, according to ongoing research at the World Bank Institute (WBI). Daniel Kaufmann, the Institute's director for Governance, says this US$1 trillion figure is an estimate of actual bribes paid worldwide in both rich and developing countries. ...

It is extremely difficult to assess the extent of worldwide embezzlement of public funds, "but we do know it is a very serious issue in many settings." For example Transparency International estimates that former Indonesian leader Suharto embezzled anywhere between $15-35 billion from his country, while Ferdinand Marcos in the Philippines, Mobutu in Zaire and Abacha in Nigeria may have embezzled up to $5 billion each.

Kaufmann notes that a calculation of the total amounts of corrupt transactions is only part of the overall costs of corruption, which constitutes a major obstacle to reducing poverty, inequality and infant mortality in emerging economies.

I suppose one could argue that it takes a thief to catch a thief (which FDR hinted at when he appointed Joseph Kennedy as the head of the Securities and Exchange Commission), but the thief in question is supposed to be reformed before being put on the case. Right now the World Bank only demonstrates that the Iraqi Oil-For-Food debacle was less of an anomaly than commonly thought. It may be time to demand audits on all UN programs that receive significant American funding, not just OFF and the World Bank.

Interestingly, this recalls an article I read by Elizabeth Becker in the New York Times three weeks ago (reprinted in the International Herald-Tribune) that reported gossip in Washington about Colin Powell's future. Powell had dinner with WB chief James Wolfensohn at Wolfensohn's DC residence, along with economic luminaries such as Alan Greenspan and IMF president Horst Koehler. Becker used a couple of unnamed sources to claim that Powell's visit was intended to line up Wolfensohn's job for the Secretary of State, who supposedly intends to resign at the end of this presidential term whether Bush is re-elected or not.

As I blogged at the time, Becker's motive in writing an unsourced news article based on "buzz" had more to do with tweaking the Bush administration than any true news content. Here's what Becker says about the effort to get Powell to lead the World Bank:

To those pressing for Mr. Powell to make the move, what better position than as spokesman for the world's poor? He served as chairman of America's Promise, a charity aimed at helping children at risk.

While his policy speeches are replete with praise for the Iraq war and Mr. Bush's more muscular initiatives, Mr. Powell never fails to list as major accomplishments the administration's contributions to the fight against AIDS and world poverty - all items on the bank's agenda.

Perhaps the position can be viewed as a spokesman for the world's poor, but it appears to be more of a bagman for kleptocrats. Do you suppose Powell is all that eager to lend his sterling reputation to such a mess?

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Posted by Ed Morrissey at May 13, 2004 7:09 PM

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