BTW what's this thing you have against Hilary Benn? I don't want 50 paragraphs, just spit it out.
Caesar in San Francisco"
Dear Caesar:
Paul Wolfowitz should make his fight to stay at the Bank as messy, protracted, and operatic as possible. He should chain himself to his desk and go on a hunger strike.
Why? Because the battles surrounding his tenure have attracted US mainstream media attention. The upshot is that many Americans have learned more about the World Bank during the last month than the last 60 years.
The Bank is an extraordinarily opaque organization, but lips have been loosened since staffers who want to boot Wolfy are intent on garnering as much outside support as possible. The more that staffers hurl cannon fodder against Wolfowitz, the more light is shed on operations at the Bank that are not generally available to the public. And that's greatly needed.
A related reason for Wolfy to fight on is that the longer this situation drags out, the longer the World Bank President website will stay up. In 2005 I tried to persuade them to keep the site going beyond the selection of the Bank's president but they didn't gear up again until a couple weeks ago. I seem to recall noting in 2005 that the site could help avert a world war. I guess readers who don't understand the importance of aid and development issues thought I was joking.
Last but not least -- it is most unfortunate that the panda Robert Zoellick frolicked with in China in 2006 didn't maul him. So if Wolfowitz leaves the presidency, Zoellick will probably take the job. Then Beijing will declare a national holiday because any hope for the Bank working out a viable anticorruption policy will go down the drain. And China will gain so much more power at the Bank that we might as well rename the organization "The Black Pearl."
Do I have a beef with Hilary Benn, aside from the fact that he's a twit? What can you say to someone who makes Bank employees rearrange chairs just so he won't be photographed sitting next to Wolfy? "Yes, sahib?"
But I suppose I envy Benn, or rather his job. The United States of America does not have a secretary of international development. Why don't we have such a cabinet-level position? Because half of US foreign relations policy is stuck in the 1970s and the other half is in the horse-and-buggy era.
Trust me when I tell you that the Bank has always been very efficient at making loans to crooks and tyrants. But there is a movement afoot, which Hilary Benn seems to support, to transform the World Bank into an outright aid agency that asks no questions of corrupt governments and makes no effort to impose economic modernization on a developing country.
I could have done better at explaining the Benn Fallacy, which technically I should have termed the Jeffrey Sachs Fallacy. The fallacy is not that development banks should keep lending even if a government is corrupt. The fallacy is that the harm done by lending to corrupt governments in poor countries is outweighed by the responsibility of the richest nations to help the neediest in a country run by a corrupt regime.
To get a handle on the fallacy let's first return to its exposition in the quote I used in yesterday's essay:
In a speech in London, [Hilary] Benn objected to Wolfowitz's actions on corruption: "Where problems arise, some people argue that we should suspend our aid or withdraw it completely. I don't agree. Why should a child be denied education? Why should a mother be denied healthcare? Or an H.I.V.-positive person AIDS treatment, just because someone or something in their government is corrupt?"(1)Benn is deploying the half-a-loaf argument: Better to feed some than none; even if a corrupt government steals much of the aid donations, at least the remainder will get to where it's desperately needed.
Benn's argument has weight when applied to disaster situations. It's established that a significant amount of disaster aid to a poor a country is stolen if the government overseeing the aid distribution is corrupt or very inept. But if the priority is to render aid to disaster victims, theft or waste of some part of the aid is not enough reason to suspend aid.
However, Benn clearly takes a page from Jeffrey Sachs and transposes the disaster aid argument to nondisaster situations. Sachs argues that the worst consequences of desperate poverty in the poorest countries -- starvation, lack of medical treatment, etc. -- are a disaster and should be treated as such by donor nations.
From there, Benn applies the same reasoning about dealing with corruption in a disaster situation to all kinds of aid and development situations. To boil it down, he's saying that if human suffering from abject poverty is a disaster, one can't suspend aid just because a government will steal part of it.
In the earlier essay, Pundita used too many dramatic and diverting examples to point up the flaw in Benn's line of reasoning but my point holds. Benn ignores the difference between a disaster and a chronic situation.
If you're going to say that lack of adequate medical treatment and food is a disaster, do you keep trying to empty the ocean with a sieve or do you locate underlying causes?
If chronic starvation is defined as a disaster, can we not say that a government's inadequate and corrupt agricultural policy is also a disaster?
If chronic lack of medical treatment is a disaster, why isn't a malfunctioning electrical grid also a disaster? Without electricity, hospitals and clinics find it hard to operate and doctors have trouble communicating with each other about cases. And so on.
Once you start looking at underlying causes, this is where the issue of government corruption becomes crucial for a development bank that makes loans to corrupt governments.
You can keep throwing food and medicine into a disaster situation and hope that at least some of the aid reaches the victims. But you can't keep throwing billions of dollars or euros into infrastructure projects that do not adequately materialize or maintain because of the borrowing government's corruption.
Yet this throwing of development money into a bottomless pit has been done for decades by the World Bank and other development banks.
Hilary Benn mixes up aid and development issues. If you truly believe that development of crucial government services and infrastructure gives a nation an economic boost that can reduce the worst poverty, you must take responsibility for seeing that your development loan money is not stolen by the government.
This is a Herculean task when applied to dispensing money for countless small aid projects. There is just too much paperwork, manpower and oversight mechanisms required to succeed. But the World Bank can chop down the task by making a clear distinction between aid and development.
To this end, the Bank should let go of the IDA, which has become a virtual aid agency, and concentrate on development loans for large infrastructure and government services projects. Such projects are easier to oversee the Bank has developed a pretty good track record at such oversight, although there is big room for improvement.
Hilary Benn and Paul Wolfowitz should note that I have not advised suspending lending to corrupt governments. A clear distinction also has to be drawn between government corruption and development bank lending to corrupt governments. I don't think that Wolfowitz listened well enough when he first came to the Bank, or did enough research, to be clearly aware of the distinctions and understand their importance.
The Bank does not have authority to stop government corruption. And because the Bank is in the development loan business, it can't halt lending programs because a government is corrupt. What the World Bank can do is tag lending terms and loan size to compliance with Bank anticorruption oversight measures on projects.
To toss out an arbitrary example, anticorruption measures can add, say, $10 million to a Bank loan for a dam project. This to ensure that a corrupt government's procurement specialists haven't substituted low-grade steel and cement on the dam, and that a thousand other kinds of theft aren't going on with the project.
Outrageous? Well, that's the cost of doing business under such circumstances. That should be clear enough but the issue becomes muddled when the Bank tries to function as both a development lender and an aid agency. Paul Wolfowitz and Hilary Benn need to write those words on the back of their hand.
1) The Next Crusade: Paul Wolfowitz at the World Bank by John Cassidy, The New Yorker; April 9, 2007.
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