By Nicholas Li

Under the leadership of President Paul Wolfowitz, the World Bank has increased its lending and research focus on the issues of corruption and governance. While this focus had already begun prior to Wolfowitz’s appointment as President in 2005, he has made corruption and governance the primary focus of the Bank’s agenda, representing $4.5 billion dollars or 19% of the Bank’s new lending in 2006. As the new President put it :

Corruption drains resources and discourages investment. It benefits the privileged and deprives the poor. It threatens their hope for a better quality of life and a more promising future. Accountable and sound governance, on the other hand, nurtures the soil in which a robust civil society and an energetic private sector can flourish.

This renewed focus under Wolfowitz is probably not coincidental, as Wolfowitz was the US ambassador to Indonesia from 1986-89. Indonesia has historically fared very poorly in international corruption perception rankings. It was already the site of much of the World Bank’s anti-corruption and good-governance programs before his appointment as President. There is dispute over whether Wolfowitz showed early signs of anti-corruption and good-governance advocacy during his period as ambassador, but there is no questioning his commitment to these policies today. Indeed, some critics have suggested that his greatest weakness is his idealism, which manifests itself in a belief that fundamental social realities like corruption and ethnic conflict can be overcome through the right policies. [Indeed, he has been characterized by friend Christopher Hitchens as a "bleeding heart".]

Although questioning the good intentions of Wolfowitz and the World Bank is unwarranted, it is important to consider the limitations of the new anti-corruption focus. Some critics have suggested that the Bank lacks authority and credibility on issues of corruption and governance because of its own poor record on corruption. Indeed, a cynic might ask how Wolfowitz came to be President of the World Bank in the first place given his lack of experience in banking or development. Although Wolfowitz has attempted to strengthen the Bank’s own internal monitoring, a skeptic might argue that what the Bank really needs is external monitoring from people outside of the Bank’s career structure and internal hierarchy. A brief glance at the web-site of the Bank’s internal watch-dog, the Department of Institutional Integrity, suggests that most of the parties banned from bidding on new contracts due to corruption are external consultants and contractors, not career staff at the Bank.

At a deeper level, this leads to the question of what exactly constitutes corruption? In the Bank’s case this seems to come down to illegality and violation of formal procedures – stealing money by over-invoicing for a construction project, or outright bribery. However, at a deeper level this is not entirely satisfactory. What is the difference between an Indonesian government official who supplies too little effort in building a road, thereby skimming off some proceeds for himself, and a World Bank official who gives very little effort and thought to a project, while his personal and staff expenses (including first-class airfares, luxury hotels, the fleet of black SUVs for transportation in-country) consume a large share of project expenses? If World Bank staffers are not corrupt, could it perhaps be a sign that they are overpaid compared to developing country officials? (Consider the case of Singapore, which seems to have reduced government corruption by paying top government officials like CEOs of major corporations). How is illegal bribery of government officials in a developing country by large foreign corporations and contractors firms different from legal influence-peddling and contracts awarded by government officials in developed countries to these same corporations and firms? Was Haliburton’s involvement in Iraq a sign of corruption by the Bush White House (legally and procedurally, the answer seems to be no)?

Sociologists have also questioned the whole enterprise of governance and anti-corruption at the conceptual level, especially as it applies to community level development. As University of Toronto anthropologist Tania Li puts itin her analysis of the Bank’s program on community and governance in Indonesia:

At the heart of government through community is a paradox. Rose puts it thus: "Community is to be achieved, yet the achievement is nothing more than the birth-to-presence of a form of being which pre-exists."23 Community is assumed to be natural, yet it needs to be improved. Communities have the secret to the good life (equitable, sustainable, authentic, democratic – however the good is being defined), yet experts must intervene to secure that goodness and enhance it. To contain the paradox, attempts to govern through community often elide what currently exists with the improved versions being proposed, making it unclear whether talk of community refers to present or future forms. They locate the model for the perfected community in an imagined past to be recovered, so that intervention merely restores community to its natural state. Or they argue that they are not introducing something new, merely optimizing what is naturally present. Even when the object of desire – the authentic, natural community – is found to be intact, experts on community argue that it is vulnerable to degeneration because it lacks the capacity to manage change. It is the paradox of community that makes it an exemplary site for governmental intervention: experts do not direct or dominate, yet they always have work to do.

As a concrete example, consider a recent research project by Harvard economist Ben Olken. He conducted a randomized field experiment based on 608 Indonesian villages that formed a part of the World Bank’s KDP program in Indonesia. Each village was about to start building a village road as part of a nationwide infrastructure project, and these villages had a baseline 4 percent probability of having their project audited externally by the government. Olken randomly assigned villages to three groups – a control group that received no treatment, and two treatment groups. The first treatment group was told that its probability of being audited was 100%. This is considered a top-down intervention. The second treatment group was bombarded with invitations to village-level "accountability meetings" where project officials would account for how they spent project funds. A subset of these were sent anonymous comment forms to relay information about corruption without fear of retaliation, and these forms were read aloud in the "accountability meeting." The objective of the second treatment was to reduce corruption through grass-roots monitoring and participation.

Subsequent analysis of the quality of road construction reveals that the first treatment was quite effective – the quality of workmanship and materials was superior to that of the control group. The effect of the second treatment was limited or nil in terms of road quality, though attendance at the community meetings increased by 40%. This is not altogether surprising. Professor Olken is perhaps the world’s leading economist when it comes to corruption, but the irony of the second intervention – an experimental intervention by external experts aimed at strengthening community participation and grass-roots activism – appears to be lost on him.

It remains to be seen whether this ambitious attempt at social-engineering will be a major priority of World Bank development lending for years to come or simply the latest fad in a long-line of development "magic bullets" that have come and gone. Professor Li concludes her analysis by highlighting the limitations of the programs, in particular the exclusion of political-economy considerations, gross economic inequalities, and class conflict:

The desirability of the ends sought by the Bank’s social development programs was simple common sense: Who would not prefer a well-built bridge to an inferior one, washed away at the first flood? Which villagers would prefer to remain ignorant about what happens to budget lines designated for the poor when given the opportunity to hold authorities accountable? Wasn’t it reasonable to reward performance? Shouldn’t rules be clearly laid out and followed? Even if the social experiment were to fail, a tried and tested mechanism to supply village infrastructure at 25% below the cost of equivalent infrastructure built through the routine planning mechanisms was surely worth having. If there might be a way to prevent small conflicts from escalating into big ones, why not try?

Putting the questions this way, within the logic of the program, I would be among those offering applause. Yet the benevolence of a program does not excise the element of power. Even when they set out to learn from the best practices of Indonesian villagers, members of the World Bank team positioned themselves as experts who knew the optimal forms that empowerment should take. Alert to what could and could not be included in a "development" program, they focused upon correcting the conduct of villagers, while leaving the conduct of senior officials, investors, and the military unexamined, and unimproved. Capitalist enterprise and the search for profit appeared in their narratives only as a solution to poverty, not as a cause. On the basis of their diagnoses and prescriptions, their diagram connecting inputs to outcomes, they set out to transform social relations in tens of thousands of Indonesian villages.

This program approached economic development as a matter of addition – add a road, a bridge, or some microcredit to make peoples’ lives easier and to stimulate growth. Altering existing economic relations was, the planners suggested, beyond their purview. The social development team had no prescription for eliminating the contradiction between capitalist accumulation and the dispossession that follows in its wake. They supported economic growth, aiming only to manage and mitigate the fallout. Justice became a matter of distinguishing the legal from the illegal, the accountable from the corrupt, the plan that was "pro-poor" from a plan that would benefit the rich, the deserving poor from those whose failure to perform made them ineligible for assistance. Liberal ideas about formal inclusion in institutional procedures and the opportunity to compete took center stage.

The Bank team’s grid "for the perception and evaluation of things," was backed by formidable intellectual and financial resources. Nevertheless, its traction for differently situated subjects – who, for example, came to understand the problem of justice as a matter of a defective "justice system" is a matter for empirical examination. The transformations stimulated by the social development program should be the subject of ethnographic study – many studies, in view of its enormous scope. These transformations would doubtless include shifts in political-economic, as powers and resources were reconfigured in ways which may or may not conform to the programmers’ plans.

In pointing out the limits of the Bank’s social development program – in particular, the limits of what it attempted – I am not suggesting that there was a hidden agenda for which the program’s rationale was merely a mask. The Bank’s social development team was very explicit about its aims and I take the team at its word. The limits of the program did not stem not from deficits in their research capacity or understanding. They stemmed, rather, from the governmental stance that envisaged empowerment as a product that could be manufactured by technique. As Indonesian critic Vedi Hadiz pointed out, experts intent on devising optimal institutional arrangements "overlook the fact that democracy, public participation, accountability and social and economic rights are all historically tied to the outcome of struggles of social forces and interests, ? the product of grinding social change over centuries, colored by often violent and bloody confrontations, not least between social classes." From the way processes excluded from the arena of intervention infiltrated their reports and shaped their interventions, it is evident that the social development team did not overlook these facts. Nor, however, did they act on them.

Nicholas Li is a PhD candidate at the University of California, Berkeley. His research interests are in international economics and the macroeconomic aspects of development.

The above photograph is of the main hall of the World Bank Headquarters