So today there is a huge showdown in the Bank over Wolfowitz, and it looks like he might actually be forced out. A decision will be made this week. Wolfie is protesting his innocence saying that he is subject to a “smear campaign” (which begs the question: Is it even possible to smear someone like him?) Steve Clemons has some of the gritty details (here and here), and George W Bush is, expectedly, speaking up in support of his demented crony.
I have to say, this is more than I had expected; I thought that this would be swept under the rug quickly, but all credit to the unity and determination of the Workers of the World (Bank) who, with nothing to lose but their very comfy contracts and 5-star junkets in starving countries, have made enough of a big deal about this that the Executive Board had to do something. It also helped that pretty much everyone in the development world despised Wolfowitz and couldn’t wait for a chance to lay into him.
On a more theoretical, academic and mundane note: I have always had a lot of trouble with the World Bank’s obsession with corruption and democratization, a fetish that started with Wolfensohn’s reign in 1994 and continues to grow.
The case the World Bank has incessantly tried to make since the mid-1990’s is that fighting corruption and democratizing are the keys to unlocking sustained economic growth and development. After a thorough review of the development literature, one will find that the simplistic relationship that everyone talks about between corruption and democracy and development has very flimsy support in the real world.
The theoretical, quantitative and case-study evidence on this is really missing, and relies heavily on some really shoddy statistical work that frankly makes very little sense.
My personal take from reviewing all this literature is this: corruption and democracy have very complex interactions with one another and with other factors that in turn influence growth and development. It is too complex to be able to generalize it across countries across different points in time, and it is misleading to attempt to study it in a simplistic cross-country regression. The simplistic mantras of “corruption bad” and “democracy good” are quite misleading and possibly as wrong as saying “corruption good” and “democracy bad”.
However, this does not just say that we should just forget about these things; we have to remember that these are important issues not just for their impact on development, but for their own right. It is a mark of the short-sightedness of some development economists that they only view the issue of democracy in terms of its impact on growth, ignoring its importance in its own right.
But what we should say about this is that the attempts from an international institution with as much clout as the World Bank or the IMF to crusade around the world with this message and packaging it as a necessary and sufficient precondition to development and growth has in itself possibly been harmful to the causes of development and growth.
This is at best irrelevant and promises false results that will lead to skepticism towards the virtues of democracy and anti-corruption; but at worst, could lead to political and economic implications that then complicate things for developing countries. The best example of this is how democratization and liberalization have, in many cases, lead to certain elites managing to capture power and special interests in their own hands, and weakened the government’s ability to undertake positive policies for development.
This is a very complex issue and I have not discussed it here thoroughly enough, but I will discuss this more in the future. Suffice to say for now: The World Bank should certainly tread very carefully when discussing these issues. However, they should certainly be very assertive in throwing Wolfowitz out on his ass for what are surely corrupt and despicable acts with no potential good for anyone but him and his cronies.
