The World Bank: Corruption in the Governance Structure

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Tu, 1

The World Bank: Corruption in the Governance Structure

By: Katie Tu

Charlotte Walker, Corruption and Human Rights Final Paper June 8, 2012

Tu, 2 Abstract: Since its inception in 1944, the World Bank estimates that it has lost over 100 billion dollars of its loaning portfolio (about 20%) to corruption.1 The Bank has recently started many initiatives around countering this phenomenon by conducting studies, promoting best practices and raising awareness of the issue via its website and publications. The Bank states, “Corruption undermines policies and programs that aim to reduce poverty, so attacking corruption is critical to the achievement of the Bank's overarching mission of poverty reduction.”2 However, something that the Bank does not account for or recognize in this fight are the losses that its own corruption has caused to the world community. These are not losses of money but of trust , influence and accountability. The World Bank may attack countries for their poor governance but its own governance has led to systematic and entrenched corruption that has prevented it from fully fulfilling its mission of poverty reduction. All kinds of corruption undermine; in the case of the World Bank, it is a corruption of power, influence and leadership that has reduced accountability, oversight and trust in the World Bank which has resulted in disastrous outcomes and negative implications for its future as a multilateral institution. To start off, it ts important to establish a working definition of corruption with which I will apply in my case study regarding the World Bank's governance structure and operations. In the anthology Corrupt Practices, Diego Gambetta describes corruption as “an array of social practices, regardless of how these are motivated which... bring about a state of degradation in certain institutions.”3 The act of corruption usually involves three parties: a truster, a fiduciary and a corrupter. The truster has some sort of relationship with the fiduciary under which there is usually an exchange of services or patronage (eg politicians). What's important about this relationship is that it is one founded 1 Emad Mekay, “Poorest Pay for World Bank Corruption,” May 14, 2004.,CommonDreams.org http://www.commondreams.org/headlines04/0514-07.htm 2 World Bank, “Accountability and Legitimacy,” http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPUBLICSECTORANDGOVERNANCE/0,,contentMD K:22996457~pagePK:148956~piPK:216618~theSitePK:286305,00.html 3 Diego Gambetta, “Corruption: An Analytical Map” In William Jordan and Emmanuel Kreike, Corrupt Histories, (New York: University of Rochester Press, 2006), 3

Tu, 3 on trust.4 The corrupter is an entity that has something to gain from exploiting the relationship between the fiduciary and the truster whether it be an improved service or a service that is technically prohibited given the relationship between the truster and the fiduciary to give but that the fiduciary nevertheless has an ability to provide. This service is given to the corrupter at the expense of the truster and at the risk of the fiduciary.5 According to this definition, the World Bank can be classified as a corrupt entity. In the three party model put forth by Gambetta, it plays the role of the fiduciary entrusted with the mission of poverty reduction and international development from member nations, the truster. In this case, the truster can be extended to practically all citizens of the world. Gambetta explains, “Corruption is parasitic on the existence of trusting relations; corruption corrupts first and foremost the trust between T[ruster] and F[iduciary] and, by implication, between T and whoever else trusts T's rules of allocations. It follows that the greater the number of trusting relations, the greater is the potential for corruption.”6 The corrupter here is a variety of different actors but is most commonly the United States and other Western nations who use their influence over...
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