IMF, World Bank Finance Corrupt Nations

by Lucy Komisar

Whether it is the IMF, promoting fiscal austerity and cuts in social spending, or the World Bank, denouncing the corrosive effects of corruption, they were busy contradicting themselves by announcing big loans to the very countries that have been stealing both institutions blind.

Top IMF and World Bank officials set the stage in Washington for the heads of state, finance ministers, central bank officials and business leaders -- some 2,000 reformers in all -- who gathered here recently to debate the financial state of the world via a series of reports, seminars and press conferences. Their words put in dramatic relief the problems caused by their practices, which often seem directly opposite.

It says that solutions should restore investor confidence and ensure that the poor share in recovery. Investors, however, prefer workers who are submissive and want the flow of profits to go mostly to owners and managers.

The World Bank talks about its new anti-corruption strategy to prevent stealing in its projects and to take corruption more explicitly into account in its "country strategies," the huge plans for national economic reconstruction it presents as condition for getting its loans.

There, the bank noted a new $1 billion loan to Indonesia while failing to mention its own internal report that last year revealed up to 30 percent of the $24 billion it has given Indonesia since 1967 was stolen by Indonesian officials and insiders.

World Bank spokesman Mark Malloch Brown said that a special audit unit has been set up for "very aggressively and very rapidly" tracking down any allegations of corruption tied to its loans.

"When allegations were made in Russia, we immediately had the auditors look into it and seek evidence from the Russian authorities," he said. So did the New York Times, whose expose of the lendings showed most of the most recent tranche, or disbursement, was shunted into the pockets of a handful of top bankers. It's unclear whether the auditors reached the same conclusion.

Last year, when the Russian Duma's audit chief, Venyamin Sokolov, reported on diversion of money from a $31 million World Bank-funded project to reimburse victims of pyramid schemes and bank failures, the World Bank ignored the charges till Sokolov came calling on officials in Washington in June. They tend to respond to questions about the diversion by badmouthing Sokolov, journalists say.

World Bank Vice President Johannes Linn said the institution is looking into some charges of misuse of its funds in Russia, but hasn't begun a formal investigation.

"To my knowledge," he said, "there is no particular target" of such an investigation.

The aim, ostensibly, is to prevent the vast capital flights that have bankrupted tens of thousands of companies around the world in recent months, resulting in high levels of unemployment and increased hunger, disease and violence.

World Bank President James Wolfensohn said at a press conference that "the crisis has highlighted the fact that financial and social policy must go hand- in- hand."

But a World Bank report on governance, "Beyond the Washington Consensus: Institutions Matter," suggests that you need to add one more ingredient: democracy. It's a topic that IMF officials like to steer away from, insisting as they do that loans should have nothing to do with the nature of a country's rulers, as long as they are neo-liberals.

The World Bank points out that when governments don't ensure law and order, protect property, or apply rules and policies predictably, when there is a "lawlessness syndrome," private investors shy away. (In the recent instance, "massive desertion" would be a more apt description.)

If the Bank, the IMF and the participants at this meeting could have begun to discuss a broader definition of "reform," the current crisis might have lead to something of transcendent importance. Now, it's just more fodder for economic theorists and those who reject any approach other than every nation for itself. p>