The Creeping Politicisation of the World Bank: The Case of Corruption

The World Bank, Corruption and Its Non-political Mandate

In 1997, the World Bank announced its intention to provide a ‘systematic framework for addressing corruption as a development issue in the assistance it provides to countries and in its operation work more generally’ (1997, p. 2). Although it acknowledged that some of these areas were new territory and would require new staff, new areas of expertise, new procedures and new lending instruments, it claimed that it had long been concerned with corruption. Indeed, a recent report asserts that it has been ‘in the business' of combating corruption, ‘since its very inception’ (Linn, 2001, p. 2).

However, until the mid-1990s, the Bank always argued that its Articles of Agreement (World Bank, 1944), the rules that govern its activity, prohibited it from making decisions based on political considerations, and that a country's political structure, its human rights record and corruption were all too political for it to consider. Instead, if there was an economic case for lending to a corrupt and abusive regime, then it was obligated to do so. Despite the fact that these same Articles also require it to ensure that its funds are spent as intended, it continued lending to corrupt regimes even when it was aware that Bank funds were being siphoned off. Indeed, it has been accused of using its non-political mandate to either avoid working in controversial areas, such as corruption, or to explain away controversial work, such as lending to countries regardless of human rights violations. It defended this by arguing, firstly, that corruption is a political issue and therefore not part of its mandate and, secondly, that even if only a fraction of aid reached a country's poor, it is still better than no aid at all. Therefore, contrary to recent claims, its new framework for combating corruption does indeed mark a departure from its past approach. Although it is part of a general process, it has accelerated greatly and moved the Bank into new areas.

Throughout this paper, I will refer to the Bank's ‘non-political mandate’. Unlike bilateral donors, it ought not to take political considerations into account when making lending decisions. Article 10 Section 10 states:

The founders – including the great political economist John Maynard Keynes – were all too aware of the relationship between politics and economics. Indeed, ‘such cognisance prompted them to emphasise the need to allow the Bank to operate as a universal, financial institution’ (Shihata, 2000, p. 165). In addition to protecting the Bank from cold-war politics, the mandate was designed to protect its reputation as a conservative, technocratic financial institution: ‘Political considerations are supposed to be irrelevant … “especially as the Bank's credibility and strength has traditionally depended on its status as a quintessential technocracy exclusively concerned with economic efficiency”’ (George and Sabelli, 1994, p. 150; Shihata, 1991).

Several authors refer to this as its ‘apolitical mandate’ (Nelson, 1995; Weaver, 2000; Fleck and Kilby, 2001), whereas the Bank refers to its ‘non-political mandate’. There is a subtle distinction here. According to the Oxford Paperback Dictionary, apolitical means ‘not political, [or] not concerned with politics’. This may describe the way the Bank used to look at development up until the 1980s; however, it now openly accepts the role that politics plays in development and impacts its own projects. Nevertheless, because of its mandate, it may be concerned with politics, but it is not allowed to work in the political sphere or to advocate one particular political system over another. This, then, is ‘non-political’ rather than ‘apolitical’, and I will refer to it as such.

The World Bank is not the only donor becoming interested in how politics and political systems impact upon development. Most observers would argue that development is itself highly political, and I would agree. Most would also argue that the Bank has always been political in its work, as it deals with national governments, development strategies, budgeting decisions, and so on. But I would also argue that there is a significant difference in assuming that it is an inherently political actor, in that it is involved in development, and seeing an explicitly political role for it in fostering democratisation movements in its recipient countries. As its corruption work has developed, it has moved closer and closer towards working on fostering democratisation movements, under the rubric of its governance and anti-corruption programmes – an explicitly political role that needs closer scrutiny.

Since the early 1990s, the World Bank has produced a great deal of research on corruption. The research is economics-led and avoids, for the most part, directly addressing overtly political issues, which it says includes ‘election processes or the structure and financing of political parties' (2000b, p. 62). This reduces democracy to the notion of freely contestable elections, a dissatisfying notion of democracy for most. The Bank's research on corruption attempts to separate the political and economic from issues like civil society. It assumes that issues like privatisation are inherently economic, ignoring political arguments about the role of the state and the provision of public services. As Fillip points out: ‘The assumed ability to separate the economic and political dimensions of governance [and corruption] is what allows the Bank to address governance issues without going beyond its mandate’ (1997, p. 70). It churns out research at an astounding rate to remind us of the economic implications of these issues and to de-emphasise the political. It is this research that drives the direction of its anti-corruption work and also clouds the issue by assuming away the negative links between economic and political liberalisation and corruption, focusing instead on only one side of the debate (Marquette, 2003; Moran, 2001; Warren, 2001; Whitehead, 2002).

In 1988, the Bank's then president Barber Conable said:

This, in itself, raises alarm bells regarding what the Bank actually sees as ‘advocating a political stance’, but it also highlights areas in which it places importance – areas of particular importance to a market economy. In an earlier paper, Williams and Young (1994) argued that the Bank's understanding, both of democracy and of governance, is intrinsically tied to its liberal roots. As they point out: ‘It has shied away from outright advocacy of democracy preferring instead to focus upon the values of liberal democracy (participation, accountability, legitimacy, and so on) and the construction of … a liberal public sphere’ (p. 88). In keeping with its liberal roots, it sees the state as providing a neutral space between the market economy and civil society, and that any deviation from this must be compatible with modernisation (pp. 88, 96). Their work raises questions about how possible it is for the Bank to break this mould and to view democratisation as the complex, indigenous process that it is.

By now, many scholars see the Bank's non-political stance as a myth, arguing that lending to nations is inherently political, especially because of the influence of powerful members such as the US (Gillies, 1996, p. 105). Miller-Adams explains:

Kapur and Webb refer to the ‘legal wriggles' needed to address corruption because of the Bank's mandate:

In a recent study of the Bank's work on legal reform, Weaver addresses the challenges that its non-political mandate poses for this work, which it claims ‘can be addressed through apolitical, technical assistance as allowed under the Bank's mandate’ (2000, p. 19). She cites Lawrence Tshuma, who writes of the inherently political nature of legal reform: ‘Despite its claims to the contrary, by advising governments on, and by lending for, law reform programmes, the Bank is involved in a process of social restructuring which involves the use of state power and is therefore political’ (p. 19). Referring to a number of studies of legal reform in Latin America, she concludes that ‘clinging to the myth of apolitical development and failing to take political factors into account may hinder the effective design and implementation of legal reform projects' (p. 20). However, it is just as dangerous to take these political factors into account using only one side of the debate, without a true, deep understanding of the complexities and potential pitfalls. The Bank risks distorting the democratic process in the countries in which it is conducting this work.

Helping Countries Reduce Corruption

Before 1997, the World Bank had never attempted to design anti-corruption programmes and had rarely addressed the issue, even in an indirect manner, within its economic and sector work. As it has admitted: ‘While the Bank has helped countries reform economic policies and strengthen public institutions for many years, its involvement in explicit anticorruption strategies is novel’ (1997, p. 3). This is the most controversial of all its anti-corruption work, both because of its experimental nature and with regard to its non-political mandate. It is with that in mind that it insists that it only works with those countries that have asked for its advice and assistance with national anti-corruption efforts. It describes its work as ‘demand driven’. This approach, a frequent strategy used by the Bank to deflect criticism of its activities, both protects it from criticism that it is interfering in recipient countries' political affairs and attempts to simplify the process of measuring political commitment.

However, the degree to which countries ‘volunteered’ is debatable. According to a number of news reports, ¹ it would appear that former Bank president Robert McNamara convinced the leaders in the first countries to volunteer – Malawi, Benin, Tanzania, Uganda, Ethiopia and Mali – to send letters to the current president, James Wolfensohn, requesting anti-corruption assistance. According to the Global Coalition for Africa, McNamara ‘visited a number of African countries to encourage them to strengthen their anti-corruption efforts' and ‘suggested that they seek the assistance of the World Bank to help them address corruption’. ² However, speaking in press conferences in Tanzania, he warned that the Bank ‘may not release funds' if corruption was not tackled (Mwambando, 1997; Mwakisyala, 1997; Observer, 1997b). Because of the importance it places on its anti-corruption work being ‘demand-driven’, it is vital that countries are not seen to have been coerced to sign up to the programme.

This further calls into question whether or not it is possible to measure political will to ensure that the programme is ‘demand-driven’. None of the participants in the Bank's pilot Anti-Corruption Core Course ³ have produced a corruption programme in their home country that did not already exist, despite this being the overall goal of the course. This may be due in part to the fact that it is questionable how many of the original countries ‘volunteered’. The Bank has not been able to successfully deal with the issue of political will, and this is likely to continue to prove problematic in work of this kind. Interestingly, it may be that the only way to ensure political will exists for anti-corruption work is to look for it in countries where there is little or no donor support. This raises questions about the likely effectiveness of the Bank's work. Is it only working in countries that already have an anti-corruption programme in place, and if so, is its work making any difference? Would countries do this work on their own, without Bank funding? If countries are actually doing this work on their own before the Bank's involvement, what added value does it bring?

The Bank used to argue that the most effective way to generate political will is to focus attention at the top, by finding ‘champions' in government. However, it found that speeches from politicians committing support do not necessarily translate into concrete action, so instead it is turning to supporting reform from the bottom up with civil society. ⁴ According to the Bank, civil society can assist the fight against corruption by ‘(a) Creating public awareness about corruption … (b) Formulating and promoting action plans to fight corruption … and (c) Monitoring governments' actions and decisions in an effort to reduce corruption’ (2002; 2000c, p. 45).

To date, the clearest conflict with the Bank's non-political mandate is this work on community empowerment and civil society. Ibrahim Shihata, the former general counsel responsible for interpreting the Articles of Agreement, allowed for work on popular participation, but only ‘in the design and implementation of a specific development project or program (as opposed to popular participation in general)’ (Shihata, 1991, p. 93). This has not been updated to allow for more general work. This is heavily value-laden work conducted by an institution that has always claimed its work is value-neutral. It assumes that certain ways of organising society are more worthy than others, while arguing that this is not an inherently political decision.

There are many methodological problems with this approach – such as definitions of civil society, civil society as a ‘smokescreen’ for further adjustment, and determining which are ‘good’ civil society partners and which are not. It is not possible to discuss these here. However, it is important to identify three key concerns regarding the Bank's work in this area. Firstly, the link between civil society and corruption is not always a positive one, as shown by Portes (1998) and Warren (2001). This work shows that civil society can actually increase corruption through ‘(a) exclusion of outsiders, (b) excess claims on group members, (c) restrictions on individual freedom, and (d) support for downward levelling norms' (Warren, 2001, p. 8). Secondly, civil society, for the Bank, is seen as a tool that can be used to empower ordinary people to take control of their own development, to hold the state accountable to its citizens and to provide for those services that the state is unable or unwilling to provide. It does not enter into its argument that the poor, once ‘empowered’, may demand an increase in state-provided services, or may even demand unequal access to goods and services. Lastly, funding nongovernmental organisations (NGOs) and other civil society groups to ‘empower’ citizens to hold the government to account also raises questions of sovereignty and the Bank's non-political mandate (Nelson, 1995, pp. 112-41). Transparency International is the most often-cited civil society group with which the Bank works on corruption, but many others – including, for example, the National Democratic Institute and the Institute for Democracy and Electoral Assistance – would have been considered off-limits for Bank funding in the recent past (World Bank, 2000d, pp. 31-2).

Fighting Corruption or Promoting Democratisation?

After the fall of communism in the late 1980s, the World Bank joined other donors in promoting the idea that good governance was a precondition for economic growth, including accountable and transparent decision-making, an independent judiciary, a free press, increased popular participation through a vital civil society and, finally, a commitment to combating corruption. Many donors now require a commitment to democratisation as a condition of aid, which includes respect for the principles listed above, but only the World Bank has stopped short of calling this ‘democracy’.

However, in recent texts on anti-corruption work, the Bank has become much more explicit in referring to the role of politics in combating corruption. A report on corruption in transition countries highlights the importance of political competition for increasing the accountability of leaders (World Bank, 2000c, pp. 40–1). The same report defines political accountability as referring to ‘the constraints placed on the behaviour of politicians and public officials by organisations and constituencies having the power to apply sanctions to them’ (p. xxii). In other words, it is advocating the need for competitive elections to combat corruption.

Looking at public sector reform, another recent Bank document highlights three important ‘drivers' of reform: (i) rules and restraints (including constitutional separation of powers); (ii) participation (including representative decision-making and political oversight); and (iii) competition (including political competition) (2000b, p. 23). However, ‘It is not being suggested that active involvement to build all of these types of institutions falls within the Bank's mandate’ (p. 23). Clearly, this is an important caveat, given that it is proposing liberal democracy as a means of reforming the public sector. Referring to decentralisation as important for fostering participation, the report states that ‘The political rationale for decentralisation is the desire to move decision-making closer to people to foster greater democracy. The economic rationale is based on gains in allocative efficiency’ (p. 24). One is left to guess where the Bank has learned of the ‘political rationale for decentralisation’, as there are no references available, and it does not take into account the many established democracies with highly centralised administrations, especially in Europe. It also does not take into account work done that shows that decentralisation can open up new opportunities for corruption (Carbonara, 2000; Bardhan and Mookherjee, 2001) or work that indicates a potential link between decentralisation in weak democracies and organised crime (Hess, 1998).

In the World Bank's Africa Region, it speaks of ‘Amending the constitution to rede-fine the role of the state, introduce new governance arrangements, change the machinery of government or alter the balance of power among the executive and the parliament’ (2000b, p. 77), as if these things are the same as a management restructure. Goran Hyden, who worked as a consultant for the Bank on governance issues, has asserted that governance is really like business management theory: ‘In the same way as business management theory treats the organisation as crucial to business success, the governance approach treats regime – the organisation of political relations – as essential for social and economic progress' (cited in Saul, 1997, p. 347). Herein lies the danger in trying to take the politics out of things that are inherently political, such as regime choice, participation and government structure. It is simply not possible and is likely to fail or to drive the Bank into a more explicitly political direction.

Increasingly, voices within the Bank are calling out for it to cast aside its non-political mandate and embrace democracy as a condition for Bank lending. Joseph Stiglitz, formerly the Bank's chief economist, connected its work on corruption to democratisation:

Indeed, Stiglitz calls on the Bank to ‘support democratic pluralism’ (p. 4). Another voice is the Bank's former vice-president for East Asia and the Pacific, Jean-Michel Severino. Referring to Indonesia, he said:

Furthermore, these conditions apply to all countries, not just Indonesia. Severino is also said to have acknowledged the role of Bank efforts to spread democracy (World Bank, 2000f). It could be that these were overzealous staff members speaking out of turn, but one thing is for certain: if the Bank is to require moves towards democratisation as a condition for lending, it will have to amend its Articles of Agreement. Significantly, during separate interviews with three senior Bank staff, I was told that ‘we're pushing the envelope’ on the board to approve this sort of amendment.

Speaking before a group of NGOs in 2000, Wolfensohn explained how it became interested in tackling corruption:

I would agree here that corruption is indeed an economic and social issue. I would also agree that it is not possible to address problems of equity and poverty without also addressing corruption. However, I depart from his logic when he argues that this is not political. How can it be otherwise? Shihata, referred to in the above quotation from Wolfensohn, has also highlighted his areas of particular concern – lack of competence, the Bank acting as both judge and jury to determine the quality of a country's political system, the implications for the Bank's reputation on the financial markets and the impact on the poor:

Even if the Bank were to amend its Articles, a difficult and laborious process, its entire culture would require restructuring as well. It is staffed largely by economists, and its programmes evolve out of the perceived primacy of economic concerns. A new emphasis on democracy would require that more political scientists, anthropologists and sociologists join the Bank. It would also require new products, new monitoring systems, a switch to qualitative, rather than quantitative, measurements for assessment, in addition to the acceptance of the international community as a whole that the Bank belongs in the ‘democracy game’. There have been some changes made to accommodate the needs of this new work, but it is not clear whether enough has been done, or indeed whether the changes that have already been made are appropriate given the Bank's nature as an institution.

The concern here is not just that this work is inherently political and violates the Bank's mandate, but also that the Bank may not stop here but will continue up the ladder of political conditionality. There has been an increasing ‘creep’ of the language of democratisation into its work on corruption. Indeed, an entire chapter in the 2002 World Development Report, the barometer of the changing direction of Bank strategy, is dedicated to a discussion of political institutions and, in particular, democratic institutions (World Bank, 2001). One section looks at the relationship between electoral rules and corruption, arguing that elections can act as an effective deterrent against corruption: ‘Citizens who are fed up with cronyism and corrupt politicians can express their dissatisfaction at the ballot box’ (p. 108) – providing, of course, that elections are free and fair and that electoral rules are in place to punish the corrupt and to allow political parties, new and old, to act as effective opposition (p. 109).

Although this may be true in theory, recent empirical evidence from developed countries shows that the electorate, faced with cronyism and corrupt politicians, is more likely to withdraw from the political process, often by refusing to vote (Burns and Kinder, 2000; Pharr and Putnam, 2000; Warren, 1999). There is little reason to believe that this would be different in the developing-country context. This makes elections an improbable check on corruption, in practice if not in theory. There is another concern, voiced by Richard Holbrooke, US Ambassador to the UN, referring to the 1996 elections in Bosnia, but relevant to this discussion as well: ‘Suppose the election was declared free and fair’, and those who were elected are ‘racists, fascists, separatists, who are publicly opposed to [peace and reintegration]. That is the dilemma’ (cited in Zakaria, 1997, p. 22). Democratically elected politicians can be just as bad as non-democratically elected ones. There is no guarantee, in new or transitional democracies or in established ones, that elected leaders will act with integrity.

Moreover, there is no reason to believe that democratisation in developing countries will foster economic growth or development. Cox reminds us that ‘Democratisation and “people power” can move to the right as well as to the left’, bringing a ‘danger of authoritarian populism, of reborn fascism’ (2000, p. 29). We can see moves in this direction already in Russia, where corruption is often cited as a reason to return to the ‘good old days' of authoritarian rule. On the other hand, democratisation can move to the left, with civil society calling out for renewed forms of socialism, strong trade unions, increased social welfare and protection from the ‘ravages' of structural adjustment and the free market, an outcome unlikely to find support within the Bank, despite any pretences of commitment to democracy.

Neither of these outcomes, which are just as likely or as predictable as any other, are discussed by the Bank as a possibility within the context of its anti-corruption programme. Indeed, the only potential outcome discussed is that corruption will be reduced, institutions will be strengthened, markets will flourish and development will result – largely due to its economistic approach. It is not possible to discuss the many issues it does – civil society, institution-building, free media, judicial reform, community empowerment, electoral rules, and so on – in a purely economic manner, which excludes considerations of, for example, power structures, class and ethnic divisions, and historical trajectories, so essential to a more political approach. This is a major constraint on the effectiveness of its anticorruption programme, and it will be a major constraint on any democratisation work that it undertakes if it does indeed ‘push the envelope’ on this.

Corruption, development and democracy were inextricably linked in earlier work by Huntington, who wrote that ‘[corruption's] extent correlates reasonably well with rapid social and economic modernization … [with] the development of new sources of wealth and power, and the appearance of new classes making new demands on government’ (1968, p. 59). This is due to changing norms and values, a new distinction between the public role and private interests and the expansion of government's role and activities (pp. 59–61). Because increased corruption, at least in the short term, is for Huntington a natural part of the development process, combating it will often prove counter-productive: ‘in a society where corruption is widespread the passage of strict laws against corruption serves only to multiply the opportunities for corruption’ (p. 62).

Veloso Abueva agreed that corruption early on in the development process was not only to be expected, but, in the case of a democracy, should even encouraged:

In other words, corruption may be an important part of the development process, providing access to wealth and power to those groups who may not have access otherwise, and in helping to build political institutions dependent upon patronage, such as political parties. Indeed, more recent work by Khan shows that corruption in Malaysia helped Chinese capitalists living in the country by creating an unofficial ‘tax’ on their enterprises that was transferred to the Malay majority. In doing so, Malaysia avoided many of the ethnic tensions that plague others in the region, and provided a ‘credible level of security’ for Chinese entrepreneurs and encouraged development (1998, pp. 32-5).

Perkins indicates that in weak states with a poor economy and weak civil society, ‘machine building’ ⁵ can produce strong institutions that ‘may assist in stabilizing democracy’ (2000, p. 21), even if this is not the intention of the actors. However, he adds an important caveat that this is only the case when actors need to form strong organisations to achieve their goals; if not, then corruption will have no good effects. We also have to be certain to make a distinction between vote-buying a – one-off, short-term transaction with no institutional benefits in the long term – and machine-building (p. 3).

Others examine the ways that democratisation can actually open up new opportunities for corruption. Warren looks at the way civil society, seen by the World Bank and others as vital for both democracy and fighting corruption, can actually increase corruption in certain circumstances. As we have already seen, he explains how civil society can produce negative externalities, such as corruption. He further argues that ‘corruption often increases as democratic institutions develop. This is less paradoxical than it may seem. Corruption in a democracy is often an indication that those with resources can no longer use cruder means to get their way’ (2001, p. 2).

Moran looks explicitly at the way in which the transition to democracy can create new forms of corruption. Firstly, democratisation increases political competition. This leads to the need to fund political parties and to find political support and the desire to win elections. He shows how this is called ‘money politics' in East Asia, and how existing patronage and neo-paternalistic networks have shifted to political parties in the Caribbean and Sub-Saharan Africa (2001, pp. 381–3). Secondly, democratic weak states offer new opportunities for corruption. For example, in Russia, new political groupings based on old power groupings (military, communists, criminals, bureaucrats, and so on) split the state among different interest groups. Also, the new private sector, without experience or an inherited ethical framework, has been actively involved in bribery and tax evasion (p. 383). Thirdly, democratic liberties can lead to increased crime. With the loss of the coercive nature of the state, a relaxation in border controls, bills of rights, and so on, there has been a high increase in crime in countries like South Africa, Bulgaria, Russia and Jamaica, as well as a huge growth in organised criminal activity globally (pp. 383–6). Finally, international factors can also lead to new forms of corruption. Democratisation has been rewarded with more aid, especially for civil society, and unscrupulous types have taken advantage of this. The same can be said for increased investment. Finally, trans-border crime has increased with the opening of borders (for example, Bulgaria, the Central Asian republics, the Caribbean) (pp. 388–9).

Moran reminds us that

According to Harriss-White and White: ‘Far from improving things in the short and medium term, democratisation may actually increase the sources and scale of corruption without strengthening countervailing political or institutional capacity’ (1996, p. 3). It is only with the eventual spread of substantive democracy and the expansion of real political access to excluded groups that democracy can act as a limit on corruption in the way in which the Bank and others describe.

Whitehead demonstrates how the two mechanisms in a liberal democracy that are supposed to check the abuses of power that lead to corruption – the rule of law and the electorate – are in conflict with the market economy. The rule of law, he argues, will always be under threat, because ‘it is in the nature of inter-party competition, and in the nature of the market economy, that those with money and power are always under pressure to gain as much advantage as they can’ (2002, p. 118). He dismisses the idea that citizens can effectively hold public officials to account, calling this a ‘very imprecise form of control’, and competition is not sufficient because there is no way to guarantee that the least corrupt will be elected (pp. 118-19).

My intention here is not to prove conclusively, one way or the other, the relationship between democracy, corruption and development or that corruption is always good for economic development. Instead, I am highlighting the other side of the debate to illustrate the difficulty with the World Bank's hardline position on corruption. There is a genuine lack of scholarly consensus regarding this relationship. The significance here lies in the Bank's use of one side of the debate to justify its own work on corruption. Ignoring half of this important debate leaves it theoretically stranded and without a clear mandate to push ahead with the more political aspects of its work.

Ball reminds us of early work by economists, such as Schumpeter (1942) and Downs (1957), who produced the ‘economic theory of democracy’, which ‘recasts democracy in the idiom of economics, or more specifically of neo-classical economic theory and the more recent “rational choice” research programme predicated on it’ (Ball, 1988, p. 122). Political scientists should not be surprised by the results of this work, as ‘economics is in no small part persuasive speech. That discipline's increasingly technical and formal character tends to discourage or disable critics who are not economists, even as it lends an aura of scientific legitimacy to those who speak its idiom’ (p. 136). The ‘economic theory of corruption’ put forward by the Bank is inevitably flawed by its insistence that corruption can be simply an economic issue. Even its definition of corruption lacks the nuance and depth of earlier definitions, being simply ‘the abuse of public office for private gain’ (World Bank, 1997, p. 8). ⁶ This means everything and nothing at the same time, and it allows the Bank great scope for work on corruption because it presents few limitations.

The main danger here, as I see it, is that the Bank will devalue democracy in its own right within its recipient countries. For many, democracy has value not because it will foster economic growth or allocate resources efficiently, for which there is little evidence to support claims that it does. Instead, democracy has value because it seems to be the most equitable way to organise society that we have found. But democracy is fragile, no matter how entrenched it appears. There is not clear evidence that democracy will in fact reduce levels of corruption, certainly in the short term, and if the Bank persists in ignoring the negative side of the debate, it risks weakening existing democratisation efforts. There is the need for a great deal more research on how democracy emerges and how it becomes entrenched, both historically and using comparative studies of recent experience, and the actual role corruption plays in this process, before the Bank become more involved with ‘engineering’ democracy in recipient countries.

There is the additional danger for the Bank of increased controversy, as it becomes an increasingly visible political actor closely associated with the anti-corruption agenda. Any failures could be placed at its doorstep, and not only those directly linked to a Bank project. It is one thing to ensure that Bank funds are properly accounted for, but it is an entirely different matter when the Bank plays a role in bringing down the government. In an evaluation of its new mechanisms to fight internal corruption, Richard Thornburgh highlights the potential for political volatility that its anti-corruption work could bring about (Thornburgh et al., 2000). He is concerned with Bank policy – would the Bank pursue action against a national government for misuse of its funds and, if so, how would it do so? This seems to be worrying about finding a band-aid when someone has cut off his or her arm. The concern should not be over how it will recover the funds that have been misused, but rather how it will deal with the political and economic collapse that could result from such high-level corruption and the attention brought to it by the Bank itself. In many cases – Indonesia, the Philippines, Mozambique, Kenya, Uganda, and so on – its anti-corruption activities have been tentative and confused, demanding that national governments be seen to be doing something about corruption and supporting investigations into fraud, and then pulling away at the last minute when the investigations bear fruit. It issues statements about unacceptable high-level corruption, while distancing itself from the leadership changes and political turmoil that result.

Conclusion

The World Bank has moved from earlier questions of efficiency, fungibility and the best use of donor funds to an all-out battle for the hearts and minds of the people in the developing world. This has become a moral crusade, culminating visually in the image of the Bank as a knight facing the mythical hydra of corruption on the cover of the IMF's Finance & Development in 2000. According to the editor: ‘Like the mythological hydra, corruption is a many-headed foe that insinuates into every part of the social fabric, weakens the body politic, and jeopardises prospects for economic growth’ (McDonald, 2000). This rather dramatic analogy is illustrative of how the Bank is approaching anti-corruption work – tackling its impact in every sector of its work, from public sector management to health to forestry, and so on. In order to ‘kill the beast’, it is trying to attack it at its institutional core rather than deal with one ‘head’ at a time.

The work being done within the Bank to minimise corruption in its own projects is valuable and, some would say, long overdue. There have been significant improvements in procurement, in staff training and ethics, the introduction of an anonymous hotline and protection of whistle-blowers. The new Department of Institutional Integrity is an important sign that it intends to permanently institutionalise these procedures. In addition, much of the work being done to main-stream concern with corruption into the Bank's lending is significant. Finally, the Bank has proved to be an important voice for bringing about awareness in the international sphere. It has been especially influential in appealing to those involved on the ‘supply-side’ of corruption: helping support the OECD anti-bribery convention, assisting the Financial Action Task Force to bring attention to money-laundering, calling for international standards for accountancy to assist audits, and so on.

However, the Bank needs to step back from its more controversial work on corruption and the increasing politicisation that has resulted. Even one of its biggest partners in anti-corruption work expressed concern regarding the potential for increased political conditionality and intervention in a sovereign country's political affairs. In 1996, Transparency International said: ‘We would not like to see the Bank dictating to governments and understand that it has no intention of doing so. Still less would we want to see elements of conditionality creeping in’ (Transparency International, 1996). Political conditionality has not proven effective in the past and there are still no effective measurements of political will for reform. There are no measurements available to test the effectiveness of existing donor-funded anti-corruption work, yet this work continues to become more complex and more politicised, rather than slowing down to ensure existing programmes are having a positive impact.

This is not to say that the Bank should not be concerned about corruption. It has an obligation to protect the integrity of its own funds, and reducing corruption is in the best interest of its borrowers and its other shareholders. It has been reluctant to apply real sanctions by cutting off lending to governments found to be misusing Bank funds. Even if it is willing to do this, and it has proven reluctant in the past, it is unclear whether the sanctions would prove effective or whether the punishment would prove overly harsh to the poor. More needs to be done to investigate the potential impact of such harsh measures.

This does not leave the Bank without any weapons in its arsenal against corruption. It can push more resources at its procurement division, ensuring that the bidding process is as transparent as possible; do more on-site inspections of projects; make its own documents more freely available for external review; and strengthen its existing work on public-sector reform. This work is less controversial than its work with civil society, more likely to be effective, and does not require a dramatic rethink of its Articles of Agreement and its non-political mandate. There is the danger that a ‘management approach to democracy’, which reduces democracy down to a tool for managing economic growth and restraining corrupt leaders, will undermine democracy as an ideology in new and transitional democracies, leading to a reversal to non-democratic politics. If this work is to continue, there needs to be acceptance by the international community, as well as individual recipient countries, that the World Bank should be authorised to make recommendations on democratisation.