Casamiento Indio (1931) - Alfredo Ramos Martínez (1871-1946)

When Politics Corrupts Money
16 June 2004

THE WORLD BANK has a human rights problem: it doesn't respect them enough. The bank also has a political problem: concern about global poverty, according to its president, James D. Wolfensohn, is "near a low point." Yet the bank, concerned about the second problem, seems to lack awareness of the first — to the detriment of its mission to help the world's poor.

The World Bank, which provided $18.5 billion in aid in 2003, should withhold money from governments that are antidemocratic, or that violate their people's human rights. To lend money to tyrants is to strengthen them and to become complicit when they stamp on their people's rights. To lend money to one-party states is to lock in their hegemony, and to ridicule the dignity of people outside the party. To lend money to well-kept dictators is to enslave their citizenry, who even after the dictator is gone must repay principal and interest — to the bank.

It would undoubtedly shock most rights-loving Western taxpayers to know that the bank does not consistently differentiate between democracies and dictatorships when making decisions about loans and aid. In the last decade, the bank has offered loans to dozens of countries that violate civil rights, according to organizations like Amnesty International, Human Rights Watch and the United Nations.

The bank's justification for lending to despots is contained in one word: pragmatism. The belief is that oppressed people are better off if their governments borrow money to provide socially useful services. By lending money to oppressive governments, the bank says, it is helping to make society more equal — if only a little.

Maybe, maybe not. Either way, there is no need to argue the point, because however much money the bank lends to oppressive governments (and that is plenty), there are enough poverty-stricken democracies that would gladly have it instead. Mr. Wolfensohn himself has said that if the world's total supply of foreign aid were doubled — to about $100 billion annually — poor countries could easily absorb the increase and use it to pay for projects to help reduce poverty.

If he is right and the unfulfilled needs are that extensive, then why doesn't the bank find other takers for the money it now lends to oppressive governments? The bank could easily redirect more than half its lending (say, $10 billion out of the $18.5 billion total) and still finance only a fraction of the poverty programs Mr. Wolfensohn deems worthy. The bank can find more than enough needy democracies willing to accept its aid.

Thus the bank's "pragmatic" justification to lend money to oppressive governments is absurd. It amounts to giving secretive, frequently kleptocratic dictatorships priority — before the democracies have their fill. This handicaps both the citizens and leaders who together shoulder the hard work of sustaining democracies.

Instead, the bank should devise a kind of human rights scorecard. At a minimum, it should include the civil freedoms (of expression, of the press, of women) and the social and economic freedoms (access to health, education and property). The bank should monitor these freedoms and refuse to aid any country that violates them.

By using a scorecard like this, the bank would show that governments that exclude civic participation in politics are not legitimate borrowers in their people's interest, because the people have no say. Using the scorecard would also harness the inspirational power of human rights to rekindle fading interest in the bank's work. And, not incidentally, it would probably be the most benign form of conditionality ever applied by the bank.

So why not do it? The bank's pragmatists point out that, under its charter, "only economic considerations shall be relevant" to lending decisions. But this argument proves nothing. If the leadership and governance of a prospective debtor are relevant considerations for a commercial bank, then surely they are important to the World Bank. Even if democratic economies do not always outperform oppressive ones, they are safer risks. As a report of the United Nations Development Program noted last year, "no democracy has ever performed as badly as the worst dictatorships."

Cutting loans to dictators would therefore avoid the worst economic outcomes like default and endless debt rescheduling. Had the bank practiced rights-based lending in the past, it never would have loaned money to corrupt despots like Jean-Claude Duvalier of Haiti or Mobutu Sese Seko of Zaire — loans that citizens there are still paying back. Rights-based lending would also save taxpayer money while achieving equal or better results for the world's poor.

Mr. Wolfensohn appeared to admit as much last month, when asked about the World Bank's practice of lending to dictatorships. "The easiest thing for me, for the bank," he said, "would be to say, just wait until these countries are democratic" before lending to them.

Mr. Wolfensohn is right. The bank should either produce honest reasons for giving aid to dictators and tyrants while democracies go begging, or it should do "the easiest thing" — and stop. To carry on, laden with excuses rather than principles, is not only a waste of money. It is an insult to the human rights of billions of people.

Shirin Ebadi, a law professor at the University of Tehran, won the Nobel Peace Prize for 2003. Amir Attaran is a professor of law and population health at the University of Ottawa.

Corruption is the greatest obstacle to reducing poverty. It distorts the rule of law, weakens a nation's institutional foundations, and severely affects the poor who are already the most disadvantaged members of our society.
— The World Bank, Governance Website; also FAQs: Fraud & Corruption


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