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This is the World Bank's blog on governance and anti-corruption. It aims at providing a space for debate and knowledge sharing on this critical field of development. | Learn more...

February 2009

Global Integrity's Grand Corruption Watch List and economic stimulus packages

Submitted by Nathaniel Heller on Fri, 2009-02-27 17:31

As Dani Kaufmann and others on this blog have rightly pointed out, the issues of “grand corruption” and “state capture” are increasingly being viewed as central to promoting more accountable and transparent governments, whether in the developing world or in wealthier countries.  The West has little to show to the developing world by way of successful models, and all countries clearly have plenty of homework to do when it comes to curbing the influence of special interests on the policy process.

In the Global Integrity Report: 2008, we created our first ever Grand Corruption Watch List. This list identifies 13 countries with exceptionally weak anti-corruption safeguards in key areas that lead us to worry about the potential for large-scale theft of public resources.  As national bailout programs and stimulus packages are being rolled out worldwide, these are the countries to keep a close eye on for disappearing funds at the highest levels of government.

Global Integrity Index: looking around the black box of corruption

Submitted by Alfredo on Fri, 2009-02-20 15:40

A couple of days ago, Global Integrity launched its Global Integrity Index 2008, which assesses whether or not key national anti-corruption mechanisms are set in place, work properly and are accessible to citizens to hold governments accountable. 

Different from other governance measurements, this index and the scorecard doesn't try looking into the black box of corruption or the perceptions about it.  Instead, the approach is to look at the inputs and outputs coming in and out of the box, trying to show the difference between de jure and de facto institutional realities of countries and how political economy dynamics within them matter.

From Madoff to Stanford Ponzi, from SEC to Congress: in dire need of political reforms

Submitted by Kaufmann on Wed, 2009-02-18 12:25

Another Ponzi scheme has allegedly been uncovered now, led by the Texas Financier R. A. Stanford, who may have swindled about 50,000 investors out of US $8 billion, or so.  The Feds have raided his house of cards but were having a hard time finding him. 

At US $50 billion, Madoff may have stood out because of the sheer magnitude of his scam.  But obviously he is not alone in large Ponzi schemes, not even within the US.  As global financial conditions have continued to deteriorate, the nakedness of those emperors without clothes is starkly exposed. 

But like the case of Madoff, this case also raises questions about whether ‘the SEC was asleep at the switch’ in this case as well.  Evidently allegations of fraud (and possible drug money laundering) have been made against Stanford over the past decade.  Yet the SEC took belated action very recently only after two former employees filed a lawsuit in civil court.

 

Open Budget Index and the need of transparency in government spending

Submitted by Alfredo on Mon, 2009-02-09 16:52

Last week the International Budget Partnership (IBP) released its 2008 version of the Open Budget Index (OBI), which analyzes budget transparency in 85 countries all around the world.   Among its main findings, the OBI shows that the level of transparency in the budgetary process is deporable in most of the evaluated countries -only 5 percent of them provide adequate information on spending to the public, while almost 30 percent of them provide very few or any information at all.

Although a group of countries are moving forward on this matter, the current state of budget transparency opens the door to waste and misappropriation of public funds in most places.   This situation is and will always be delicate, but in this time of expansionary and stimulus policies, an appropriate disclosure of the use of resources becomes very sensitive. 

More on Lessons from Chile for the Americas during the Crisis

Submitted by Kaufmann on Thu, 2009-02-05 11:38

In my previous blog entry, I made the case that both the antecedents of the financial crisis faced by Chile in 1982, as well as the approach taken to resolve it, provide insights for countries such as the US today -suitably adapted by circumstances, size and complexity, of course.  Nonetheless, focusing on the fundamental pillars to approach the crisis comprehensively (including fiscal and monetary policies, institutional revamp, financial workouts, regulatory reforms) always ought to be a priority, rather than endless debates about whether one initiative such as a ‘bad bank’, will be the solution.  

From its more recent experience, there are further insights from Chile for the Americas. One is Chile’s consistently effective macro-economic management over the past two decades, where fiscal surpluses (a term that appears to have been excised from the US lexicon) have been the order of the day.  In fact, ‘best practice’ stabilization funds have permitted a sizeable accumulation of public funds during the ‘fat cow’ years, for judicious use during leaner times. 

 

Lessons from America for the US Financial Crisis?: the case of Chile

Submitted by Kaufmann on Mon, 2009-02-02 11:04

Forbes Magazine invited me to write an article on corruption.  Among others, I argue that the US financial crisis is a major and overdue wake-up call to the dormant anticorruption field, which for too long has focused on conventional second-order issues (here the article).   I also suggest that some humility could help: for a change, lessons from an emerging economy could be useful to the current situation in the US.  We know that the experience of Sweden in addressing their past financial crisis  offers some insights. 

But it is also important to draw on the lessons from other countries.  Let us focus on Chile, another country in the Americas (the era of equating the US with America should be over anyway).  I am getting questions about the parallels and insights from Chile for the US crisis.  Let me bring up a few points here, with some more detail than in Forbes.