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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...

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Towards Better Governance by the G-20: Learning from the 'Missing' ggg-8 Countries

Submitted by Kaufmann on Fri, 2009-03-27 08:12

Consider a very different “group-of-8” countries: Botswana, Chile, Mauritius, Uruguay, New Zealand, Norway, Singapore and Switzerland.  Do they have any relevance for the G-20?  Hardly, at first.  None of them are invited to the London G-20 Summit next week.  They are not G-20 members, since neither their economic size nor their population are large enough, and they lack the global “systemic significance” of most G-20 members.  None of them belongs to the EU.  This particular "group-of-8" in fact does not really exist as a formal body.

But there is a neglected rationale for the leaders of the G-20 to pay attention to this particular set of uninvited countries.  Like the G-20, they comprise a rather diverse group of developing and developed countries from different regions of the world.  But, unlike most of the G-20, this group of eight countries have exhibited high quality of national governance.

No country is perfect, obviously.  Each one in this group of 8 industrialized and emerging economies has its own challenges. But overall their quality of governance (and recent trends) exceed those of the Group-of-20, and to an extent even those of the powerful, formal, and elite Group-of-8.

This does matter.  Not just because failures of governance (among key nations in  the G-20) played a major role in today's financial crisis.  It also matters because lessons can be drawn for short and longer term initiatives from the good governance experiences from this group of 8 small countries (in short 'ggg-8' ifor this 'good governance group'-- and not in caps, since they are small, and not a formal group...).

Capture and the Financial Crisis

Submitted by Kaufmann on Mon, 2009-03-09 17:41

There is no 'theory-independent' way of viewing reality.  We see and analyze world events through our own prism, shaped and tinted by upbringing, experiences, training and professional field of expertise. So it is not surprising that when it comes to the many explanations given for the current financial crisis, they differ greatly.

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.

 

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.

 

Illinois Governor Blagojevich: sign of endemic corruption in the US?

Submitted by Kaufmann on Thu, 2008-12-11 14:00

The new corruption scandal embroiling Illinois Governor Blagojevich is already resulting in sweeping generalizations about the hopelessly corrupt state of that State.  And commentators from other States are jumping in to suggest that their State can compete with Illinois in having such high levels of corruption. 

Wait a second.  First, let us take a world-wide perspective.  Granted, the US in general is not a model for the world in terms of control of corruption.  Countries like New Zealand and the Nordics are closer to being a model of integrity instead.  There are 18 countries rating better than the US in controlling corruption according to the Worldwide Governance Indicators.     Yet there are about 190 countries rating worse.   

 

A message from Kaufmann

Submitted by Kaufmann on Thu, 2008-12-04 16:48

Some of you may know that I am in the process of moving on from the World Bank to the Brookings Institution.  Let me also share with you the email I have just sent out to many outside friends, colleagues and partners. 

 

Dear friends, partners,

As some of you may already know, I announced internally over a month ago that I was moving on from the World Bank. I wanted to write to you directly to give you my new coordinates, to briefly share a thought, and to thank you for your continued collaboration.

How about next G-20 Summit on good governance for sound financial markets?

Submitted by Kaufmann on Wed, 2008-11-19 18:27

The first G-20 summit, focused on the financial crisis, just took place this past weekend.  When measured against expectations of such gatherings, there were some accomplishments.  Such as in trade:  the collective pledge to avoid raising any trade and investment barriers, or the promise to ‘strive’ for a deal on the stalled Doha round.  And the  summit's ‘action plan’ holds promise. 

The declaration includes a generic list of a plethora of financial sector  ‘principles’ and many areas of work.  But at least it is comprehensive in scope, touching on most of the right ‘buttons’.  It provides space to work concretely on real issues.