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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...

OECD Countries

Twittering your way to improved governance

Submitted by Tanya on Fri, 2009-06-05 16:47

San Francisco is setting the US standard for using technology to improve accountability.  The Mayor recently announced the launch of a 311 Call Center through Twitter. Check out the site here.  San Francisco is the first US city to roll out a major service such as this on Twitter.

The Summit of the Americas: One Eye Wide Open, Another Shut

Submitted by Kaufmann on Fri, 2009-04-17 08:54

President Obama has just written an op-ed for over a dozen newspapers throughout the Americas, in the eve of the Fifth Summit of the Americas that is about to take place in Trinidad & Tobago.

This is significant.  I care deeply about the Latin America and the rest of hemisphere, and wanted to write about the upcoming Summit.  Yet until now what we had was a draft Summit "Declaration" which the country leaders and their (Foreign Ministerial?) teams had been belaboring for a couple of years.

That draft "Declaration of Commitment of Port of Spain" is a travesty.  It is interminable and practically devoid of concreteness or substance.  It would be funny if we wouldn't be in the midst of a major economic crisis, one which is expected to hit South America particularly hard in the coming months.  Andres Oppenheimer has commented on that draft, labeling it as a joke.

 

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.

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.

 

Bailout a la Swedish? Not without transparency and tough measures

Submitted by Alfredo on Wed, 2009-01-28 20:56

With a new administration in the White House, different approaches to address the persistent financial crisis are on the table, once more.  Over the last week there's been some talking about the creation of an "aggregator bank" -also called 'bad' bank- that will buy troubled assets with part of the remaining bailout funds (TARP), aiming to take toxicity off financial institutions' balance sheets. 

An aggregator bank that eats all of the junk in the financial sector is expected to finally unfroze credit markets, and gives new life to the idea of a bailout a la Swedish.  However, the Nordic country's experience draws some specific governance lessons that go beyond separating good and bad assets, and that are applicable regardless of the technicalities, features and context that make both cases different.

 

From self regulation to government regulation: Mary Shapiro move to the SEC as a metaphor?

Submitted by Kaufmann on Tue, 2009-01-27 12:59

Mary Shapiro, unquestionably a highly qualified choice, was confirmed by the US Senate and is expected to be sworn in the next days as the new chairman of the Securities Exchange Commission (SEC).  She would literally be moving from a chief self-regulator to a chief government regulator.  Her previous position was as CEO of the Financial Industry Regulatory Authority, FINRA, the largest independent and non-governmental regulator for securities firms in the US.  In her Senate hearings, Shapiro indicated that she would give priority to the regulatory problem in the country and that she will reinvigorate the SEC enforcement divisions.  But according to a Wall Street Journal article, Shapiro showed a light regulatory touch at FINRA.

 

Ponzi Schemes in Russia, Colombia and the US: from Mavrodi to Murcia to Madoff (MMM)

Submitted by Kaufmann on Thu, 2008-12-18 08:34

Very recently we witnessed political and social unrest in Colombia due to the implosion of the DMG pyramid scheme (named after the scammer, David Murcia Guzman).  And now we got Madoff in Wall Street.  These cases today show how difficult it is sometimes to learn from the past.  Especially when past events are far way in space and time…

I have received articles from experts in Colombia who found parallels in their current case with the analysis I made long time ago on the Mavrodi’s MMM pyramid scheme collapse, which inflicted major pain on so many Russian citizens in 1994.  The focus of my old article was on the MMM Russian case.  But there were other such financial collapses caused by pyramid schemes at that time, including in Romania, and then the tragic case of Albania, in which 2,000 citizens died during the civil war that ensued.

 

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.