CAPITALISM'S ACHILLES HEEL Dirty Money and How to

“I Don’t Understand” and “Don’t Tell Anyone” 251
volunteers proved to be amazingly short. Then the view emerged from the
Bank that “you don’t fight corruption by fighting corruption,” meaning that
you fight it by strengthening the economies of poor countries so that incentives
for corruption dissipate. This served to bring Bank officials back into
their comfort zone—economic development.
There are two things wrong with this position. First, a country’s level of
corruption is not correlated with poverty. Julius Nyerere’s Tanzania in the
1960s and 1970s was dirt poor, but it was not correspondingly corrupt.
There was some bribery and intimidation at the rural levels, but he ran a
clean central government. Admired by Robert McNamara and hordes of
Scandinavian aid officials, Nyerere’s socialist economic policies were a disaster
but not because he and his ministers were robbing the treasury. Poverty
and corruption were not in league during his presidency.
Contrast this with Saudi Arabia, garishly rich and without doubt one of
the most corrupt countries in the world. It’s a kingdom, and the only time
corruption is frowned upon is when the level is so egregious as to offend the
king. Other than this, most anything goes. A banker friend of mine catering
to the overseas interests of Saudi civil servants told me that, on average,
high-level bureaucratic officials have between $10 million and $30 million
in external assets, accumulated primarily through kickbacks and payoffs
from foreigners. Of course, no self-respecting minister at the very highest
appointed level would think of having anything less than $50 or $100 million
for starters.
Corruption is not an inevitable product of poverty. It is rooted in the
weak rule of law. Good legislation and effective judiciaries in poor countries
curtail corruption. Bad legislation and ineffective judiciaries in rich countries
promote corruption.
The second flaw in the World Bank’s understanding of this issue is the
notion often heard that corruption has to be fought from the bottom up.
Pay the military and police more, and they won’t subject citizens to shakedowns.
Raise civil service pay, and demands for bribes will decline. Not correct.
As long as top government officials are thought to be corrupt, nothing
done at lower levels will effectively curtail corruption. The more nuanced
view is that the fight against this scourge has to be balanced, addressing all
levels of society simultaneously. This sounds quite reasonable and is again
incorrect. As long as the top is corrupt or seen to be corrupt, the so-called
balanced approach won’t work either.