As long as we are talking about corruption...

The European sharks smell blood and are circling. Paul Wolfowitz, President of the World Bank, as of this writing has just received further backing from the Bush Administration. This is possibly a signal that they want him to stand tall as they push him out of the administration's sinking lifeboat. The problem, technically, is the cloud of corruption surrounding the President of the World Bank. This is somewhat problematic, as the World Bank is the OECD's anti-corruption missionary.

Someone has to carry the anti-corruption flag, as neither the Europeans, nor the Americans, are up to it. Indeed, as long as we are discussing corruption, it seems to me we should bring up some European cases to balance the scales. For example, can someone explain to me why German Chancellor Gerhardt Schroeder is not in prison? At the end of his term as Chancellor, he negotiated a gas pipline deal with the Russians that, in essence, turned over a bit more of Europe's collective energy security to Russia. He made security concessions to the Russians while representing his country at the negotiating table. According to the International Energy Agency, "the Northern Pipeline will make Germany even more dependent on Russia in terms of gas supplies." Schroeder's government even gave a €1billion guarantee to Gazprom. As a reward, when he retired he switched sides at the table, assuming chairmanship of Nord Stream. This looks to me like conflict of interest. It certainly seems as bad as many things the Bush Administration has done -- like Cheney's handling of the U.S. energy industry's interests. Then again Cheney is not in jail either. However, I am not convinced the Bush Administration deliberately sold U.S. security for profit. Rather it was collateral damage. In Schroeder's case, he quite simply sold German (and European) energy security interests to the Russians, and retired into a high-salaried job working for the other side. In a country obsessed with investigating corporate corruption, I am baffled as to how this one has stayed out of the courts. If the Germans won't do it, maybe the Poles could put him in jail. Yes, a German sold Polish security to the Russians (again...)

Another, more current question, relates to British bribery. Britain belongs to the OECD, and has signed onto the OECD Anti-Bribery Convention. In December, the Serious Fraud Office in Britain closed an inquiry into rather obvious allegations that BAE had paid substantial bribes linked to sales in Saudi Arabia. The Blair government pressed for closure of the investigation (something that surely involved Blair himself) because the investigation "risked jeopardizing relations with the Saudis." In other words, notwithstanding treaty obligations against corruption, when it comes to British defense exports to the Middle East, corruption is ok. This is not over. Since Swiss bank accounts were used to pay the bribes, the Swiss are investigating. The U.S. Congress is also investigating, and may use the issue to block further BAE expansion into the U.S. defense market. In addition, while the Saudi arms deal, known as al-Yamamah and worth an estimated £40 billion, stretched over many years, there are new allegations involving BAE and Saab (yes, even the squeaky clean the Swedes are now caught up in corruption scandals) sales of Griepen fighters. In this case prosecutors from Austria, Britain, the Czech Republic, Sweden and Switzerland are all working on the investigation. So here is a case where a British company, BAE, is having problems with its moral image (if not its behavior -- a decision for the courts). And in this case the British Prime Minister has apparently intervened to extricate the company from a corruption investigation. It has not helped national security, as the company will be punished in OECD markets for its behavior in the Middle East.

And while we are at it, in addition to Swedes (Saab), the British Prime Minister, and the former German Chancellor, we can add the former Presidents Chirac of France and Berlusconi of Italy, who both avoided criminal prosecution for corruption by virture of the office they held.

This whole epidose is steeped in irony. In retrospect it is clearly ironic that the Republicans, under the Clinton Administration, felt free to go after President Clinton for what was clearly personal behavior problems. This was somehow reprehensible. Under such a standard, it is ironic that the Bush Whitehouse characterizes the apparent rule-breaking of Wolfowitz as somehow ok. If you remember the spectacle of an impeachment surrounding a sexual peccadillo, it is hard to know how to take it when Press Secretary Tony Snow says Wolfowitz "made mistakes," but shouldn't be fired. It is also hard to know how to take it when the European pot calls the American kettle black. Lewis Carrol would approve.

Further reading

1. The OECD Anti-Bribery Convention
2.Swiss confirm BAE inquiry
3.Schroeder's Gazprom pipeline job provokes storm
4.Schroeder Govt Guaranteed Credit for Russia’s Gazprom, Report Confirmed
5. International Energy Agency Speaks Out Against Russia’s Baltic Gas Pipeline
6. Chirac after the presidency
7. Italian PM's fraud trial resumes
8. Today's Idiom = "The Pot Calling The Kettle Black"
9.Through the Looking Glass
10.Wolfowitz barricades self in World Bank office.
11. The Daily Show spin on the Wolfowitz scandal

Endnotes:

1/ "What sort of things do you remember best!" Alice ventured to ask.

"Oh, things that happened the week after next," the Queen replied in a careless tone. "For instance, now," she went on, sticking a large piece of plaster on her finger as she spoke, "there's the King's messenger. He's in prison now, being punished: and the trial doesn't even begin till next Wednesday: and of course the crime comes last of all."

Lewis Carroll, Through the Looking Glass: Chapter 5 "Wood and Water", M. F. Mansfield & A. Wessels: New York 1899 .

Sometimes appearances are everything

The headlines following the G-7 and World Bank-IMF meetings this last week were not all about global imbalances, the changing role of the World Bank in poverty reduction, growing unease about globalization, or calls for reform of the IMF. No, they have also been focused on the relationship of the president of the World Bank to a former Bank employee, and the manner in which he has handled the appearance of conflict of interest in managing the departure of this romantic interest when he took over at the Bank. Who needs substance, when you can have scandal?

If you work for the U.S. government as a civil servant, you need to follow a certain set of rules guiding ethical behavior. If you look closely at those rules, you will find that they do not really proscribe behavior that is unethical. Rather the rules proscribe the appearance of such behavior. I was, at one time, baffled by those rules. They are made by a Congress who generally and explicitly exempt themselves from those same ethics rules (so that they can and do continue to run ethically amok, individually and collectively.) Yet the rules do serve a purpose. For the electorate to have faith in the workings of the government, they must believe it is ethical and fair. An ethical and fair regime populated by career employees that appear corrupt will be crippled in its operations. You can vote out unethical congressman and parliamentarians. A functioning civil service shows much more inertia in terms of (potential and actual) employee turnover. For this reason, it is a necessary though not efficient condition that civil servants appear to be free of corruption, regardless of the tabloid-based entertainment provided by politicians. Indeed, if a politician wants to go after the civil service, he will attack its reputation in this regard individually or collectively (witness Reagan's attack on the U.S. civil service in the 1980s, and the Valerie Plame affair more recently).

In a similar vein, international civil servants must also appear operationally honest. This is especially true for the man/woman tasked with running the World Bank. The Bank, among other tasks, has appointed itself a promoter of good governance. It cannot do this, and has no credibility if it tries, under present circumstances. If there is the appearance of corruption around its top employee -- aka Bank President Paul Wolfowitz -- then that employee must go. If he is going to stay, it simply has to be the case that doubts about his ethical character can be fully removed. If they cannot, then regardless of the actual ethical qualities of the situation, he must go.

Now maybe the Bush administration is playing a deep game, and their strategy is to attack the World Bank from within by piling it from the top down with corrupt leadership. I do not believe they are capable of actually managing such a game (though if they were they would try). But regardless of whether the present situation is deliberate or accidental, it must end.