The recent passing of James Wolfensohn, president of the World Bank from 1995 to 2005, offers a moment to reflect on global progress in the fight against corruption. That his 1996 speech decrying the “cancer of corruption” broke a taboo offers a benchmark for how far we’ve come as we mark this year’s International Anti-Corruption Day.
Today, governments and international financial institutions broadly recognize corruption’s heavy price and, along with good governance advocates, have developed a growing toolbox for fighting it. Recent decades have seen the proliferation of global standards like the Extractives Industry Transparency Initiative; new financial and corporate transparency laws to stem money laundering; more robust anti-corruption conditions attached to aid and lending; and innovations in investigating corruption and returning stolen assets.
Yet a fundamental problem that underlies corruption—the systems that allow for a fluid transfer of public assets from the many to the few—continues unabated. Across the globe, inequality has soared.
While there are many reasons for this, one contributing factor may be that the fight against corruption has been too narrowly focused. Much of the attention in anti-corruption efforts has been on illicit abuse of office—bribes and bogus companies and blatant conflicts of interest that divert public money into private accounts. Yet the power at the heart of politics’ intersection with business interests is the ability to shape legal and economic systems to benefit the very few at the cost of the general public.
The economic crisis roiling Lebanon is a good example. Acts of corruption that violate the law are a serious problem, but the proximate cause of the current crisis was both perfectly legal and fantastically corrupt. What appeared to be a miraculous stretch of economic stability was in fact a Ponzi scheme of sorts, in which local banks lured wealthy depositors with high interest rates, and then lent their deposits to Lebanon’s central bank at high interest rates. Wealthy depositors and banks made fortunes off this scheme, until it inevitably came crashing down when the government ran out of money to continue servicing the debt.
Within months of the crash, poverty and unemployment swelled, even as the cost of food and other necessities in the country skyrocketed. Three in four people in Lebanon need aid and many already face starvation.
Are the profits Lebanese high-value depositors and bankers squirreled away from this scheme considered illicit funds? Here’s to hoping we can soon mark an International Anti-Corruption Day where they would be.