World Bank's war on corruption

How can anyone question a global campaign against corruption? Graft scoffs at rule of law, dilutes a nation's wealth and market forces, degrades the environment, and frustrates citizens. And yet, such a new campaign at the World Bank, championed by president Paul Wolfowitz, deserves close scrutiny.

After nine months at the helm of an institution which lends $20 billion annually to relieve poverty in poorer nations, a controversial architect of the Iraq war has found a new cause.

"Corruption is the biggest threat to democracy since communism," Mr. Wolfowitz says. His big priority is to reduce graft in the countries where the bank does business and ensure that the bank itself is clean.

For instance, he's staffing up the bank's "integrity" unit, in part to clear a backlog of several hundred cases of alleged misconduct and corruption relating to bank projects and operations. That effort has encouraged more willingness to report suspect cases.

He's also using loans as leverage to prompt change. A sampling so far: The bank has held up $800 million in loans to Indian health programs, canceled road contracts in Bangladesh, and frozen loans to Kenya - all because of graft concerns.

Here's to the passion and cause of the Wolfowitz campaign, and to the signal his measures send. But, as with the White House's vision for transforming Iraq, the challenge with the World Bank's cleanup crusade lies with its execution - and, perhaps, unrealistic expectations for change.

In ramping up the antigraft effort, Wolfowitz acknowledges "turbulence" among staff. The loan-witholding decisions have been criticized as arbitrary, and made without input from senior managers (some of whom have left). A bank official says the campaign is still a "work in progress."

At the same time, there's a matter of balance. Just how high will Wolfowitz set the bar? Corruption is widespread. The bank shouldn't put itself on a trajectory not to lend at all (which could turn weak states into failed states), or to lose sight of its main purpose: to alleviate poverty.

Using loans to fight corruption should be just one tool in a wider effort by international bodies to tackle this deep, long-term problem. Poor countries need a variety of incentives to overcome such problems as low salaries for civil servants, who use bribes to supplement their income.

In his new book, America at the Crossroads, Francis Fukuyama concludes that domestic pressure is the most effective force for longterm, institutional reform. (That argues for the bank's decision to freeze most loans to Kenya, in concert with Kenyans protesting graft.) For external pressure to work, he says, the incentive must be huge (such as the lure of membership into the European Union) and must reward already proven reform.

Wolfowitz should be commended for a more vigorous approach to graft. But if he wants to make headway, he'll have to build up bank morale. And while it's right to aim for aboveboard bank projects, clear and consistent criteria are needed for freezing loans or canceling projects.

Most important, he must watch to see that he's striking the right balance between fighting corruption and fighting poverty. Going head-to-head with bribes and favoritism is not just a moral battle, but a logistical one.