Monday, June 18

Rated 'K' for Kleptocratic

Years ago they used to say that countries allowed to go very far into debt could end up with de facto control of private banks. Today, Meles Inc. by setting up its own country to fail (taking the whole Horn of Africa with it) and by willfully becoming a permanent beggar government - has ended up with de facto control of governmental institutions like the World Bank ... and that seems to be just fine with the World Bank.

... how the World Bank bureaucracy set Wolfowitz up to take a fall, the existential crisis of the World Bank, and the dubious business of pushing loans to despots ...
I'm your Mamma, I'm your Daddy
I'm that bureaucrat in D.C.

No free market? Real corrupt?
No problem, have some bucks

I'm your World Banker, when in need
Want some loans? Have some green

Pay me back!? Oh, you're joking
Swiss bank's fine, no one's checking

You know me, I'm your friend
Blind to killing, thick and thin

I'm your pusherman

I'm your pusherman
Pusherman lyrics from the Superfly soundtrack are mangled with apologies to Curtis Mayfield . For readers not nearing retirement age, here is a concert video of the song.


... how the World Bank bureaucracy set Wolfowitz up to take a fall ...

We certainly don't agree with Christopher Hitchens on a whole host of topics but he certainly says it as he sees it and he certainly has the World Bank figured out. The essay in Slate, "Why Wolfowitz Did Nothing Wrong" is a clear example. Sometimes one is lucky enough to come across one source that just says it just right ...

He begins a customary flurry of blows to the heads and necks of assorted pundits (sadly, not all are as committed to truth and justice as we are) whose "eagerness for prurience, the readiness for slander, and the utter want of fact-checking" would have us believe that Paul Wolfowitz and Shaha Riza were financing some sort of "shameless lasciviousness out of the public purse and the begging bowls of the wretched of the earth".

Hitchens states that it is hardly Riza's fault (no relation to THE RZA mind you) that she was working at a senior position at the World Bank when Wolfowitz, with whom she had a private adult consenting relationship, was appointed to head up the whole thing ALL THE WAY BACK in 2005. He told the Bank up front and the "ethics committee" at the Bank decided she had to leave. The committtee suggested that any disruption to her career could be made up with a salary increase at her new job. Hitchens goes on
What could be easier to understand? A highly qualified individual, compelled to leave her job for reasons entirely unconnected to her performance—and forced also to undergo bureaucratic scrutiny of her private life —is at least to be recognized with pay and promotion.

The bank's ethics czar [wrote to Wolfowitz] to say that "because the outcome is consistent with the Committee's findings and advice above, the Committee concurs with your view that this matter can be treated as closed."

Four weeks later, a personal note was added to this sanctimonious and official one. "I would like to thank you for the very open and constructive spirit of our discussions, knowing in particular the sensitivity to Shaha, who I hope will be happy in her new assignment."
Riza, a dedicated professional was likely not happy in recent months to ""be dragged through the press as if she were some Levantine concubine or nontyping "secretary," feathering a love-nest with ill-gotten gains."

She was hurt because of a new bureaucratic tradition and both she and Wolfowitz eagerly complied with every bureaucratic rule. Bureaucratic culture saw to it that at the right moment it would all be stirred up, horribly slanted and used against them. The ethics committee chair refused to let Wolfowitz recuse himself from decisions about Riza and encouraged him to help her get a new and higher paying job.

Such is the poor stuff that has made up the new World Bank Scandal of past weeks - more headlines than facts and no one much caring either way. The Wall Street Journal said that
according to bank officials, the timing of the committee's report and its conclusions have been choreographed for maximum impact in what has become a full blown campaign to persuade Wolfowitz to go. So there it is from the plotters themselves: Verdict first, trial later.
The real issue of the World Bank scandal had nothing to do with Wolfowitz and Riza. It had everything to do with vicious bureaucratic infighting defined by how Wolfowitz wanted to change business as usual at the normally unaccountable multi-billion dollar World Bank with its unaccountable and uncountable legions of generous six figure employees. The Bank's mission had kind of evolved over the decades from being a self described "vital source of financial and technical assistance to developing countries around the world" to being more of a major source of cold hard cash for corrupt dictators.

Wolfowitz began the process of changing the Bank's lending policies and began the process of his own downfall with the Bank's acts such as stopping all lending to the dictator of Uzbekistan where the "kleptocratic and megalomaniac regime" had just massacred numerous civilians. Critics noted that the break followed that of Washington with the regime. There is some degree of truth to this charge but that does not mean that more money from the taxpayers of the world should have enriched the resident dictator anyway.

In stark contrast the Bank responded to far greater massacres by the kleptocratic and megalomaniac regime of Ethiopia by ignoring the bloodshed rather firmly. Only when absolutely forced to do so the Bank gave ever so gentle indirect warnings to Meles Inc. that really just amounted to advice on how to game the system. Finally the Bank announced in essence that the mass killings of Ethiopians had probably obviated the need for further mass killings of Ethiopians - so the business of enriching that resident dictatorship could go on as usual.

Oh, and by the way, the Ethiopian dictator was near maturation at that point as Our Man in Africa. Before you get all excited about any supposed moral viewpoint of the Wolfowitz critics - note that they never had any problem with continuing to finance any dictator - they only had trouble with stopping the financing of any dictator since that could set a bad precedent.

Wolfowitz may have had geopolitics partially in mind but his Bank critics only had business in mind. That dubious business is of course pushing cash to despots under every circumstance imaginable with no definable goal in mind but the sense of importance and the sense of pleasure that comes from signing big checks of other people's hard earned money - and getting paid six figure sums for it too.

... the dubious business of pushing loans to despots ...

We wrote about the Bank's intimate relations with Meles Inc. in the post Re-Ups, the World Stash and Meles Inc. and the post "It's Not a Magic Solution". In the latter we noted the absurd statement that
the bank and the donors are re-engaging with Ethiopia but providing a much different form of assistance than before, on the theory that they can continue to aid the country's poor while refraining from bolstering the Meles regime.

Instead of lending to the national government as it usually does, the bank will provide $215 million of its new aid to hundreds of local governments.

"It's not a magic solution. It's just a completely different way of doing business," Ishac Diwan, the World Bank's country director for Ethiopia, said in an interview.
The World Bank form of re-engagement (bolstering to any rational observer) of Meles Inc. is rather worse for Ethiopians than the constructive engagement of American policy was for South African blacks in the 1980s. It is a wonder that the country director could make such a statement with a straight face but no real surprise since the entire World Bank bureaucracy exists to push cash to anyone willing to receive it who has managed to get a seat at the U.N. and to unfailingly find reasons why it should be fine under any circumstances to push yet more cash.

What kind of regime was the Bank 're-engaging' with?

Ethiopia is one of the poorest countries on earth that is cursed with one of the most corrupt and brutal regimes on earth - there is no coincidence in those facts. The despot, his politburo and the top ranks of minions in his party and his government own all of the land in the country and the economy at every level. They are the most greedy, grotesquely wealthy and most of all - unaccountably powerful aristocracy that Ethiopia has ever had.

Together they own 'private' banks and government banks, government monopolies and ruling party businesses, party and 'private' endowments, conglomerates & trusts, the entire bureaucracy at every level and all trade from the level of villages to tribal / regional / religious borders onto international borders - somehow this unholy mess is supposed to regulate itself and tax itself to produce development. By definition it cannot and the World Bank knows it.

The same system is run not by the laws of economics or by markets but rather has built into it a brutal totalitarian apparatus of secret police, tribal militias, spies, informers, propagandists, torturers and all the assorted wardens and collaborators of a prison nation. Countries without accountability and with such despotism don't develop normally. Countries divided by ethnic politics do not develop normally so imagine what happens where tribal divide and rule is the law as it is in Ethiopia.

Countries with no private property rights do not develop normally. Countries in which every economic activity is determined by political factors to the point that popular insecurity and destitution serve as the security of the regime don't develop normally. Trotsky, whose business was oppression once honestly stated that "opposition where the state owns all land [or the economy for that matter] is death by slow starvation."

Countries whose economies are so dependent on foreign money that all internal economic relations are dwarfed by aid don't develop normally. Countries where native dynamism are seen as a threat to government rule don't develop normally. Countries where all investment comes from abroad in the form of aid or remittances don't develop normally.

Countries where aid contracts go to the kleptocractic core of the very same party / government / private elite don't develop normally. Countries where pensions and pencils are all paid for by foreign budget grants don't develop normally. Countries where the only plan the government has for development rely on Western taxpayers don't develop normally.

All of the things that even manage to get built by the time funds trickle down out of the hands of Meles Inc. and the fraction of those things that are maintained once ferenji interest moves on won't develop anything. The sort of development that the Bank has in mind for Ethiopia is essentially a civil compact between Bank bureaucrats and Meles Inc. that Ethiopians have nothing to do with.

Geopolitics comes into it surely because the Bank is a political organization with a dual mission - first to serve the interests of the politicians who give it money and second to justify its existence by giving out the money to anyone who has killed their way to the top of or fought their way into the capital city of a tragic people somewhere.

Pretending that Meles Inc. will go forth and kill no more or that giving money to capos Clemenza or Pauli Galtieri is any different from giving it directly to the bosses like the Godfather himself or to Tony Soprano is simply stupid - if sincere.

Since such illogic must be insincere by definition becauses the folks at the Bank are smart - in the end one must wonder what the World Bank exists to do.

Well, assuming that intelligence and common sense or for that matter intelligence and good intentions naturally go together is clearly wrong.

... the existential crisis of the world bank ...

The folks at the Bank know very well that their way of doing business won't help anyone but themselves and the despots they deal with. After all they are rational people who would never put their own money in a place like Ethiopia or live there without the very Raj like trappings of international bureaucratic life.

The source of all the billions that the Bank hands out is the hard work of Donor nation taxpayers who live in systems that allow them to be secure and benefit from their own labors. The Bank sees no problem with assuring that Ethiopians are denied those same opportunities.

The main factor in all of this is low expectations. When the Bank quotes development figures from a government like that of Meles they all know it is all lies but accept it and don't question further because to do so would bring into question their own raison d'etre of institutional and personal interests. Ethiopians are already working hard, they just want to be working for the future like billions of other humans instead of barely surviving.

To expect more from Ethiopian government or for Ethiopians would mean the Bank and the concept of aid in the most existential sense would become brought into question. Basically, Ethiopians have to be satisfied with the government the Bank is busy bolstering, they should not think too far above their position as hostages of the regime and subjects in both senses of endless reams (bytes today we suppose) of bureaucratic reportage.

In absolute terms and in per capita terms, Ethiopia gets less foreign direct investment than almost any other country on earth. In other words, FDI in Ethiopa is at rock bottom. FDI in Ethiopia could be more accurately described as subterranean since Meles Inc. is busy investing money abroad. To rephrase the past sentences, FDI in Ethiopia is for all practical purposes non-existent except for those very few who have particular emotional ties or a particular confidence based on political factors or who just have money to burn.

After all, who the hell else would invest in a country self defined as a 'revolutionary democracy' Since our first post on the subject of the guiding Albanian Communist inspired official ideology of Meles Inc., it has only been mentioned in English once and we take full credit for that. Revolutionary Democracy remains in the title of the government of Meles Inc and is endlessly repeated in Ethiopia's native languages.

The few shareholders of Meles Inc. are well aware of the absurdity of their economics and why there is a lack of FDI. That is why they own so much property, run businesses and have bank acccounts abroad. Ultimately, in the Ethiopia they have created for themselves, they themselves feel insecure about property and realize that aside from foreign inputs yet to be tapped such as the Millenium Development Goals, that they have squeezed the country dry already.

There is a big problem with so much bureaucratically dispersed funds from abroad and an absolute dearth of privately dispersed funds from abroad or confidently generated funds at home. Namely, that every country that has ever managed to escape 'poor, nasty and brutish' lives for its people did so with high levels of FDI and comfortable domestic investment environments.


Foreign aid has never been a substitute and it never will be - actually past a certain point it hurts poor people far more than it could imaginably help them. As one writer put it Ethiopians already have the most important part of the necessary combination above, the human mind. All they need now is a government not threatened by their doing well and ferenjis who don't think Meles Inc. is the best Ethiopian can do.

This is all a crisis not for Ethiopians but also for the World Bank. In the words of the New York Times
clientitis and outright corruption have historically been real problems at the bnk - too many loans have been approved for no better reason than to keep the borrowing government happy and too few questions asked abouot how the bank's money has actually been used.

The bank lends some $23 billion a year to poor countries, and is currently trying to raise $30 billion to finance new loans to the poorest among them. It cannot go on asking taxpayers in the developed world to underwrite its activities without demanding transparent accounting and public accountability for how its money is used.
Clientitis here refers to the inclination of many officials to take on and internalize the aims and views of the recipient or client government. The NYT, like everyone else, uses the term loans here. Like everyone else they don't mean it. What is being talked about here and everywhere the World Bank comes up is giving away money. Only countries who don't need the Banks help because they are well run are actually expected to pay the Bank back in any way.

The culture of the World Bank is very harsh to whistleblowers, is arrogant to donor governments that want answers, does not investigate corruption anywhere and rewards only bureaucratic getting along and handing out cash - no questions asked. Follow up on money spent and programs paid for as well as review of projects planned is poor to non-existent.

Wolfowitz tried to change a very little bit of that and got slammed in the process. He even appealed at one point quite specifially to African governments who he felt might stand up for him. Despite having re-engaged with Meles Inc. during the dark days when other donors talked of abandoning Ethiopia's tyrant, Wolfowitz was met with a stony silence.

That silence was predicated on staying on the winning side. Meles who rose to the top of a revolutionary party with murder and purges while not too busy lying and scheming was not about to let sentiment take him off the winning team. A winning side that would not just make excuses for Meles based on geopolitics but that would never question the concept of financing thugs like Meles to begin with.

If you want to imagine what kind of essential corruption there is at the World Bank imagine all of the self justification institutionally and careerism individually that goes along with a development mission that logic and history have left behind until all that is left is just handing out money.

At some point recently the World Bank actually wanted to change itself in response to a competitive environment for loans to countries that were actually developing. The competitors being worried about were private lenders! How ridiculous but how sensible that the Bank could consider itself as comptetition to actual businesses who had to be efficient and have sensible lending policies to survive. A lending world run by private lenders would be the sensible goal of any sensible development institution.

But that would amount to expecting the Bank to admitting its mission was being wrapped up aside from the occassional crisis in the rational world and the perpetual crisis in the world of dictators. If you gave a bureaucrat of any origin the job of making sure that the world's beaches had enough sand - all the sand would be gone in a few years except for those next to the vacation homes of the politically powerful.

Picture this - corrupt governments abroad (most less brutal than Meles Inc. but bad enough anyway) who are dictatorially unaccountable to no one at all and who are being handed billions in cash directly or being given a chance to have billions in cash pass through their fingers - all because their people are poor ... poor because their government is brutal and corrupt ... etc. etc.

Does that make any sense? Meles is being rewarded for stealing from Ethiopians and keeping them poor & starving.

Over all of these decades we are talking about hundreds of billions of dollars that have produced far less development than sensible or civilized government could have with common sense and less aid. Indeed, they have actually furthered the aims of some bad governments such as Ethiopia's.

With all of that cash floating around in an un-natural and artificial economic / political environment like that inhabited by the bureaucracy of the World Bank and upper reaches of dictatorships - is it possible in any person's imagination that considerable sums (billions) have not found their way back to the bank accounts of somev World Bank / donor government officials who make the decisions and write the checks to begin with?

It doesn't take but a few bad apples in such a time and place to make the whole business rotten. The bad apples wouldn't even have to actually steal any really. Just looking the other way and keeping it all going is bad enough all by itself.

Of course the World Bank is in very bad shape as an institution and of course it bolsters corrupt dictators. With that much cash floating around and a culture of handing out cash to thugs with no questions asked - most would become corrupt.

Given time at the World Bank it would be impossible to trust Gandhi, Martin Luther King, Mother Theresa or any host of saints and angels with anyone's aid project or wallet for that matter. Not to mention the average human being ... not to mention even your average bureaucrat either.


bad monkey

Let us try this silly and rather tortured, but to an imaginative friend of ours, incredibly revealing analogy ...

... imagine a forest where a very naughty monkey is busy ripping out all of the banana trees to keep for himself ... the same monkey is rewarded by his trainer everytime he steals bananas from people ... it is not that simple though - you see, the more people are starved of bananas, the more opportunity there is for the monkey to get stuffed with bananas ...

... to the shock of the monkey, whoever the trainer works for - just keeps handing out loose bananas ... the monkey even gets to be in charge of handing out bananas ... no one is paying attention to who gets to eat nor how much nor about how many people the monkey bites when he feels like it ...

... of course the monkey-trainer relationship was not founded for the purpose of stealing bananas - on the contrary it was founded for the purpose of making sure everyone got plenty of bananas ... and sure the monkey has never been explicity told to steal bananas ...

... but - the monkey knows he will always get rewarded for stealing, so he keeps stealing bananas ... and, whose to know if the trainer gets some bananas kicked back every now and again ... who will mind if the monkey puts in a good word on the trainer's behalf?

... It is not like anyone's getting hurt but the people - if they wanted something different it is their fault by being so banana-less to begin with ...

... pretty soon the monkey and the trainer are partners and sometimes the monkey gets to tell the trainer what to do ... the banana givers are just fine because they would never let a bad monkey take their trees and as for the people ... well, they just get hungrier and hungrier ...

Imagine our not so human cousin in primate-dom above (actually not a monkey but a chimp, but you get the idea - source) in a Saville Row suit hanging out at the United Nations with the representatives of civilized governments from every continent who actually care about their people. Or imagine him chilling at the G-8 summit with the most powerful men on earth.

They all know he is a bad monkey who bites people and steals bananas - but just right now he is a somewhat useful bad monkey - and the the pushermen at the World Bank help to pay him off.


-Re-Ups, the World Stash and Meles Inc.
-"It's Not a Magic Solution"

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