Newsletter info ( https://www.ft.com/content/ad264511-9603-4651-9b73-cc5ef469dfe3)
The financial institution responsible for development aid to the poorest countries has tried to censor an internal publication with thunderous conclusions.
"Misappropriation of foreign aid by elites. Proof of offshore bank accounts", the publication questions the effectiveness of the World Bank’s action. Development aid payments from the international financial institution fuel part of the corruption of poor countries. For the benefit of Western financial centers - and therefore for the benefit of richer countries.
The World Bank tried to censor the study
The "Elite Capture of Foreign Aid" study in question successfully passed an internal validity assessment three months ago.
And last week's resignation from the institution’s chief economist, Penny Goldberg, was explained by The Economist (and in all likelihood) by the censorship of this controversial publication.
7.5% of aid, in tax havens
The results of the study - commissioned by the World Bank itself -: on average, 7.5% of the institution's payments to developing countries are diverted to tax havens like Switzerland, Luxembourg, and Singapore.
A share that climbs to 15% for the 7 most assisted countries - when World Bank aid represents at least 3% of gross domestic product (Uganda, Eritrean Sierra Leone, Mozambique ...).
The more a country is dependent on World Bank development assistance, the larger the payments made to offshore financial centers.
Concretely, the three researchers demonstrate that "development aid paid to poor countries systematically coincides with a sharp increase in bank deposits from the countries concerned to tax havens". And, worse, the more a country is dependent on World Bank development assistance, the larger the payments made to offshore financial centers.
However, tax evasion by multinationals alone outside of developing countries is already a major problem for developing countries - estimated at $ 200 billion a year by the International Monetary Fund. Which is in itself more than 143 billion in development aid. The consequences of this tax evasion are already as such colossal for poverty in these countries.
Public money for development aid fuels corruption
In the case of #papergate, the Western, European, Belgian taxpayer now knows that public money intended for development aid feeds corruption in the poorest countries of the planet. For the benefit of Western financial centers. To the benefit therefore, richer countries.
According to Arnaud Zacharie, secretary general of the CNCD 11.11.11: "This is what is particularly shocking and which actually shows that institutions like the World Bank did not take all the measures to ensure monitoring, to ensure the traceability of the aid it grants to the poorest countries ".
World Bank internal tensions
This is not the first sign of tensions within the World Bank, for Arnaud Zacharie: "There is a large and growing gap between the World Bank research department on the one hand, who often orders studies from academics, and on the other hand the board of directors and the presidency which implements policies. You should know that this is not the first episode in this area, since the economist previous chief (Paul Romer, Nobel economist) himself resigned after 15 months, after denouncing falsifications of data concerning Chile ".
Until now, there has been little systematic evidence of aid diversion
The debate on the effectiveness of development aid is not new. To what extent does this aid actually stimulate growth, improve human development results and reduce poverty? The study authors stress the "concern often expressed by skeptics is that this aid can be captured by the economic and political elites of poor countries". But that "so far there has been little systematic evidence of aid diversion".
So far. And for the institution, the defeat is twofold: its effectiveness in reducing poverty is deeply questioned, and it is clearly not ready to admit it. What credibility can senior World Bank leaders still boast today? The debacle is monumental.
The World Bank paper at the center of a controversy [UPDATE]
The departure of chief economist linked to research on the ties between aid and corruption.
UPDATE: One of the economists behind the research published the paper here at around 10 am UK time. It has also now been conditionally accepted for publication by the World Bank.
Penny Goldberg’s departure from the chief economist role at the World Bank is a good example of what can happen when the worlds of public officialdom and academe combine. Or in this case, clash.
At first, the relationship is mutually beneficial — the institution’s reputation is enhanced through its association with a top-drawer talent, while the academic has a chance to shape policy. More often than not, however, the honeymoon is followed by a spectacular falling out when the academic refuses to toe the party line and says the work of the institution is flawed.
We’ve seen it before — most notoriously between Joseph Stiglitz, another former World Bank chief economist, and the Bank’s sister organization, the IMF.
As The Economist reported last week, the specifics of the chief economist’s departure are not known, with Goldberg herself saying anything ahead of her return to Yale in March. However, the article links the departure with research — reviewed by her department, but allegedly blocked from publication by higher-ups — into aid granted by the Bank falling into the wrong hands:
After aid to a country spike, money departs for offshore havens. And after a sensitive paper is spiked, Penny departs for New Haven.
We managed to get hold of a copy of the paper, which dates from December 2019 but is yet to be made public.
The work is the fruits of three economists. Two — Jørgen Juel Andersen of BI Norwegian Business School and Niels Johannesen of the University of Copenhagen and CEBI — have in recent years looked at where oil wealth goes (surprise: usually into bank accounts in financial havens). The final contributor is the World Bank’s Bob Rijkers.
SOURCE: Financial Times (https://www.ft.com/content/ad264511-9603-4651-9b73-cc5ef469dfe3)