Problem of World Bank
EAP2
10/04/05
Tai Tanaka
Research paper
Abstract
The World Bank had corruption. They underestimated their interest and they kept the money. In addition to that, they loaned a lot of money to developing countries without good projects. In this research paper, I suggest three things that should be done to protect the World Bank from corruption and help them contribute to eliminating poverty. First, the World Bank should retrieve their reputation. Second, they should make new laws to eradicate corruption and to relieve employees from the pressure that they have to loan a lot of money. Last, the World Bank should change their strategies that help developing countries eliminate poverty.
According to web page, The World Bank, the World Bank was established on July 1st, 1944, during a conference of 44 countries in Bretton Woods, New Hampshire, during World War II. They initially helped rebuild Europe after the war. Its first loan of $250 million was to France in 1947 for post-war reconstruction. The World Bank supports developing countries in the world in terms of a vital source of finance and techniques. They are not a real bank in the common sense. They consist of two unique development institutions which are owned by 184 member countries - the International Bank for Reconstruction and Development (IBRD) and the international Development Association (IDA). Each institution plays a different but supportive role to reduce poverty which is their mission and the improvement of living standards. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. “Together they provide low-interest loans, interest-free credit and grants to developing countries for education, health, infrastructure, communications and other many other purposes”(The World Bank, about us). They manage the World Bank with money collected by each nation as tax.
According to Emad Mekay (2005), The World Bank, which lent 20 billion dollars for many products last year, was exposed in that they underestimated the total expense. They controlled the accounting system and offset the gap by using special adjustment. As a result of that, they got much money, tens of million dollars, which is paid by each nation as tax. In addition, they retaliated against whistleblowers by cooperating with the Department of Institutional Integrity (INT). One employee was mistreated without an appropriate reason. In order to eliminate World Bank corruption, a senator suggested a new law (Lugar, 2005). The new law is as follows: People who have authority should show their finances to us; employees don’t have to care about the total money that they loan. They focus on the events’ quality and effects; and the law has strict punishments for offenders. Though the World Bank has been corrupt, they have a lot of special knowledge about poverty. So they are still needed to eradicate poverty.
I think three things should be done to eliminate the World Bank problems and to make it work well.
First, they should reflect on and regret what they did in order to recover their reputation. I think if the World Bank doesn’t recognize their faults and keeps their attitude strong, people will be angrier against them. The most important thing to manage a corporation is trust. Corporations can’t do anything without trust. If they lose their trust completely, who will pay money for them? The World Bank is the same as a corporation. I asked my classmates whether they want to pay money for the World Bank. Most of them don’t want to pay money for it because the World Bank had corruption and we can’t see the improvement in the developing countries. My opinion is the same as that of my classmates. If one of your friends tells some lies, do you believe him next time? You probably have suspicious about what he says. But from that time, if he never tells a lie for a long time, you will forget that he was a liar. So what the World Bank can do to retrieve trust is just work honestly and to show us the improvement in the developing countries. It takes a long time to retrieve trust.
Actually I don’t know how the World Bank helps developing countries improve their economy and industry because these kinds of programs are not often broadcast on television. And I think many people don’t know what they are doing, either. That is one of the reasons why the World Bank offered poor plans and had corruption. They didn’t have to care about the consequence of the plan, because few people criticized them, even if the plan had failed. It was the same with corruption. Not so many people checked their account system. In terms of showing us what the World Bank is doing for the developing countries, the plans that they offer developing countries entail responsibility. They will feel that they can’t fail on the plan, so they will spend much time to make a good plan. As a result, they will be able to retrieve their reputation without notice.
Showing us the progress of developing countries’ situation and working honestly are the best ways to retrieve their reputation.
Second, the World Bank should eliminate corruption. “Corruption is one of the challenges. Eliminating corruption is a major challenge” (Hindustan Times, 2005, par. 1). Corruption is now a serious problem. Hindustan Times (2005, par. 1) also said, “this problem is for all the developing countries.” I think this means that no matter when and no matter where the World Bank loans money, some of money is spent for corruption. Developing countries can’t improve with corruption. The project must not go well with corruption. Dan Johnson (2002, par. 2) said, “Corrupt behavior reduces economic growth and can destabilize governments. It results in over-invoicing and substandard work by contractors and reduces tax revenues.”
A new law is needed to eliminate corruption. Richard G. Lugar (2005), who is a senator, proposed ideas of a new law. The new law covers strict punishments and makes executives have to show taxpayers their finances. I think these ideas work to eliminate corruption. When strict punishments are enacted, people will hesitate to do something which is against the law, so they can overcome their greed. In addition, because people who have authority have to show their finances to the taxpayers, they don’t have a chance to have corruption. Mainly, corruption is caused by executives. To prevent executives from having corruption will lead to a world without corruption.
Certainly those ideas I mentioned above will work well against corruption. But in the next decade or so, I wonder if the same problem may be going to happen because somebody may be going to find the way to have corruption. Every law has a bypass. If people find a way to get money illegally, can they keep their mind? Someone may yes, but someone may not. Some people can’t control themselves in front of big amounts of money. People are not perfect. Such are people. Even strict punishments will not work. So I suggest that the law should be changed slightly along with social flow and the World Bank system. To keep the same law is not good idea. Some day the same law will not work in the future.
Finally, the World Bank should contribute to eliminating poverty because it was built for it. They have a lot of expertise in poverty. They have to use it for poor people. Expertise is not for corruption. They can manage much money that is paid as tax. They betrayed the taxpayer as well as developing countries. People pay money for the World Bank because they hope poverty will be eradicated. So I think the World Bank has an obligation to eradicate poverty. What they can do now is to make a good project that leads developing countries to a bright future. They have to think of the countries’ benefit rather than the World Bank’s.
In the past, employees loaned a lot of money to developing countries without a good project. They had to loan money to promote their position or to keep their position. They had to achieve the workload that was imposed by superiors. That was why a lot of projects that the World Bank offered to developing countries failed. It was more important for employees to get good evaluation from their superior than to improve developing countries’ condition. Their job was not to succeed the project but to loan money.
New concepts that employee can make good projects for developing countries are needed. The new law that Richard G. Lugar (2005) proposed covers this need as well as eliminating corruption. The new law relieved the employees from loaning money without a good plan. In other words, they don’t have to feel pressure to loan money, they don’t have a strict workload, and they don’t have to worry about demotion which is only evaluated by amount of money they loaned. Due to the new law, they can spend a lot of time to make a good plan. They can afford to think about only developing countries. By using the new law, the number of failed plans will be reduced, and the economies economy in developing countries will progress.
Then, what kind of projects will help those countries? The Pakistan Newswire (2005, par. 1) said, “Balance between economic growth and social programs are key to successful poverty reduction.” This means that when the economy is not high enough, it has no meaning to adopt high technology from foreign countries because they neither need nor use such a high skill in daily life. They need just skills which match their life. So the World Bank should make a project which matches each developing country. Certainly, this is a good way to reduce poverty, but not enough. I have heard about the strategy of the International Monetary Fund (IMF). They lent a lot of money to developing countries with short-term contract and high interest rate. But it takes a long time to get profit from the new project. So many developing countries could not pay back money and have suffered from the debt and high interest rate. So in addition to the balance between economic growth and social programs, long-term contract and low interest rate are needed.
I think the World Bank will change their system and work well for developing countries. Personally, I want to see the progress of the developing countries through the World Bank contribution after I had researched about it. I also pay a little money for it as tax. When poverty is reduced, I will be happy. But I still have a little suspicion whether the World Bank will not have corruption. If the same mistake occurs, it will be time to collapse the World Bank.
Bibliography
Hindustan Times (2005, Aug. 18). Corruption is biggest challenge before Pak, says World Bank chief. USA Today. Retrieved from Lexis-Nexis, Sep. 27, 2005.
Johnson, D. (2002, Mar./Apr.). Progress Against Corruption. In Maidment F. (Ed.), International Business (pp. 101,102). Dubuque, IA: McGraw-Hill/Dushkin.
Lugar, R. G. (2005, July 1). Loan corruption control. USA Today. Retrieved from Lexis-Nexis, Sep. 6, 2005. p. A19.
Mekay, E. (2005, Mar. 14). Congress to probe World Bank accounting ‘problems’. USA Today. Retrieved from Lexis-Nexis, Aug. 30, 2005.
The Pakistan Newswire (2005, May 25). Balance of economic growth, social programs key to successful poverty reduction. USA Today. Retrieved from Lexis-Nexis, Sep. 27, 2005.
The World Bank. Retrieved from http://www.worldbank.org/ Oct. 4, 2005.