Must the IMF Quantify Grand Corruption? A Friendly-But-Skeptical Reply to Global Financial Integrity

The World Bank and IMF held their annual meetings last week, and it appears from the agenda that considerable attention was devoted to corruption—an encouraging sign that these organizations continue to treat this problem as both serious and relevant to their work. But does addressing the corruption problem effectively require that these organizations make more of an effort to quantify the problem? In a provocative post last week on Global Financial Integrity’s blog, Tom Cardamone (GFI’s President) and Maureen Heydt (GFI’s Communications Coordinator) argue that the answer is yes. In particular, they argue that the IMF should “undertake two analyses”: First the IMF “should conduct an annual assessment of grand corruption in all countries and publish the dollar value of that analysis.” Second, the IMF “should conduct an opportunity cost analysis of [] stolen assets”—calculating, for example, how many hospital beds or vaccines the stolen money could have purchased, or how many school teachers could have been hired.

This second analysis is more straightforward, and dependent on the first—once we know the dollar value of stolen assets (or grand corruption more generally), it’s not too hard to do some simple division to show how that money might otherwise have been spent. So it seems to me that the real question is whether it indeed makes sense for the IMF to produce an annual estimate, for each country, of the total amount stolen or otherwise lost to grand corruption.

I’m skeptical, despite my general enthusiasm for evidence-based policymaking/advocacy generally, and for the need for more and better quantitative data on corruption. The reasons for my skepticism are as follows: Continue reading

Lessons from Moldova’s “Theft of the Century”

One year ago today, on April 20th, 2017, a Moldovan businessman named Veaceslav Platon was sentenced to 18 years in prison. His crime? Helping to steal a billion dollars. Between 2012 and 2014, businessmen and politicians siphoned off money from Moldova’s three largest banks in a crime now known as the “Theft of the Century.” While corruption is endemic in many parts of Eastern Europe, the theft in Moldova was spectacular in its size and in the severity of its consequences.

This theft was an economic, social, and political catastrophe for Moldova. The amount of money that disappeared was similar to the amount implicated in the 1MDB scandal in Malaysia–but Malaysia’s GPD is 2.3 times the size of Moldova’s. The Moldovan government’s secret bailout of the banks cost $870 million, one-eighth of Moldova’s GDP. As a result of the theft, three of Moldova’s main banks went bankrupt and were liquidated; more banks are still under the supervision of the National Bank of Moldova, and there is persistent instability in the financial sector. And then there’s the human cost. For example, the misuse of money in the State Health Insurance Company’s accounts led to a medicine shortage in 2014-2015. During street demonstrations that ensued after the theft became public, two dozen people were injured. The political fallout from the theft has also been substantial: Confidence in the government was shattered, as every government branch and every major political party seemed implicated. Furthermore, because the party seen as most heavily involved in the theft was a pro-EU party, Moldovan support for joining the EU plummeted. Pro-Russian sympathizers capitalized on the public reaction, and the pro-Kremlin Igor Dodon was elected president in 2016. Dodon has talked about joining the Russia-controlled Eurasian Economic Union, halted participation in NATO exercises, and opposes the opening of a NATO office in Chisinau, Moldova’s capitol.

The investigation into the theft has dragged. More than 40 people have been implicated, and more prosecutions are supposedly in the pipeline, but only a few people have been convicted so far. With Moldova’s 2018 elections looming, now is a good time to look back at the fallout and lessons from the Theft of the Century.

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Greece’s Golden Opportunity: Economic Crisis and Corruption

Greece’s struggles with corruption are longstanding. Greece has perennially been viewed as one of, if not the, most corrupt countries in the European Union (EU). (In 2014, for example, Greece was tied, along with Italy and Romania, for last among EU countries in Transparency International’s Corruption Perception Index). Recently, however, coverage of Greece’s ongoing battle with corruption has increased dramatically due to two interrelated factors: (1) the election of the Syriza party, which has never before held political power and ran in part on an anticorruption platform; and (2) ongoing negotiations with other members of the EU to receive additional, vitally important bailout funds as Greece continues to struggle to rebound from an economic crisis that first began in 2010 (in which some have suggested that Greece’s receipt of any additional loans should be conditioned on its ability to make “credible progress in boosting [its] tax take and fighting corruption”).

Transparency International and others are (admittedly somewhat reservedly) hopeful that the election of the Syriza party will signal a renewed focus on combating corruption by the Greek government, calling its campaign platform “music to our ears as long as [its] commitments remain strong and unwavering” and noting that the “new government seems more committed to addressing corruption than past ones.” And there have been some promising early indications of the new government’s willingness to combat corruption.  For example, its new anticorruption chief recently announced he will be investigating 80,000 of the wealthiest individuals in Greece who are believed to have funds in foreign bank accounts for tax evasion. Nonetheless, there have been some rumblings of discontent from both anticorruption activists and the broader international community. Other members of the EU have accused the government of “wasting important time” in instituting anticorruption measures and commentators have noted that too little has been done to make good on campaign promises of “tackl[ing] the corrupt oligarchical business elites that dominate the economy.”

It is likely premature to judge the Syriza govenrment’s commitment or ability to combat corruption.  Yet as Greece continues to grapple with an economic crisis that has left the country reeling – and dependent upon significant loans from the International Monetary Fund and the EU – it seems an appropriate time to draw attention to the fact that this crisis has presented both the Syriza government and broader anticorruption community with a rare opportunity to make significant strides in addressing corruption in Greece, an opportunity that prior administrations have failed to appropriately capitalize on.

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