After a period of introspection, one of the most powerful bodies in global governance announced in April that it had not been doing enough to stem corruption. This self-reflection by the International Monetary Fund could do wonders for the world economy.
The IMF admitted that it had long used vague phrases such as “the need for a level playing field” to describe rampant bribery in the troubled economies that it rescues from a financial cliff.
And despite having had a 20-year-old policy to deal with corruption, it now says its official “guidance” to graft-ridden countries has been inconsistent.
The IMF also failed to point a finger at wealthy countries that facilitate the flow of ill-gotten money from poor nations.
Having cast the beam from its own eye, the IMF said it will now become more “intrusive” in a country’s affairs if it sees “hanky-panky” in official spending or market regulation. It will also be more candid and evenhanded in applying standards on fiscal integrity and rule of law.
“Corruption prospers in the dark,” says the IMF chief, Christine Lagarde. The IMF’s new efforts, she adds, will help “harness the immense power of sunlight to put the global economy on a healthier and more sustainable path.”
More than half of people worldwide say their government is not doing enough to curb corruption, according to the watchdog group Transparency International. One out of 4 people says he or she has been either asked for a bribe or offered one to access a public service. Overall, bribery reduces the world’s economic output by more than a $1 trillion, finds the World Bank.
The IMF says its anti-corruption drive is necessary to rebuild lost public trust in institutions and prevent a further slide in tax evasion and income inequality. Fighting corruption will also help ensure that governments pay back the loans they’ve received from the IMF. Countries that suffer a “reputational risk” from a corruption scandal, such as Brazil, can be hit hard by global financial markets.
In a few developing countries, some officials welcome stronger intervention by the IMF. “It can help make a country a star rather than a falling star,” says Lea Giménez Duarte, finance minister of Paraguay. Anti-corruption activists will also be emboldened in many countries by the IMF’s new stance.
The most intriguing aspect of the IMF’s new focus is its request for advanced countries to volunteer to be “assessed” on their efforts to prevent foreign corruption. Do they prosecute bribery of foreign officials by their domestic companies? Do they prevent money laundering by foreign entities?
So far, about 10 countries have stepped up to be held accountable, including Britain and the United States. Their willingness to clean their own house may be a model for other countries to do the same.
“All countries may want to do an introspective look at how they operate,” Ms. Lagarde says. The IMF certainly has. A bit of humility about one’s own faults can help others to correct theirs.