Notes on a Scandal

Paul Wolfowitz Photo credit: Simone D McCourtie and World BankThe World Bank is in the news of late. Its president, Paul Wolfowitz (pictured), has been pilloried for making confetti out of the Bank’s ethical rulebook, and showering his sweetheart with it. While this is generally unremarkable behaviour in Washington, he has attracted more attention than his peers because of his institution’s crusade against corruption, and his saying things like “to make poverty history, we need to make corruption history”.

The real muck, however, doesn’t come from annals of hypocrisy. The bigger story is one that the media are ill-suited to find. It’s about what happens when the limelight is off the Bank, when the Bank goes about its normal business, and enforces policies that impoverish millions, while saying things like “Our Dream is a World Free of Poverty”, (the World Bank’s slogan). And although it’s tempting to blame the fourth estate and their habits of sensationalism, part of the reason there’s no scandal is because the World Bank is in the business of hiding the evidence.

Over the past two weeks, for example, at the very same time that Wolfowitz has been pilloried, the Bank has been quietly airing a draft of its World Development Report which, for 2008, covers agriculture. Few outside a small circle of policy junkies got a chance to look at it (and even they were rushed – pointing out what’s good and bad with a dense 500 page report takes more than two weeks). Yet the report will do far deeper, and more lasting, damage than any Beltway bedroom farce.

To see how it all happens, here’s a review of some recent salary-related scandals, which rehearse some of the techniques of scandal and subterfuge that are to be found, on a deeper and more covert scale, in the Bank’s latest thoughts on agriculture.

I

In the wake of last week’s scandal, we now know that Condoleeza Rice earns $185,000 a year at the State Department. We know this because we have learned that Paul Wolfowitz, the President of the World Bank, has a love interest, Shaha Riza. Riza works at the State Department where she earns $7000 more, and tax-free, than Rice. She was sent there by Wolfowitz, who earns a tax-free salary of $391,440 and a ‘supplemental allowance’ of $70,070.

These revelations are different from the other salaries disclosed in early April, when we discovered that George Bush’s household earned $765,000 last year and that the Vice President did a little better than his boss – Dick Cheney’s household made $1.8 million in 2006.

Morally, there seems to be little to choose from here: from Rice to Cheney, we have a gallery of mendacity, subterfuge and, in one case, almost certain criminal behaviour. Cheney was likely intoxicated when he shot a man in the face.

But the salary disclosures have distinct epistemologies. We come to know them by very different routes. The presidential salaries are online because it is tax season in the United States, and a tradition begun by Jimmy Carter means that the president and vice president release a (possibly-truthful) tax form. We know it, in other words, because it’s traditional.

In the case of Riza, by contrast, we know the numbers because of an ‘ethics violation’, a breach of protocol. Wolfensohn authorised Riza’s promotion, unusually large (even by the terms of the World Bank) salary increase, and secondment to the US State Department. We know, in other words, because it’s sensational.

The media, and the Financial Times in particular, have made a great deal of the irony here. Wolfowitz has painted himself as the unimpeachable figure-head of the World Bank, creating an anti-corruption unit and scolding rich country governments on their refusal to give to the poor. But, as the Los Angeles Times has put it, he has sown the wind, and reaped the whirlwind.

Wolfowitz, one of the principal architects of the war in Iraq, is now fighting for his job. Few European ministers feel he has the ‘moral authority’ to remain at the institution. Although he complains that Bank outsiders and ‘the left’ are the ones calling for his head, his misadventures have united a wide range of Bank insiders and ‘the right’ in support of his departure. There is already talk of who might replace him. Tony Blair and John Bolton are two candidates whose names have been mooted, the former largely in jest – the head of the Bank is invariably a US citizen. (If you’re keen on finding out more on the Wolfowitz saga, the one-stop-shop is WorldBankPresident.org)

There’s some frustration among those in-the-know that the media has chosen to concentrate on the most obvious aspect of the scandal – the distance between Wolfowitz’s rhetoric and his actions. There are other strands to unravel here. Like what it is that Riza is up to at the State Department. She is, apparently, advising the Foundation for the Future in the Middle East. Riza will undoubtedly be familiar with many of her colleagues in the State Department, having worked “as a consultant for a major U.S. defense contractor during the run-up to the invasion of Iraq” though, once again in violation of the rules, without the permission of the World Bank.

There are also tales of Wolfowitz bringing a brace of neoconservative consultants over from the White House to the World Bank, and with them, Bush’s agenda, from Iraq to birth control.

These are important stories, ones that deserve our attention. But, as is invariably the way with these things, the deeper scandal lies less with the sensational than with the traditional. The real outrage isn’t that the World Bank is headed by a war criminal (its second war criminal, if we’re counting – the first being Robert McNamara). The
real atrocity lies in what the World Bank does day-to-day.

II


And when the Foreign Office find a Treaty’s gone astray,
Or the Admiralty lose some plans and drawings by the way,
There may be a scrap of paper in the hall or on the stair –
But it’s useless to investigate – Macavity’s not there!
And when the loss has been disclosed, the Secret Service say:
`It must have been Macavity!’ – but he’s a mile away.
You’ll be sure to find him resting, or a-licking of his thumbs,
Or engaged in doing complicated long-division sums….

Macavity: The Mystery Cat, T.S. Eliot

The hubbub over salaries and protocols is certainly an occasion for schadenfreude. But masters of the highest crimes are never caught, for they understand that if detection is inevitable, they stand a much better chance of escape if they are also tasked with investigating themselves. And this is how, under the guise of writing its annual World Development Reports, the Bank has so long evaded itself.

The World Bank’s flagship ‘World Development Report’ is a yearly tradition, a publication that offers a deep examination of a particular poverty-related issue. The policy conclusions are ones to which the Bank promises to commit itself for the foreseeable future. Previous titles in the series have covered services, the investment climate and the latest report covers youth and development. It’s an exercise that brings some of the most prominent social scientists in the international development industry, and their reputations, to bear on problems of poverty. And, every year, the Bank manages to write itself, its mistakes, and its friends, right out of history.

For the 2008 report, to be released in September, the Bank’s World Development report covers agriculture. Little about the report has made the headlines so far but, in fairness, we ought to spare a thought for any prospective journalist trying to write the story: it’s hard to cover the Bank’s responsibility for poverty when the main protagonist has made itself disappear into thin air.

The Bank’s sleight of hand can’t happen too obviously. The rituals of rolling up cuffs and proving that there’s nothing up this sleeve, nor anything up this one, are an integral part of the show. It’s a show that begins with a bang, laying out the awful truth about agriculture and poverty:

three of every four poor people in developing countries are rural, 2.1 billion individuals below a $2 a day poverty line, one third of humanity. Most depend directly or indirectly on agriculture for their livelihoods.

It’s a shocking fact, and one that has long animated one of the report’s co-authors, Alain de Janvry, author of the seminal 1981 “The Agrarian Question and Reformism in Latin America”, about whom more in a moment. Suffice it to say, though, that at least some of his early thinking has survived to inform the report’s first chapter.

In seeking an explanation for grinding rural poverty, the buck stops at many doors. It’s not just third world governments that are to blame for their rural citizen’s penury, although it’s true that “developing countries show widespread underinvestment and misinvestment in agriculture as well as policy biases against agriculture and against the rural poor.” According to the report

donors turned their back on agriculture. This neglect of agriculture has had high costs for growth, welfare, and the environment.

This will be as close to a ‘mea culpa’ as we’ll get from the Bank. And it’s not terribly accurate. The Bank has been fairly active in agriculture, with agricultural trade policies and domestic subsidy cuts enforced as part of its lending packages. It’s just that the results have had high costs for growth, welfare and the environment. More about that anon.

Let’s return to the report, though, because there’s another observation that deserves attention. The authors note that:

‘agriculture is a multifunctional sector for development, with three fundamental functions: an economic activity, a way of life, and a provider of environmental services.’

This has always been something that farming communities and organizations have been at pains to stress. Agriculture isn’t like, say, software programming. It’s not a portable skill, it’s one that is shaped rather directly by ecology and place, by the rhythm of seasons, and which in turn has shaped its own complex cultures and traditions, and which creates and maintains a certain kind of environment. It is, in short, a way of life.

But this doesn’t mean one should be misty eyed about agriculture – there’s plenty in tradition that is oppressive and nasty, and agriculture alone isn’t going to raise living standards for poor people. The report’s authors are wise to this too:

It is clear that agriculture alone will not defeat rural poverty. A coordinated approach for rural economic and social development is needed.

This, incidentally, is something that fervent believers in ‘fair trade’ tend to forget. Fair trade on its own is only ever going to throw a couple of pennies more at a system of rural poverty that requires billions to fix. The only good reason to buy fair trade (at least, the only reason I do) is not because it’s going to make the world a good place, but because, in a best case scenario, it’s a way of temporarily making the world slightly less heinous. It’s a way of paying a shade above rock-bottom prices for things like coffee, but fair trade will never fix the underlying structural problems of poverty in rural area.

That said, fair trade seems to irk the Bank a little. In a report that covers a great deal of ground in its 500 pages, the authors go out of their way to worry a good deal about fair trade. They are concerned not that fair trade will make a pitifully small difference to the lives of poor people. They’ve grander and altogether more Kantian concerns. They’re nervous about what will happen if everyone were to produce fair trade goods. The reason fair trade goods currently cost more is consumers are willing to pay a little extra to be assured that there’s some sort of guarantee of workers being better treated and producers better paid. But what would happen if everyone were better paid? How would we be able to tell the difference between good and bad fair trade? If there were no difference between fair and unfair trade, would there not a danger that we’d be back where we started?

Of course, we’re very far away from this situation at the moment. Even in Europe and North America, depending on the product, the amount of fairly traded agricultural produce ranges between 0.5% and 5%.

But the Bank is jittery nonetheless. This is surprising, because the Bank has never troubled itself about this in the past. Just so we can be precise, the idea here is one common both to economics and rhetoric. It’s called the fallacy of composition, where what is true of parts need not be true of the whole. In rhetoric, an example is this: 1. Atoms are colourless. 2. Cats are made of atoms. 3. Therefore cats are colourless.

The Bank, it turns out, knows a great deal about the economic fallacies of composition. Through the 1980s, the Bank through its ‘structural adjustment conditionalities’ pointed out to a number of countries that foreign exchange to repay loans might be made through the growing of, say, coffee. Coffee prices in the early 1980s were relatively high. While this might have made sense if just one country had done it, the effect of simultaneously bringing a number of similar export crops onto the market at the same time was to produce a glut. Prices fell. The windfalls never arrived.

Such policies characterised a number of its agricultural interventions – the Bank wrote the book on the fallacy of composition in agriculture. But that’s not something that appears in its Report on the subject. Like Macavity, when the problems are diagnosed and the story of poverty told, the Bank’s not there. And this isn’t the only Case of the Disappearing Cause to be found in the Bank’s report.

III

Its treatment of climate change illustrates the Bank’s broader failings. That climate change should appear in the report at all is surprising. The Bank continues to violate the terms of its own ‘Extractive Industries Review’ funding oil, gas and mining industries across the world, and pays only moderate lip-service to the issue. But the cameo appearance of climate change in its report betrays the extent to which the Bank’s ecological thinking is largely cosmetic

In the World Development Report, climate change appears as an exogenous shock. It’s something that will happen to agriculture, and for which agriculture ought to be prepared. Climate change will bring flooding and changes in precipitation. Farming practices will need to change. Also as a result of climate change, biofuels might be a profitable crop to grow, given the increasing demand for things-to-burn-that-aren’t-oil. Climate change is, in other words, treated as the analytical equivalent of a change in consumer preferences, or a rise in the cost of raw materials.

But there’s another link between climate and agriculture. Regular readers will remember that the United Nations’ Food and Agriculture Organization put out a report last year entitled “Livestock’s Long Shadow” . In it, they pointed out that

Livestock rearing is responsible for 13% of all CO2 emissions. This is more than the emissions caused by driving.

Industrial agriculture is, in other words, a major cause of climate change, not merely subject to its effects. But if all you did was read the World Bank on this, you’d never know. Any acknowledgment of the causal link between agriculture and climate change has been shrugged aside.

If agriculture contributes more to global warming than transport, there ought to be a good reason for ignoring it. And there is. Today’s food system is powered by carbon. Food grown with fertilisers, harvested mechanically, and then shipped and flown to market – this food takes carbon. As Richard Manning has noted, “Every single calorie we eat is backed by at least a calorie of oil, more like ten.” This is a rather large clue about the Bank’s silence about climate change. To speak of it would be to invite questions over its source. To answer those questions would be to mention the corporations that profit from the transport, trade, production and sale of agricultural goods. These agribusiness corporations are invariably more powerful than the countries in the Global South that the Bank hopes to help. According to the Group on Erosion, Technology and Concentration,

  • the world’s top 10 seed companies control one half of the global seed trade
  • the top 10 biotech enterprises control nearly three-quarters of world biotech sales
  • the market share of the top 10 pesticide manufacturers is 84%, but industry analysts predict that only three companies will survive the next decade

And this is to shrug off the market power of grain-exporting titans like Archer Daniels Midland, Bunge and Cargill. Cargill, for instance, is not only the largest soy exporter from the US, it’s also Brazil’s largest. For these firms, the economic environment pushed by the Bank is a boon – who else will grant an environment in which corporate regulation and taxation are pared back, and where a country’s compliance with the rules of the World Trade Organization are enforced as part of a lending package? And sometimes, especially for pesticide companies, the Bank can provide more than just a favourable economic and legal environment. It can provide a direct product endorsement.

Consider, for instance, the way the Bank presents its analysis of genetically modified crops. These crops are the product of the pesticide industry. They’re also crops that have run into a fair amount of trouble– although they purport to improve yields and profit for farmers, longer term studies show that all might not be well.

Here’s an example of how all this gets redacted. The Bank observes that with the adoption of transgenics, ‘added profits’ in South Africa were 198%. The source for this claim is a 2006 piece in the Journal of Development Studies by Bennett, Morse and Ismael. In that piece, the authors present findings (published in at least three other venues) from a study in the Makhathini area of South Africa, over three growing seasons, from 1998/1999 to 2000/2001. Bennett et al use invoice data from the Vunisa cotton company, the local monopoly and monopsony for cotton seed-selling and cotton buying. This data, we are told represents a fair, impartial and accurate representation of what happened over the course of the trial. And, according to this, large profits were made and yields increased.

An open and shut case? Almost. Except that everybody in Makhathini knows that the Vunisa Cotton Company was giving money away hand over fist to make the genetically modified crop financially viable, that Vunisa collapsed, and that under the new company that emerged in 2002, much less cotton is being planeted. Bennett et al might be expected to know this – a member of their research team has, begrudgingly, observed it already. Perhaps the Bank hadn’t a clue, though. Its response might be this: sure, there might be some problems with the research in South Africa. But it surely works in Argentina, China, India and Mexico.

This is not an unreasonable response, but there are two reasons to be suspicious. First, there are grounds to think that the authors have cherry picked their research conclusions. Other governmental agencies have come to quite different conclusions. In India, for instance, the government of Andhra Pradesh banned genetically modified cotton for being ineffective.

Another reason smell a rat is this: the ‘it may not work here, but it works there and there’ argument is an old Bank chestnut. When the Bank was promoting its market-led agrarian reform policies, it created a circle of policy perfection. In South Africa, it told the government of land reform wonders in Brazil. In Brazil, it pointed sceptical government officials to the successes in the Philippines. To Filipinos, it pointed to untrammelled success in South Africa.

That there were shining examples of success in South Africa came as something of a surprise to Ben Cousins. He’s someone who might be expected to know about South African land reform success – he’s the director of the Programme for Land and Agrarian Studies at the University of the Western Cape. But he learned of the Bank’s songs of praise when he got a call from a delegation of Filipino parliamentarians, who’d arrived in South Africa on their own initiative, having taken the Bank at its word, and were looking for someone, anyone, to show them a successful market-based land reform programme.

This rather points to the power of the Bank’s publications, and their importance in keeping its misadventures and corporate favours out of the limelight. And they’re at it again, and this time with climate change as an alibi. Now, hands clamped firmly over ears, the Bank confronts agrarian poverty and climate change not by indicting the socioeconomic system behind agriculture’s carbon addiction, but by offering a prospectus for biofuels. This, incidentally, is an agricultural option that has been panned by movements of landless people, who have experienced the slavery and exploitation that have already accompanied biofuel-plantations in Brazil.

Industrial agriculture isn’t, then, a system that cripples the environment and harms poor people. Its pollution and environmental damage are nothing more than a market opportunity.

IV

Although the Bank largely ignores corporations (though with a brief tip of the hat to supermarkets) its agnosticism about power and agriculture isn’t complete. In the Bank’s world, the ongoing impoverishment of the poor is presented as a magic ‘dualism’, a concept that Alain de Janvry used in the 1970s and early 1980s to great effect to point to systematic imbalances in power between export agriculture on the one hand, and the subsistence agriculture that feeds agricultural workers on the other.

Back then, according to De Janvry, the solution to agrarian problems lay “in social and structural changes at the level of the total social formation.” For how else was society to stop exploiting the poor to feed the rich? Today at the Bank, though, dualism is something that is an almost accidental by-product of poverty. The power of the concept is scooped out the moment that the Bank blinds itself to the exploitation that happens domestically and internationally. The only tools for change on the table now are ‘market based’.

By distorting the truth, misrepresenting reality, and ignoring social struggle, the Bank engages in a permanent ideological battle, and maintains its status as a ‘knowledge bank’, as former Bank President James Wolfensohn put it. This is a central part of its daily work. The Bank is, after all, in the epistemology business. Its job is to make itself, and its policies, acceptable, normal, and free of the taint of scandal. Its daily exercises in technocracy are central to its work. The conclusion is this: the World Bank is a disaster not merely when its employees don’t follow its guidelines. The World Bank is at its most dangerous when it does what it promises. And that is a scandal we need to be hearing a great deal more about.