 Through to mid-1990s: Corruption a byproduct of under-development.  Address through overall development strategies.  Corruption in Bank projects, specifically, a concern. ▪ Rely on country systems and normal corporate fiduciary practices.  Mid-1990s – mid-2000s: Corruption a cause of under- development  Support anti-corruption policies (e.g., Hong Kong style anti- corruption boards, asset declaration, etc.).  Governance (not specifically corruption) conditions IDA allocations.

 Corruption THE obstacle to development:  Country corruption an overriding factor in conditioning lending;  Extractive Industries Transparency Initiative (EITI)  No consensus on assessing corruption creates organizational challenges (e.g., ad hoc suspension of country loans).  How to measure corruption and/or governance?  Contentious – intellectually and politically.  What government policies/actions are definitive evidence of progress on governance/corruption?

 Internal:  Budgets for monitoring corruption in Bank projects significantly increased.  Integrity Vice Presidency created (above and beyond usual corporate practice).  External:  Anti-corruption policies in countries: reduced emphasis.  Significant attention to public sector financial management - much less to other aspects of country systems (bureaucracy/judiciary/police/etc).  More attention to political economy (though ad hoc, not clearly actionable).  Some loans still halted on ad hoc basis: Bangladesh Jamuna bridge.  Still no consensus on measuring/conditioning on corruption/governance.

 Research: Corruption IS a by-product of over- arching political economy.  Underlying political dynamics simultaneously influence :  Rent-seeking  Conversion of public resources into public benefits/public goods.  Implications: Where political incentives are friendly to corruption  ALL development efforts are hard to implement.  Above all, though, anti-corruption policies won’t be enforced;  Public sector financial management reforms less likely to succeed

 To mid-1990s:  Reasonable to assume that corrupt behavior a “by- product” of development.  An error to ignore governance/political economy roots of development.  Mid-1990s to mid-2000s  Key and important innovation to start paying attention to governance/political economy.  But disconnect in emphasis on anti-corruption reforms without an integrated strategy to address governance/political economy obstacles to development.

 Conditioning loans on corruption a reasonable expression of moral indignation. But...  An incomplete development strategy.  Is donor influence strong enough such that conditionality on governance leads to governance improvement?  Research ambiguous: We don’t know if fiscal crisis/necessity (the source of efficacy of conditionality) spurs political reform.

 Measurement agenda: tension between policy and research  Gov’ts to Researchers: how can we improve governance scores?  Res to Gov: Governance is about responsiveness to citizen interests!  But – how to measure responsiveness?  focus on corruption, or  government responsiveness to citizens, or  citizen ability to act collectively to influence government, or  simply policy performance?

 Extractive industries (EITI)  What we care about is: natural resources turned into public benefits.  EITI accomplishes this only if information is the missing link in government accountability.  In many cases – not the case.  Ignores the alternative solution: keep the stuff in the ground; lump sum transfers.

 WB expenditures on WB integrity is a response to external pressures... but development impact?  Less specific attention to country corruption, per se, consistent with research.  But huge attention to PFM – not supported by research.  More attention to political economy – consistent with research.  But still little systematic integration of governance/political economy into development strategies.

 What to do in countries that exhibit severe governance problems?  Corruption?  Governance generally?  Fragile states?  These countries are the ones where development challenges – poverty, misery – are the greatest.  The biggest tool that donors have is money.  But these are the countries where government action least likely to improve development outcomes.

 Governance = no accountability to citizens.  Fundamental issue in accountability: ability of citizens to act collectively.  In weak governance countries:  Political parties underdeveloped.  Efforts to organize are undermined.  Removing obstacles to collective action a donor priority?  Remove obstacles to formation of civil society organizations (Tunisia).  Community-driven development.  Not easy – we need research here!

 Focus on corruption as a development issue has waxed and waned.  Growing understanding that political incentives underlie corruption – and poor public sector performance, generally.  Implication: “supply-side” interventions (anti- corruption, PFM reforms) unlikely to succeed.  More effort needed on “demand-side” – increasing citizen ability to (act collectively to) hold government accountable.