Bags of gold as an anti-corruption strategy?

My colleague, Laurence Cooley, and I have just finished a book chapter on ‘Corruption and Post-Conflict Reconstruction’ for a forthcoming collection, and we wanted to compare three cases to see if any specific lessons can be drawn about what worked, what didn’t and why. We chose Bad, Worse and Rock Bottom as our cases – Liberia, Iraq and Afghanistan, partly because we thought they’d be of interest to the most readers, but also because if lessons on corruption can’t be drawn from these, well, heaven help us…

The literature on the relationship between corruption and conflict is pretty contradictory, as anyone who’s waded through it can tell you. While corruption may very often be a driver of conflict, there is evidence to suggest that, in certain circumstances, it may also have conflict-mitigating properties. Post-conflict reconstruction efforts can inadvertently present new opportunities for corrupt practices, leaving international attempts to fight corruption in the aftermath of violence in tatters. Countries suffering from political instability face the danger of a vicious cycle of corruption and conflict. Even when the violent phase of conflict is over, the deeply rooted nature of corruption and the fact that it’s been made a million times worse during the violence mean that attempts to reconstruct post-conflict societies inevitably have to try to tackle it. Put another way, post-conflict reconstruction efforts are not afforded the luxury of a ‘clean slate’. Odds are corruption was there before conflict, and it’s definitely there afterwards. The challenge is what to do about it.

You would think then that the importance of tackling corruption as a key component of post-conflict reconstruction efforts should be self-evident. Yet where corruption is used to buy the loyalty of potential spoilers, well-meaning attempts to eradicate it may risk undermining the emergent peace. It’s a mess, no two ways about it.

The challenge for reconstruction isn’t just to figure out what to do about corruption, when, in what order and in a way that ‘does no harm‘. It’s also to ensure that post-conflict reconstruction efforts themselves don’t have the perverse effect of contributing to corruption. These efforts involve substantial inflows of finance and personnel, both of which present new opportunities for corrupt practices. Iraq and Afghanistan are sad examples of this and illustrate that in post-conflict situations, the sources of corruption are not solely domestic. International intervention in both societies, backed by large amounts of economic assistance designed to support reconstruction, has failed to tackle the issue of corruption successfully and in many ways the actions of donor governments has served to undermine such attempts.

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But we’re not just talking about humanitarian or development aid here, and we’re not just talking about military aid. We’re talking about big, huge, unimaginable stacks of cash. Boxes of it. Pallets of it. Crazy, mile-high, where the hell is did they find all of it, piles of cash.

12billionAn article in Vanity Fair in 2007 reported that the US Federal Reserve shipped US$12 billion in cash on pallets to Iraq between 2003 and 2004, but at least US$9 billion of this has gone missing . This is the equivalent of Zimbabwe’s GDP in 2013 or approximately one-third of the US’s entire aid budget for 2012, just vanishing in bricks of $100 bills.

I like to think of myself as a moral person, but if my department’s entire budget was loaded off the lift in pallets of cash, the temptation to ‘borrow’ just a few bills to pay for coffee, or my mountainous student loans, would be pretty big. I wouldn’t do it, of course, but not just because I’m a good person. I wouldn’t do it because odds are, I’d be caught. Remove any chance of being caught, any chance of being punished, and poof…$9 billion vanish into the ether.

In Liberia, the other case study considered in the chapter, the international community has been able to claim a greater degree of success, but the approach taken, which involved a remarkable degree of interference in the domestic affairs of the country, has proven understandably controversial. In Liberia, donors almost set up a ‘default government’ with regard to economic governance, known as ‘GEMAP’, and which was so controversial that it need the approval of the UN Security Council. Indeed, in their report for the OECD, Alina Rocha Menocal and Ken Sigrist recommend that: ‘Donors should engage cautiously in this kind of support on the basis of sound contextual analysis, and they should tread lightly to ensure their interventions don’t end up exacerbating tensions or generating (further) conflict’.

What’s particularly interesting about Liberia, in comparison with Iraq and Afghanistan, is that there is genuine evidence of change, despite some recent corruption scandals. In the most recent Transparency International Corruption Perceptions Index, Liberia ranks 83rd out of 177 countries, whereas Iraq ranks 171st and Afghanistan a depressing 175th.

In both the Iraq and Afghanistan cases, Western intervention contributed significantly to corruption in post-conflict reconstruction, exacerbating local tensions and prolonging conflict long after victory was officially declared. The main problem doesn’t seem to be the one debated within academic and policy circles – at what point in the reconstruction process should donors push an anti-corruption agenda – but rather governments (not to be confused with ‘donors’) not exacerbating an existing problem with big pallets of hard cash. As far as we know, Liberia didn’t receive this sort of ‘inward investment’, but both Iraq and Afghanistan did; this is perhaps the most important difference between the cases.

These aren’t going to be new arguments to corruption/state-building wonks (book chapters – ‘Handbook’ chapters in particular – aren’t where you bury lots of new arguments!), but it’s a lesson that we should keep coming back to. With humility.

With the push to spend more aid money in post-conflict states – including in Somalia, the only country that is ‘worse’ on corruption than Afghanistan – tough lessons will need to be learned from the experiences of the past decade, before the pallets again start to disappear.

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