Suzanne Rich Folsom, the controversial head of the World Bank's internal anti-corruption unit, resigned yesterday to return to the private sector. With Ms. Folsom's departure almost all of Paul Wolfowitz's inner circle has now left the Bank. I expect that some of the Bank's critics will cast this turn of events as victory of the bank bureaucracy over the forces of good in a fight for truth, justice, the American way, and, most especially, zero corruption. This would be an unfortunate misrepresentation of reality.
I don't know Ms Folsom, and am not familiar with her modus operandi, but I do understand from the Volcker Report and other sources that she was not popular among bank staff. Even without knowing her, I can imagine the strains an energetic "single issue" individual with the power Ms Folsom had would bring to the bank. Her job was zero corruption, but that is not the bank's only, or even primary, job. The bank's core business is helping poor countries develop. Keeping corruption in check is an important part of achieving that goal, but other things matter as well.
If you want to understand why the job of the anti-corruption unit is tricky, just look at the ongoing saga of the World Bank health project for India (subscription required). No one, not Mr. Zoellick, not the Indian government, not bank staff, argues that the corruption allegedly found in the project is not a serious problem. But India, home of the largest number of poor people in the world, is also an emerging international power. It sits on $275 billion of reserves, roughly 100 times the Bank's annual lending to India. It is a nuclear power that gets its way with Washington on issues about which it cares.
Does anyone really think that the World Bank issuing a public condemnation is somehow going to embarrass India into eliminating corruption, developing more rapidly, or helping its poor people more effectively? What should happen -- and is happening -- is a serious conversation based on facts between senior bank and Indian officials, a conversation that cannot take place on the front page of newspapers. India must take the lead -- and take the credit -- for addressing the problem action. Otherwise Delhi will stonewall and obfuscate if for no other reason than to show who is in charge. While India's size and international stature makes it special, the core idea that the bank's business is built on relationships, not Big Sticks and policing authority, is true for every Bank country client.
My advice to Mr. Zoellick is to not replace Ms. Folsom with another policeman or police woman. Of course the bank must keep its own house in order to be an effective voice in the fight against corruption, but it should not let that fight paralyze critical development efforts. The bank does not have the privilege of working only with the good guys. Bank staff work in a world of tradeoffs, of judgment calls. In many of the difficult, complex environments in which the bank works, staff must ask themselves every day: "Am I part of the solution or part of the problem?" If they don't they should, because that's the reality of development work in many countries.
The next head of the anti-corruption unit must understand this. She or he must not only be on guard against corruption in bank projects but also help staff to engage governments, win them over if necessary, and get them to take responsibility for fixing corruption problems themselves. Only by moving accountability back to the developing countries can the Bank hope to make progress in the fight against corruption.