Forces of Evil Fight Corruption!
Jude Wanniski
August 13, 1997


Memo To: House Majority Leader Dick Armey
From: Jude Wanniski
Re: IMF/World Bank Fight Corruption!!

Although this should probably be directed to Newt, I’m writing to you, Dick, because your grasp of economics will better enable you to understand my concerns.

What a nice headline I found in Monday’s New York Times: “2 Global Lenders Use Leverage to Combat Corruption.” There follows a story by Paul Lewis that World Bank President James D. Wolfensohn and International Monetary Fund managing director Michel Camdessus are now using the money they get from American taxpayers to fight corruption in foreign governments. Actually, they announced last year that they would be doing this, and as they prepare to meet next month in Hong Kong “the first fruits of that new policy are starting to become visible.” The first fruits!!! The program is already a success? It bears fruit? What is the evidence? The Timesman, Mr. Lewis, reports: “This month the Monetary Fund sent the Kenya shilling and the Nairobi stock market into a tailspin. It suspended a $220 million loan to Kenya after President Daniel arap Moi failed to create the powerful new anticorruption authority the fund had demanded, and failed to reinstate Samuel Chebii, who had been dismissed as Commissioner for Customs and Excise. Mr. Chebii had earned a formidable reputation for combating graft, to the Government’s evident discomfort.”

This, Mr. Leader, is what happens when the Forces of Evil Fight Evil!! The value of Kenya’s currency and its publicly-traded capital stock crashes! Good job, Wolfie! Nice work, Michel!!

I know you have a lot of other things on your mind, Dick, but please think about the implications of what this Dynamic Duo from the Dark Side are doing, and where they are heading. Camdessus, who regularly tops my list of “10 Most Dangerous Men on Earth,” is nothing but an appointed bureaucrat who answers to no voters or taxpayers. Yet he is now able to pull the rug out from under a sovereign head of state who has been democratically elected, by withholding funds because that head of state fired another bureaucrat!!! As if Kenya were not poor enough, the fruits of their policy as Mr. Lewis of the NYTimes reports, is that the people of Kenya are that much poorer. What kind of fruit is this?

Why is Kenya so poor to begin with? Because for 40 years it has been borrowing money from the IMF on the condition that it raise taxes and devalue its currency. Every time the Nairobi government swallows this poisonous advice, the country becomes less capable of creating wealth, and the value of their tax revenues declines. The civil servants not only are advised there will be no salary increases. They also find, with the currency devalued, their current salaries no longer buy what they used to buy. They also observe that civil servants who have retired on meager pensions, now have pensions that will buy nothing at all. In order to survive, the civil servants begin charging businessmen under the table just to rubber stamp one bureaucratic form or another. Nothing gets done unless someone is paid on the side. The economy keeps functioning, because this underground method of operation is extremely efficient. The graft is not taxable income and the bureaucrats of internal revenue allow the graft to be counted as a cost of doing business.

True, the graft becomes more deeply embedded every time Camdessus and Wolfensohn pass through Nairobi, forcing another tax increase and another currency devaluation in exchange for a promise of $220 million loan. But when the Commissioner of Customs and Excise cracks down on the system of graft that is permitting the economy to function at its underground level of efficiency, the economy can only collapse, which is what the Forces of Evil intend all along. President Moi has no choice but to fire the Commissioner who has developed a formidable reputation for messing up the economy. And now the promise of a $220 million loan is withdrawn, with dark consequences for the impoverished people of Kenya.

It’s important you know what’s going on here, because this Dark Duo will soon be at your doorstep again, asking for another “replenishment” from American taxpayers. They will tell you that they deserve this “replenishment” of several billion or so, and to prove it, they will show you the clipping from the NYTimes about how they are cracking down on corruption -- and other good deeds.