President Trump has chosen David Malpass to lead the World Bank for the next five years. Malpass currently serves as the undersecretary of the Treasury for international affairs. He has been a critic of the World Bank in the past, and as such his nomination has generated controversy.
Malpass’ doubts about the effectiveness of the World Bank makes this a good time to revisit how it intentionally overstated world poverty in order to get more money from American taxpayers, then fired the employee who wouldn’t play along with the scam.
This situation has cost American taxpayers about $2 billion each year for most of the last decade. And we only know about it because of a whistleblower at the World Bank named Dr. Yonas Biru, an outstanding Ethiopian economist whom I represent, who was fired for failing to play along and insisting upon telling the truth.
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The U.S. Treasury and the office of the U.S. board of director to the Bank are on the record acknowledging Dr. Biru as a whistleblower and supporting his request for external arbitration outside the Bank’s own fig-leaf International Tribunal. The only recourse Dr. Biru had was the U.S. Whistleblower Appropriations Acts, the last of which was enacted into law in 2014, due partly to his case.
The 2014 law required the U.S. government to withhold 15 percent of U.S. funds to the Bank until it agrees to give whistleblowers access to external arbitration. If enforced, the law would cost the Bank more than $500 million a year in U.S. funds until it complies with the U.S. law. Of course, those are dollars that would then stay with American taxpayers.
American taxpayers may think the U.S. would enforce its laws and make Dr. Biru a model to encourage other whistleblowers to protect U.S. taxpayers from international swindlers. Instead, it is the Bank that has made an example of Dr. Biru, to teach other potential whistleblowers a lesson.
Dr. Biru has three complaints against the Bank: racial discrimination, defamation, and wrongful termination for his whistleblowing. Accounts of his racial discrimination and defamation complaints are presented elsewhere, but his whistleblower case has received less attention.
In May 2018, founders and presidents of 32 conservative organizations signed a petition stating: “We believe this case is a precedent-setting case. We pray and hope that President Trump will use his pen to strike down U.S. funding to the World Bank until it agrees to fully redress the injustice it inflicted on Dr. Biru.”
In 2008, one of Dr. Biru’s management responsibilities in the Bank included data production the Bank uses to calculate its global poverty headcount. This headcount is critical to the funding requests the Bank makes to its member nations’ governments, and to where the bank’s monies are targeted.
In the course of Dr. Biru’s management of this effort, he found out that a Russian economist working under him was playing fast and loose with the 2005 data, artificially making developing countries, particularly China and India, look much poorer than they were. This was done in order to justify lending them tens of billions of dollars with low interest rate loans, burdening the American taxpayers who subsidize those loans.
Dr. Biru instructed the Russian employee to recalculate the global poverty head count, noting that the data for China, India and 21 African countries had serious problems. Not only did this Russian employee refuse, but he also moved the data at issue from the Bank’s official server to his personal laptop. He then dropped the Bank’s institutional data processing software and uploaded the data on his personal software that had not been institutionally vetted, and he denied Dr. Biru, his supervisor, access to the data and the software.
Dr. Biru reported this scam to the Bank’s chief ethics officer, ombudsman, and the chief economist, as he was expected by World Bank rules to stop the data from being published. In response, he was placed on probation, accused of “impugning [his colleagues’] professionalism, competence, or integrity.”
The global data production program had a technical advisory group, including professors Alan Heston of the University of Pennsylvania, who served as the chairman, and Angus Deaton, a Nobel Prize-winner in economics from Princeton University, among other globally renowned economists. When the preliminary data was shared with them, the chairman expressed concern, stating the data for China and India were “seriously misleading.” This was echoed by Deaton, who wrote: “I continue to be worried about the long-term impact of the results for India and China … It is simply not feasible to run a world poverty measurement system where hundreds of millions of people who were previously out of poverty are suddenly dumped back in.”
In November 2009, professors Deaton and Heston showed World Bank officials that the data they were using shrank China’s and India’s economies by 40 percent and 36 percent, respectively. An independent report published by the Brookings Institution in 2014, after the 2011 data became available, showed that the distorted data was falsely more than doubling the world population living in extreme poverty.
The Bank’s high-powered economists, however, made full use of the fabricated data in widely circulated reports with such titles as “ The Developing World Is Poorer Than We Thought” and “ Even Higher Global Inequality Than Previously Thought.”
Armed with such reports, World Bank officials pulled at the heartstrings of Western donors. The U.S. contribution to multilateral development banks increased, on average, by $2 billion per year for the eight years following the publication of the data for a total supposedly “poverty-driven” increase of $16 billion.
Meanwhile, informed researchers stopped using World Bank data. This compelled the Bank to establish a data computation task force. Ultimately, the World Bank reluctantly started using better data. But to mitigate the impact of this new data in reducing the global poverty headcount, it raised the global poverty threshold. The Financial Times noted that this is “a move likely to swell the statistical ranks of the world’s poor by tens of millions.” The newspaper quoted Deaton as saying, “I think they have some institutional bias towards finding more poverty rather than less.”
This bias continues to cost American taxpayers billions of dollars each year.
In January 2018, the Bank’s American senior vice president and chief economist, Paul Romer, publicly accused the Bank of cooking its data. He wrote, “ I’ve never in my professional life encountered professional economists who say so many things that are easy to check and turn out not to be true.” He was forced to resign.
In the same year, he won the 2018 Nobel Prize in economics.
Dr. Biru was vindicated for his battle for honesty with the Bank and to protect the Bank’s funders, first among them the United States of America.
Dr. Biru’s whistleblowing case fits right in with President Trump’s agenda of protecting American interests. Hopefully, America will take this moment with a new incoming World Bank president to protect American taxpayers from the Bank’s fraud. Meanwhile, the new appointee should push the World Bank to finally deal justly with Dr. Biru, an accomplished economist whom the Bank has discriminated against, wrongfully fired, and defamed in the eyes of the world.
Ken Cuccinelli is the former attorney general of Virginia and represents Dr. Yonas Biru against the World Bank.