Thursday, April 13, 2006

AWB scandals?

During the sanctions imposed on Iraq the United Nations agreed to allow the Iraqis to sell oil for US dollars to buy food in international markets. The intention was to enable the food purchases but to limit the possibilities for Saddam from aggrandising himself or from purchasing weapons with the dollars. But Saddam controlled access to the Iraqi market and those trying to sell food there and had to deal with him.

So the Australian Wheat Board apparently paid the regime almost $300 million in bribes to secure access. Saddam's regime got kickbacks (he effectively taxed the trade), the people of Iraq got the wheat which helped prevent them from starving, the AWB secured a valuable Middle East sales contract and Australia's left and the press got the chance to concoct conspiracy theories about how the Federal Government knew about the trade all along and didn't try to stop it. Why am I not excited about the terrible AWB scandal?

From the perspective of the AWB were not the kickbacks just the cost of doing business with a corrupt regime? This is not just cynical realpolitik. Would the people of Iraq been better off had the AWB wheat sales not been made? I guess US wheat vendors might have been better-off and sales might even have been made without kickbacks or with lower kickbacks. As for the left and the media - they would have found some other issue to kick the government over but they might have had to think a bit harder which would have definitely made them worse-off.

The kickbacks were wrong but I cannot get too angry about the AWB's actions. Nor can I get overly concerned with the Cole Inquiry. I agree with Greg Sheridan - The government won't lose a vote on the basis of this and Alexander Downer's performance showed class. John Howard subsequently performed well also - indeed very well. The left in Australia are digging desparately for dirt but it is hard going because, ignoring the questionable behaviour of the AWB, the Government's story has stuck:

After three months of hearings and despite numerous allegations and warning bells, no evidence has emerged that he (i.e. John Howard) or other ministers were told definitively that AWB was paying kickbacks. The Government may have been naive or indulging in wishful thinking in wanting the allegations to go away. It may have been culpably negligent in not pursuing its inquiries more forcefully. But its denials that it knew conclusively that the bribery was taking place have held.


lesleym said...

Surely any money outlaid eventually has a bearing on the value of the eventual return. (IANAE-I am not an economist) Therefore the kickbacks are money taken by stealth from its rightful owners.
The argument that in not supplying in accordance with Saddam's terms would mean unacceptable suffering to the Iraqi people is not tenable given a world-wide surplus of grain. (Even if not all of it is hard wheat favoured by middle-eastern breadmakers)
If the govt didn't know what was going on, it should have. Isn't that what we expect governments to do? There are sins of omission as well as commission, don't forget. Downer's admission that he only reads cables when he has nothing better to do is more than ordinarily negligent.

genf20 said...


conrad said...

I realize that most people don't care either, but being an economist, you might like to think about the big picture. We now have :

1) The highest individual crime rates in the OECD.

2) A populist government basically willing to buy votes = government crime/public crime.

3) A government willing to allow large amounts of dirty money to float around overseas = government/business crime.

So basically all levels of crime are now acceptable in Australia, including on a business, individual, and government level.

Are there any countries that have been succesfull in the long term with such a pattern of corruption/crime ?

hc said...

LesleyM, I agree with 1., the point is could this theft be avoided. 2. not clear - it would have gone to the highest bribe offerer. 3. Downer's office gets 250 cables per day - he could not read all of them. I am not convinced that either the Government or DFAT acted dishonestly.

Conrad, I don't think its a matter of people not caring. Its business and selling wheat in a corrupt regime run by Saddam. At the time he was prepared to allow his people to starve to blackmail the west. You are suggesting that public corruption has corrupting effects on society as a whole. I am not sure there has been any in this case though, as I said, the AWB have acted wrongly.

I'd be interested in you amplifying point 1) which I recall you making before. How about a guest post on crime in Australia compared to the OECD? I've had the impression we had low and decreasing crime as discussed before. The lower crime rates in Europe presumably rest on more aged populations.

conrad said...


I don't think that there is much point on (1) as most of it is in the recent OECD report. I agree we have decreasing crime (like many similar countries), which is in no small part attributable simply to aging.

Alternatively, we don't have low crime by any stretch of the imagination. A quick search through the ABS shows how high it is (I believe the inicidence of crime per head of population is over 10 times higher than the low-crime Asian countries like Japan and Hong Kong)

hc said...

I haven't checked the ABS statistics but I think the OECD statistics don't tell you much. They are for 2000 when crime rates peaked in Australia. And other indices of crime - such as murder rates - are much loewer than the US. I posted the summary of my brief search in a post above.

I am suspicious about comparing Australia with small racially-homogeneous countries like Hong Kong and Japan. But if I get a chance I'll chase up the ABS data bases.