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Saturday, April 21, 2007

William Easterly: The World Bank is "Facing the Gravest Crisis in Its Six-Decades-Old History"

William Easterly is no fan of Paul Wolfowitz, and it goes far beyond recent revelations involving Wolfowitz and his companion:

Does He Hear the World's Poor? Don't Bank on It, by William Easterly, Commentary, Washington Post: Pity Paul Wolfowitz: Every time he tries regime change, he triggers an insurrection.

The latest revolt was launched by World Bank staffers and Western aid leaders in response to the revelation that Wolfowitz -- who had made a crusade against corruption the hallmark of his bumpy tenure as president of the World Bank -- may have awarded his companion a $60,000 pay increase. A staff that had always hated working for the intellectual architect of the Iraq war was now quite literally shouting for his resignation, and Wolfowitz was left wandering the corridors of the bank looking for a Green Zone in which to hide.

The root cause of his debacle at the bank was pretty much the same as the reason for the fiasco in Iraq: intellectual hubris at the top that disdained the messy realities at the bottom. He imagined it would be as easy to clean up the pathologies of foreign aid as he had thought it would be to create democracy in the Middle East.

Wolfowitz came to the bank determined to fight corruption and perhaps redeem himself after Iraq by offering a compassionate, conservative brand of help for the world's poor. ... Trying to fight the corruption that all too often saps foreign aid was noble, of course. But bank staffers bristled because some corrupt regimes seemed to bother Wolfowitz more than others. Worse, his main objective -- transforming bad governments into good governments -- was simply unworkable.

Wolfowitz's arrogant belief that the bank could overhaul the often nasty politics of the world's poor countries sounded familiar to many bank staffers; his predecessor, James D. Wolfensohn, also had a fondness for utopian schemes. All of this overreaching bogged the bank down, making it less capable than ever of delivering even the simplest things that alleviate the sufferings of the world's poor -- medicine, water, food. Frustrated, suspicious and resentful, the staff was ripe for revolt.

Let's start with corruption. ... The First Commandment of aid agencies like the bank is, "Thou shalt spend all your aid budget." So the natural impulse of the bank's bureaucrats was to shovel dollars out the door to lousy regimes eons after it had become obvious ... that the funds would never reach the poor.

Wolfowitz drew a line in the sand in Uzbekistan, cutting off loans to its tyrant, Islam Karimov. ... Wolfowitz's detractors grumbled that the real reason for the cut-off was Karimov's July 2005 decision to deny the Bush administration the right to use a military base there. But so what? Perhaps the right thing was done for the wrong reasons. It's still hard to feel any sympathy for Karimov, who is as far from democracy as Borat is from journalism.

But beyond Uzbekistan and a few other laudable aid cutoffs, the Wolfowitz program was compromised by selective prosecution. By the bank's own measures, 54 other countries are about as corrupt as Uzbekistan, or worse. Should the bank cut off all 54? (I say, why not?) Wolfowitz was not willing to go that far, alas, which left everyone confused about what his criteria really were. Pakistan -- a linchpin of the U.S. campaign against al-Qaeda but not much more of a paragon of clean hands and democracy than Uzbekistan -- continued to receive oodles of World Bank money. The arbitrariness of the corruption campaign also allowed Wolfowitz's notorious sidekicks -- two widely loathed former Bush administration aides, Robin Cleveland and Kevin Kellems -- to threaten to brand staff dissenters as "soft on corruption." (Sound familiar?)

But the problems with Wolfowitz's management of the bank ran even deeper than his botched anti-corruption campaign. He also embraced and expanded the utopian goals of his predecessor, Wolfensohn.

For example, while Wolfowitz was allegedly getting tougher on "bad government" in places such as Uzbekistan, the bank was simultaneously insisting that development programs show "country ownership" -- bureaucrat-speak for having the recipient government take charge of its own programs. But how do you get tough with misbehaving governments while insisting that they run your programs?

Such follies are only one symptom of a deeper intellectual crisis over whether the bank has the slightest clue of how to achieve its grandiose goals. Just as Wolfowitz arrived at the bank in 2005, it produced a report on "Lessons of the 1990s." The lessons were that the bank did not know which lessons to teach; the report showed that countries that had ignored bank dogma (China, Vietnam, India) were thriving, while those under bank tutelage (Russia, Argentina, Zambia) did poorly.

Wolfowitz also continued a disastrous trend begun by Wolfensohn, whose answer to every bank failure to meet a goal was to add three new goals. The pair have supplemented the bank's original objective -- promoting economic growth -- with everything from securing children's rights to promoting world peace. In so doing, they've sacrificed clarity of direction for ludicrously infeasible but PR-friendly slogans like "empowering the poor" and "attaining the Millennium Development Goals" (which cover every last ounce of human suffering).

All of which leaves the bank in rocky shape. The best and the brightest of its staff have been leaving in a steady, demoralized exodus, and poor nations are now deserting the bank to seek loans from private capital markets or grants from aid donors like China, who are in it for No. 1. Meanwhile, new private foundations (the Bill and Melinda Gates Foundation, Google.org and so on) are taking over traditional bank areas such as health and agriculture. Add to that the debacle over Wolfowitz's sweetheart deal, and you have a bank facing the gravest crisis in its six-decades-old history.

Can -- or should -- the bank be saved? Yes, but not without real change. It would be a shame to discard the world's largest repository of development knowledge and experience.

The bank's problems would be simpler -- though still far from simple -- if it were not trying to transform whole countries but simply finding out which tools in its toolkit truly help...

One can only hope that the reformers, whose only political asset is their compassion for the poor, will prove strong enough in this hour of crisis to save the bank -- not for its own sake but for the sake of the world's most vulnerable people. That would be a regime change we could all live with.

Jeffrey Sachs and William Easterly agreeing on something involving the World Bank? Amazing. Maybe George Bush really is the uniter, not the divider. Just look at how well he's united the country against the Iraq war and against neocon ideas more generally. If we give him more time and let him talk freely, Social Security will be completely safe and we may even end up with overwhelming national demand for single-payer health insurance. Go George! Yep. He's the uniter.

    Posted by on Saturday, April 21, 2007 at 11:02 AM in Economics, Politics | Permalink  TrackBack (0)  Comments (36)


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