March 17, 2005

But Does He Do Banks?

Fred Kaplan's essay on Paul Wolfowitz' move to the World Bank is pretty good. Yes, it seems likely that Wolfowitz was nominated because President Bush and Condoleeza Rice are trying to purge—*ahem*, gently nudge out—all the neoconservatives from the administration. And yes, I'm willing to believe that Wolfowitz is an idealist who genuinely wants to improve the world, even if, like so many academics, his preferred means of getting there are woefully misguided.

But sadly, Kaplan doesn't talk much about what the World Bank actually does, and I've seen little on what sort of effect Wolfowitz would actually have at the place, besides the usual platitudes. (Fair enough; economic development is boring, and doesn't effect us much here in America.) So let's talk. Wolfowitz is no an economist, true, but that's somewhat irrelevant. And, when it comes down to it, I think talk of his idealism and his grand vision are sort of beside the point here.

I got a little snarky this morning on the subject, but here's my slightly more-considered take on the World Bank. It seems that over the past decade or so, especially under Jon Wolfensohn, one of the biggest problems with the Bank is that it's suffered from a good deal of "mission creep," trying to focus on everything at once—imparting advice and knowledge to developing countries, helping with governance reform, improving public and private institutions, lowering crime, reducing poverty, promoting environmental sustainability, promoting good health, etc. etc. Hell, the Bank was even asked, more or less, to help Russia transition to a capitalist system during the '90s, something it was quite clearly not equipped to do. Meanwhile, there are all sorts of weird political restrictions on the Bank; it's supposed to advocate public-sector reform, for instance, but it's certainly not "allowed" to press for, say, income redistribution or welfare state measures. In essence, the U.S. asks the World Bank to save the world, but please, good sirs, try not to rock the boat.

So where does Paul Wolfowitz fit into all this? Early news reports suggest that the Bush administration wants to scale back the overly-wide scope of the bank and return to the good old days of funding large infrastructure projects. Okay, but many of these projects were a disaster. And there's one simple reason for that—the Bank, it seems to me, has very little in the way of accountability. From what I've seen, heard, and read, the institution hasn't really learned from its mistakes over the years so much as just shifted strategies with the changing political winds. In the '60s, that decade of flower power and big liberalism, the Bank was directly funding education, agriculture, small business, etc. In the '80s, in the age of Reagan and Thatcher, it was all about structural adjustment lending and freeing markets. Then Wolfensohn had his own approach. Now Wolfowitz will have his. But none of it really relates to outcomes. No one's asking whether this or that approach is actually getting results.

Thinking it through, in the end I'd like to see the Bank do one thing, and one thing only: lend money. In other words, just be a damn bank. It could outsource all those other functions to a number of outside institutions who could do research on the best projects to funnel money into, provide technical advice to developing countries, evaluate progress, etc. etc. But let outside experts handle it, rather than the monolithic bloc that does everything now, and let those outside experts compete with their crazy and nifty ideas. It's decentralization at its finest! The hope is that the Bank would consult a wide range of outside ideas about development, and put them to the test, jettisoning the ones that failed and keeping the ones that worked. And the Bank itself would stick with its comparative advantage: financing the whole thing.

So yeah, I don't think the problem with the World Bank is that it needs a new visionary or new overarching theme, which means I don't really care if Wolfowitz' heart is in the right place or if he's brilliant or anything else. It seems to me the Bank needs a whole new structure, one that essentially creates a market for thinking and practice on development. For that, though, you need a stellar administrator, a CEO or some other organizationally-brilliant executive to shake up the institution. Wolfowitz isn't that, so all in all we're just going to get more of the same—a brand new "master vision" for economic development that will dominate the Bank for a few years, and then disappear at the dawn of the next American presidency. Ho hum.

Continue reading "But Does He Do Banks?"
-- Brad Plumer 3:35 AM || ||