TCS Daily

Wolfie at the Bank

By Max Borders - March 25, 2005 12:00 AM

Just when his umpteenth mispronunciation of the word "nuclear" makes you question his IQ, President Bush goes and does something shrewd. This time, it looks like war-architect Paul Wolfowitz is heading to the World Bank -- despite the ruffled feathers of various doves and doubters opposed to the Iraq war.

While his very name sticks in the craw of some of our European counterparts, they have nevertheless decided not to attempt to block Wolfowitz's nomination. (Could the Rice-Bush goodwill tour have paved the way?) They've chosen to grimace and bear it, it seems -- even while theories of a Zionist cabal are surely a susurrus in the halls of Brussels, Berlin and Paris.

Picking Paul Wolfowitz to run the organization is a stroke of political genius. But not just for the reasons many have cited. The common analysis is that Bush wants a neocon to take over half of the international development coffers, so that the US can begin using "soft power" -- i.e. the carrot -- to begin transforming the world in America's image. While this is probably true in part -- and probably a good idea -- it doesn't give us a complete picture of the possible benefits of having Wolfowitz at the top of a bureaucracy long overdue for an overhaul.

First, despite nightly prayers from folks like me (and just about every Austrian or Chicago-school economist), the World Bank will not be broken up, privatized or abolished outright. For many who genuinely care about the developing world, the World Bank is a symbol of hope -- despite a deplorable track-record for actually helping. Thus, it has political clout. Second, like all entrenched bureaucracies, its first mission is to find a way to keep itself around, using political maneuvering and de facto immunity to market forces to feed its blood and bones. So if its going to be around, reasons the Bush Administration, let's make the best of it.

This is the kind of thing we can expect from Wolfowitz, quoted here in a DoD transcript:

"...just words [are] rarely going to get you much unless you're dealing with people who basically share your values and your interests. I'm not against, I mean sometimes it does help to just have a better understanding... But if you're talking about trying to move people to something that they're not inclined to do, then you've got to have leverage... and one piece of leverage is the ultimate threat of force. It's something you need to be very careful about because, as Rumsfeld likes to say, don't cock unless you're prepared to throw it."

In this case, it's not the threat of force, but the threat of refusing aid.

One of the biggest problems with the World Bank is that it has not been tough enough about demands on borrowing nations for institutional change. Nobel-caliber economists such as Doug North have finally gotten the term "institutions" into the bureaucratic nomenclature, but the concept has been distilled into weak calls for "good governance" by both the World Bank and IMF. Such governance lip-service has done little to solve the problems of corruption and systemic malaise that plague the developing world. Paul Wolfowitz might just be the man to say "if you don't change, we cut you off." It's time somebody said that.

Good timing too. As Jim Vallette at writes:

"At the past two World Bank annual meetings, ministers and lawmakers from Africa, Latin America, Asia and the Pacific pointedly demanded that the democratically elected representatives of borrowing nations be the final arbiters of all economic policies in their countries. They are challenging the very structure of the Bank -- which would entail taking voting power from the wealthiest nations."

Jim Vallette thinks that would be a good thing. I don't. To allow borrowing nations be the final arbiters of their own economic policies is like handing kindergartners your wallet and telling them to go find their own dinner. (If they weren't hospitalized from cotton candy overdose first, your credit cards would be maxed out at the video arcade.) I realize the child analogy may seem harsh on some level, but when borrowing nations have only extended palms to offer in return for aid, they are infants at the level of institutional development. People like Paul Wolfowitz know that projects like the Marshall Plan only work in the context of people with certain traditions and fixtures such as titled property, systems of arbitration, and counter-corruption mechanisms. Under the development status quo, goons get more Kalashnikovs, cronies get more kickbacks, and poor people get more alms.

In other words, too much of the vast resources poured into the Third World end up in the coffers of dictators, cronies and lackeys. And the money that does trickle through to the people ends up as some expensive, misguided "infrastructure" project, or creates dependency relationships on people trapped at subsistence. If Wolfowitz has the fortitude to commit to war in Iraq, then he'll have the fortitude to pull some of these welfare nations from the World Bank's subsistence teat unless they change. And Wolfowitz will demand reform, not just from recipient countries, but throughout the whole World Bank organization. (I shiver to think what Bono would have done.)

Finally, the Wolfowitz nomination was smart because it gives the impression that the Bush administration is moving away from hawkishness. Some even view the Wolfowitz nomination as a way for Bush to get him away from the White House, where he was perceived as influencing policies based on a continuous war-footing. Appearances can be deceiving, if not ambiguous. Despite the fact that some view this move as a way for the President to extend his imperial reach, I think most people will come to see the new face of the administration, instead -- one devoted to diplomatic democratization with a slightly more feminine countenance (in the form of Dr. Rice). Whether for the sake of appearances or honest-to-goodness statecraft, this is a good move for both Wolfie and Bush. The only better move I can think of would be to sick Donald Rumsfeld on the World Bank and let Wolfowitz run the Pentagon. But hey, you can't have everything.


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