New World Man

TNR has published a compelling article that makes the case for liberal support for Wolfowitz to head up the World Bank.

The Author, G. Pascal Zachary, opints out something that I’ve been noting for years. That the American Liberal and Conservative activism on the World Bank is in agreement more than not. I recall leftist friends who claimed that the World Bank was so harmful in its present state that it ought to be disbanded. I delighted in explaining to them that Bush allegedly held the same beleif before taking office as president, and it was prety amazing that they would agree with him on such a huge issue.

I don’t know if it’s true that Bush actually believed this as was alleged during the 2000 election, but I can agree with the sentiment that the World Bank is in serious need of reform. Mismanagement and lack of focus have caused it to be implicated in helping bad governence cause many serious calamities, from Argentnia’s default, to Mexico’s currency crisis.

Most conservative critics seem to agree that the World Bank should stop subsidizing loans to medium income countries such as China and Argnetina, since it detracts from what should be it’s central goal: the elimination of proverty. They also call for poor countries to recieve grants instead of loans for two reasons. One is that you can tie more stings to grants than you can to a loan, which can putting controls in to make sure the money is not squandered by corruption as has happened so often in the past. More importantly, you do not burden a country with debt that it may not be able to deal with.

These very different lending practices trouble conservatives greatly, though for diverse reasons. The Bank really has no justification, they say, for lending money to China, which has hundreds of billions of dollars in cash reserves and could readily borrow money (though perhaps at higher rates) on the open market. Meanwhile, conservatives argue that the Bank’s practice of making interest-free loans to poor countries is a charade, since many of those loans never get repaid. And so some conservatives argue for replacing loans with grants. Why? For one thing, it’s easier to attach strings to grants than to loans; because you’re actually giving away money you can generally demand more control over how that money is used. (This appeals to social conservatives who would like to exert more control over how money is spent on family planning, for instance.) More important, though, conservatives believe the World Bank pushes loans on poor countries the same way a dealer pushes drugs on poor customers. Because Bank executives can get ahead in their careers by orchestrating loans, there’s little institutional incentive for them to hold back. Meanwhile, the debt of Third World countries continues to grow and grow. With a grant system, conservatives argue, there would be competition among countries for a limited pool of money and resources would be distributed based on merit, not based on the need of a Bank official to notch another loan.

The article makes a case that a big-idea thinker like Wolfowitz, who ideologically bridges humanitarian liberalism with hard-edged conservatism, may be just what the world bank needs to implement the reforms that both conservatives and liberals want.

It’s worth noting, as Zachary does, where typical liberal and conservative views diverge. Liberals fear that conservatives would use greater conrtol over grant money to pressure governments on subjects like planned parenthood and privatization. Similarly, liberals would like to see more intervention over environmental issues, which many conservatives view as outside of the purview of the bank.

What’s important to remember here is that the World Bank still must answer to its group of shareholders (the “owners” of the bank are the G7 countries, western Europe and the US who can leand thier creditworthiness to secure good rates for the banks capital-raising). It isn’t as though the Chariman has carte blanche to take orders from Washington. It’s also not clear that Wolfowitz is in alignment with the concerns of some conservatives that are most troubling to liberals.

This entry was posted on Friday, March 25th, 2005 at 16:59 and is filed under general, politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.