David Frum March 31st, 2005 at 12:00 am
Say this for President Bush: The man has a sense of style. Critic after critic howls for the heads of the architects of the Iraq war, and above all for the head of the man the European media call “Paul Vulfovitz,” as though he were a villain in a John Buchan novel. So what does the president do? He names this Vulfovitz to run the World Bank – a job that the world’s do-gooders and bleeding hearts have long regarded as their exclusive domain. Take that!
And just to add extra torque to the nomination, there is this irony: Even the president’s detractors have been constrained to admit that Wolfowitz is likely to prove an excellent choice – maybe more excellent than is entirely comfortable either for the bank, for its clients in the underdeveloped world, or for its constituencies in the advanced industrial democracies.
The foreign-aid industry has long been under fire from the free-market Right. The great Hungarian-born economist Peter Bauer published his searing essay “Dissent on Development” all the way back in 1971. Bauer’s work was bitterly controversial at the time, but in the three and a half decades since, it has evolved into something close to orthodoxy: Bauer himself ended his days as a member of the British House of Lords.
In the 1990s, the old attack from the Right was reinforced by a new challenge from the anti-globalist Left. This new wave of protesters objected to the World Bank’s record of supporting dams, mines, highways, and airports rather than the traditional life of primitive villages – and to its even more alarming habit of expecting its loans to be repaid. In the face of this unexpected onslaught, the bank’s image-conscious chairman James Wolfensohn hastily retreated. He gave speeches declaring that he shared the protesters’ goals. He promised to consult environmental activists before funding future dams. He declared that poverty reduction would replace traditional big-project development as the bank’s main priority.
These lofty words did not, alas, translate into actual progress against poverty. In a fascinating and important new book about Wolfensohn, The World’s Banker, Sebastian Mallaby of the Washington Post observes that the condition of the poor in much of the world actually deteriorated in the 1990s. Between 1987 and 1998, the number of people living on less than $1 per day increased by 100 million. The growing population of desperately disadvantaged was obscured, however, by a counterbalancing statistic: Over those same years, the number of Chinese living on less than $1 per day declined by about 100 million. Net-net, as the bankers say, there was global progress – but only because one smashing success story could be set against disappointment throughout much of the rest of the poor world.
In the 1960s and 1970s, the World Bank justified its role by arguing that only a subsidized multinational lender like the bank could be counted on to fund essential projects in the developing world. The experience of the 1990s discredited that old claim. In the post-1989 globalization boom, capital flooded into Latin America and East Asia. And despite shocks, disappointments, and crises, the money keeps coming: Developing countries attracted $255 billion in foreign direct investment in 2004, 42 percent of all foreign direct investment that year – the highest level since 1994.
When the developing world offers opportunities, entrepreneurs and investors will eagerly seize them. The trouble of course is that much of the developing world does not offer opportunities. And the reason for that glaring lack is politics, bad politics: war, civil strife, corruption, oppression, and lawless government. Why is Zimbabwe plunging into famine? Not for lack of fertile land or willing workers – but because of a greedy and brutal dictator, Robert Mugabe. Variants of this story can be told from West Africa to Andean South America – and throughout too much of the Islamic world, from Mali to Pakistan.
If Paul Wolfowitz is known for any one thing, it is his insistence that Middle Eastern terrorism can be traced back to Middle Eastern tyranny – that the region cannot know security until it enjoys freedom. This insight has, if possible, even more relevance to the problems of global poverty and Third World development.
The World Bank has in the past eschewed such political thinking. It is after all an institution owned and controlled by governments. The United States is the bank’s single biggest funder and accordingly holds the most votes – about 16.4 percent – but bank management cannot easily avoid responding to other large shareholders such as France (4.3 percent) or China, Russia, and Saudi Arabia (2.78 percent each). Any suggestion that tyranny is an important cause of poverty can be counted on to offend large voting blocs.
No wonder then that the Wolfowitz nomination has stirred the pot. But isn’t it long past time that this particular pot be stirred? Fifty-plus years since the World Bank went into business, there is precious little verifiable evidence that it has as yet done its supposed beneficiaries any real or enduring good – and considerable evidence that its willingness to underwrite projects that flunk the market test has done real and enduring harm. If the day should ever come, though, when the bank reinvents itself as a force for clean and representative government in the Third World; if it could offer incentives to encourage peace and stability in conflict-wracked places like Sierra Leone or Iraq; if it could be a force for democracy-led development: then its long disappointing record would at last change for the better. Paul Wolfowitz is heart and soul committed to this task – and so is the president who has again defied international complacency to give Wolfowitz his backing. It’s a great choice by a gutsy president who stands by friends – and has the right enemies.