Lounsbury: Well done Wolfowitz Comment

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March 28, 2005

Well done Wolfowitz Comment

I rather liked this commentary on Wolfowitz:

World Bank Pragmatism
Wolfowitz's Ideology Fits New Challenges
By Sebastian Mallaby
Monday, March 28, 2005; Page A17
http://www.washingtonpost.com/wp-dyn/articles/A5757-2005Mar27.html

...... What of the Wolfowitz ideology? His nomination has been bracketed with that of fire-breathing John Bolton as U.N. ambassador, but this is ridiculous. Bolton argues that international law and multilateralism constrict the United States and that this on principle is bad. Wolfowitz espouses no such principle. His passion is the advance of democracy, and he's willing to use unilateral tools to get there, but unilateralism is not an end in itself. To strengthen democracy in Eastern Europe in the 1990s, Wolfowitz advocated multilateralism in the form of NATO expansion.

Wolfowitz appears pragmatic on economics as well. His main exposure to development comes from his time as ambassador in Indonesia, which combined miraculous poverty reduction with state intervention; he surely does not believe in privatizing everything in sight. Nor is he associated with the common Republican belief that, because Brazil or China can borrow on private capital markets, the World Bank should on principle stop lending to them -- a principle that would deprive the bank of its strong borrowers and threaten its financial foundations.

Well, I am not sure I am convinced that Wolfowitz is a pragmatist in this sense, although what I know of him from my convos, I would endorse that the characterization of support for a broad role for WB in activating and supporting private markets is correct.

I emphasized the underlined because this somewhat highlights Wolfowitz is not a strong candidate on this kind of experience, although I do know he's genuinely interested. That's fine of course, but so am I. Should I be WB President?

The next question is harder, and gets to the points the FT made:
So there are some troubling ideologies that Wolfowitz does not share. That leaves the reasonable question: Is a passionate democratizer right for the World Bank? Fifteen years ago the idea would have seemed outlandish; the research consensus held that democracy was actually bad for development, because it takes a hatchet-faced dictator to cut government spending, close inefficient government businesses and eradicate inflation. Taiwan and South Korea in the 1970s; Suharto's Indonesia in the 1980s; China, Vietnam and Uganda in the 1990s: All seemed to demonstrate an "authoritarian advantage."

And yet, over the past decade, our understanding of what drives development has changed. The Washington consensus reigns no longer, partly because it's been successful -- in nearly all developing countries, hyperinflation, rampant budget deficits and other forms of crass economic incompetence are gone. Now a new consensus -- also headquartered, naturally, in Washington -- holds that the chief challenge in poor countries is political. It's to fight the corruption that deters private investment and to create the rule of law.

Well....... I think this is rather thoroughly overstated as where the hard core problems remain - e.g. Middle East and Africa, some parts of continental South East Asia, the problems look rather similar as to the cited. As for the corruption that deters foreign investment, that is but one driver, and arguably not the most important one (within certain limits).

A China, a India can overcome this drag by the sheer attractiveness of their markets, nor is democracy always a route to transparency: see Nigeria.

For this new challenge, democratic virtues such as accountability and transparency are essential, and appointing a passionate democratizer as World Bank president seems less outlandish after all. Amusingly, the cheerleaders of this political new Washington consensus have been mostly left-wingers -- intellectuals such as Joe Stiglitz, the Nobel laureate and former World Bank chief economist, and nongovernmental development activists -- and now these same left-wingers are deploring Wolfowitz's appointment. But anyone who regards Wolfowitz as a wacky far-right ideologue should consider Nicolas van de Walle's new book, just published by the sober and nonpartisan Center for Global Development. It says democratic reforms, especially presidential term limits, should be required as a condition of development assistance.

First, I rather dislike Stiglitz, although I reluctantly admit he has some on point criticisms, however the man is blind to a lot of problems and idealizes emerging market actors at the expense of developed market actors. An ideological thinker.

Second, I think tying development assistance to democratic reforms is a loser. Fooling oneself about where the drivers are.

Wolfowitz should be cautious about pushing this agenda. Although the empirical link between good economic governance and poverty reduction is well established, the link between democracy and poverty reduction remains debatable. It's fair to ask whether, given his naive forecasts about the easy success of Iraqi reconstruction, he can be trusted to be cautious. But if he can avoid hubris, and if he can fight through the thicket of negative perceptions, he may prove a worthy leader for the World Bank.

I agree with this overall, empahsis added on the above; hard to know what extent he say this as political spin.

March 28, 2005

Well done Wolfowitz Comment

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