The left is up in arms about the nomination of Deputy Defense Secretary Paul Wolfowitz to head up the World Bank, but Jacob Heilbrunn writes in The Los Angeles Times about why Paul Wolfowitz will give the World Bank a well-needed shakeup.
The essential problem with the World Bank is that it gave money out like popcorn without consideration of where that money went or how much debt Third World nations were racking up. Former World Bank head Robert McNamara gave billions in money to tyrants like Tanzania’s Julius Nyerere without regard for how that money was being spent. The results of all this was a system in which the nations of the Third World carried massive debts for projects that provided absolutely no benefits to the people of those nations. That endemic endebtedness of the Third World continues to this day.
However, Wolfowitz is accutely aware of the conditions in the Third World and how aid can be used and misused. Wolfowitz served as Ambassador to Indonesia for three years, during which time his management skills and acument led the Embassy in Jakarta to be recognized as one of the four best-managed embassies in the Foreign Service.
As Heilbrunn also explains:
Under the leadership of current chief James Wolfensohn, who took over in 1995, the bank started to shift away from massive loans that built useless dams and highways. But Wolfensohn was wrong to fight against proposals for giving outright grants to poor countries that need help. As someone who is not a professional development expert, Wolfowitz can break with orthodoxy and shake up the moribund bank, which plainly is what President Bush wants.
Coming on the heels of his nomination of John Bolton as U.S. ambassador to the United Nations, it is clear that Bush hopes to challenge the giant international institutions that have for decades propped up Third World dictatorships. With his ideas and idealism, Wolfowitz could force the bank to promote democracy.
It’s not as though he’s a naif when it comes to international diplomacy. Not only did Wolfowitz serve in the Reagan State Department, he was also ambassador to Indonesia, where he garnered valuable experience in negotiating aid grants. Wolfowitz’s first moves should be to begin replacing loans with grants and to persuade the West to forgive existing debt.
Grants and debt forgiveness will help with the issue of indebtedness, but what Wolfowitz also brings to the table is a strong belief in democratization. The Bush Administration has tied its Millennium Challenge Accounts to increased transparency and democratization in recipient countries — which means countries have an incentive to reform their legal systems to recognize property rights. As Hernando DeSoto, one of President Clinton’s favorite economists has noted, a system that grants property rights to all citizens is one of the first steps towards economic development.
If Wolfowitz can craft policies that tie debt forgiveness into incenting Third World nations to reform their legal systems to grant more rights to all their citizens, it will not only get rid of the crushing debts owed by many of these already impoverished nations, but it would also set the foundation for those nations to begin producing their own wealth and getting themselves out of poverty. As DeSoto has noted in his brilliant The Mystery of Capital, a system that allows people to enforce contracts and protect their property is absolutely key to economic development. Wolfowitz clearly understands these principles and would be willing to put them into practice.
While Wolfowitz is regarded as one of the dreaded “neoconservatives” and an architect of the Iraq War, his motivations have always been clear. Wolfowitz has been a tireless campaigner for democracy, he argued against the US siding with Saddam Hussein in the 1980s, he has been strong in his support for the Iranian people freeing themselves from the mullahcracy, and he has a record as being an excellent administrator who can take a vision and make it work. The World Bank needs someone like Paul Wolfowitz, and hopefully that’s what they will get.
