Thursday, March 10

We're so glad you enjoyed the G8 luncheon, India and China! With wine and tip that comes to 5 billion dollars.

Pundita received a number of emails in response to the Juggernaut essay. Some readers wanted to know if I made up the story about the origin of the IBRD. Other readers asked whether I had read the Time magazine cover story on Jeffrey Sachs's book (The End of Poverty) and whether I agreed with his proposals for ending the worst poverty in the world by 2025.

Pundita learned about the Sachs book from the Guardian Unlimited, which is the only newspaper to read if you want to know what the Democrat Party and the left wing of the Supreme Court are up to these days.

We have yet to read the Sachs book but from the Guardian column about the book it's clear that the Creatures from the Theoretical Bubble Lagoon are massing for another attack on Washington. After all, this is the run-up to the IMF Spring meeting, the White House decision on the next World Bank president, and the upcoming G7/8 meeting. Pundita warned her readers months ago that this is the Trifecta. If you think the Sachs book wields a sledgehammer, you ain't seen nothin yet.

President Bush is partly to blame. He agreed in 2002 to give 0.7% of the US national income to foreign development goals. Why he should agree without first demanding an independent audit of every development bank to which the US belongs is beyond a reasonable mind. But Jeffrey Sachs is an economist so he doesn't need to be reasonable. Thus, according to the Guardian, he argues that there is little evidence that corruption has been the main obstacle to development in Africa.

Well of course there's little evidence. How can there be evidence without an audit? In any case, development banks are not set up to serve the poorest. They are set up to serve the trickle-down theory. The development banks are designed to keep contractors and subcontractors gainfully employed. The idea is that if enough businesses can stay afloat, the country will stay afloat and stay away from war.

So Pundita fails to see why Sachs assumes the IMF and the World Bank can be reformed and remade to help in the task of saving the world's poorest on the theory those organizations have accumulated useful expertise and experience. If your phone company has been trying for 40 years to get your service back on, the experience and expertise they've accumulated during those decades of trying is neither here nor there--if you want phone service. If the Bank and the IMF haven't gotten it right by now, clearly their expertise and experience have limited value for the task Sachs envisions.

Of course both organizations have tremendous expertise and experience, both of which are valuable at certain stages of a country's development. But Jeffrey Sachs is the wrong person to advise on such matters. Even the Guardian, which predictably supports any idea meant to squeeze more aid money out of the United States, can't avoid a glaring contradiction in their praise of Sachs.
Prof Sachs rose to prominence 15 years ago as the chief designer of "shock therapy" for the post-communist economies of Poland and Russia, emphasising an immediate transition to free markets and drastic cuts in state spending. In his new book he argues that the market-oriented prescriptions of the IMF have been part of the problem, by cutting away at the fabric of poor societies
The theory pushed by Sachs was as much a part of the problem as the IMF, a point which the Wikipedia encyclopedia alludes to in a chapter on shock therapy theory. The author points out the downside of the theory:
A developed Western economy rests upon and tends to take for granted a framework of law, regulation and established practice (including between parts of the domestic and international economy) that cannot be instantaneously created in a society that was formerly authoritarian, heavily centralised and subject to state ownership of assets. Even re-defining property law and rights takes time.
That's some downside. But establishing the framework is a thousand times harder in a country where the rule of law was only superficially applied by a colonial rule. That's what African countries faced, while they served for decades as experimental labs for IMF theories.

That was essentially Iraq's problem under Saddam Hussein, as Pundita has noted before. Behind the stage paint of the Europeanized Baathist fascist government stood a tribalized clan society.

That was also the situation in the Soviet Union. The shock therapy that Professor Sachs and his cronies shoved through in Russia created the oligarchs, who proceeded to vampire their country's wealth and retain inordinate power through clan affiliations.

Once the stage paint was scrubbed from the Europeanized fascist model of government, it turned out that Russia and the rest of the FSU countries had been running according to ancient clan laws. The structures of modern government simply weren't there--a situation which Sachs and his bubble-headed school of economics completely ignored.

So. Now Professor Sachs brings his intellect to bear on the plight of the world's poorest countries. Pundita will read his list of recommendations and report back to her readers. Point by point.

In the meantime, we impatiently await India's first luncheon at the G7/8 meeting. Yes, India has finally received an invitation to the lunch. If memory serves, this will be China's second lunch.

Pundita can't wait for the Chinese and Indian delegations to arrive. It's going to be music to hear the anti-Globalist protesters yelling, "Stop robbing the poor!" at the Chinese and Indians sneaking in the back entrance to the luncheon.


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