But I was disappointed with Easterly's main argument, which confuses aid issues with development ones. Before adding my two cents, here are excerpts from the opinion piece:
Wolfowitz also continued a disastrous trend begun by [James] Wolfensohn, whose answer to every bank failure to meet a goal was to add three new goals. The pair have supplemented the bank's original objective -- promoting economic growth -- with everything from securing children's rights to promoting world peace. In so doing, they've sacrificed clarity of direction for ludicrously infeasible by PR-friendly slogans like "empowering the poor" and "attaining the Millennium Development Goals" (which cover every last ounce of human suffering). [...]Since when do we define "development lending to a government" as helping individuals to help themselves? Since when do we define "national infrastructure projects" as feeding the hungry?
The bank's problems would be simpler -- though still far from simple -- if it were not trying to transform whole countries but simply finding out which tools in its toolkit truly help individuals help themselves. We should hold the bank accountable for deregulating the overregulated, feeding the hungry, supplying clean water to the thirsty and treating the sick.(1)
I understand that the World Bank left this planet during Wolfensohn's tenure as Bank president, so Easterly is right to mock the Bank's wholesale embrace of the Millennium Development Goals. But if one really wants to mock the Bank's muddle -- indeed, locate the muddle -- the obvious place is with a review of the following concepts:
> lending vs aid,
> government infrastructure vs social development, and
> government economic development vs aid to the poor.
One isn't far into the review before coming up against the World Bank articles of agreement, which prevent the Bank from mounting programs designed to influence a country's politics. It is because of this stricture that the Bank (and Wolfowitz) has gotten most muddled with the anti-corruption drive.
The only way to make a dent in government corruption is to promote genuine democratic governance on the theory that in a real democracy, private citizens can muster oversight of government procedures and demand transparency in government deals. But this path is closed to the Bank.
What's the next best option for the Bank? Spin off the International Development Association from the Bank and transform the IDA into a multilateral aid agency. This would allow the World Bank to concentrate lending on the kind of projects it's always done best: national infrastructure development projects. These help a government build up or modernize critical industries and services (e.g., power and telecommunications) and extend to 'government operations' infrastructure. The latter include projects for strengthening a country's judicial system and sorting out hideously complex legal projects such as helping a government determine land ownership in their country and register large numbers of deeds.
Easterly asks:
Can -- or should -- the bank be saved? Yes, but not without real change. It would be a shame to discard the world's largest repository of development knowledge and experience.I agree that it would be a tragedy for humanity if the Bank's vast knowledge base went down the tubes. Indeed, the Bank's expertise is the best selling point when competing with private banks and regional development banks to make development loans. However, the Bank has been bitten by the Benn Fallacy Bug, which has eaten into development issues to such extent that the Bank's muddle is approaching chaos.
Last September Hilary Benn, the British Secretary of State for International Development, announced that the United Kingdom was withholding from the World Bank a fifty-million-pound payment, to protest the conditions the bank attached to aid. Here we come to the Benn bug:
In a speech in London, Benn objected to Wolfowitz's actions on corruption: "Where problems arise, some people argue that we should suspend our aid or withdraw it completely. I don't agree. Why should a child be denied education? Why should a mother be denied healthcare? Or an H.I.V.-positive person AIDS treatment, just because someone or something in their government is corrupt?"(2)Hello, Mr Benn, if China's government wasn't so corrupt, if the World Bank hadn't spent decades pandering to Beijing's corruption during an era when the Bank had little competition from other lending agencies, think of the tragedies that might have been averted!
Maybe China's poorest citizens could have avoided the democide that their government set in motion by suspending HIV tests for large-scale blood plasma drives. All of the donors were poor villagers who sold their blood.(3)(4) The donors are now dying of AIDS by the hundreds of thousands. Hundreds of thousands, Mr Benn.
Recently Indonesia's corrupt government announced that most of the multilateral aid for Tsunami victims never reached the hundreds of thousands of victims; it was stolen. Hundreds of thousands, Mr Benn.
If the World Bank had been tough on corruption during the era that Indonesia had nowhere to turn for big development loans but the World Bank -- think of the horrific tragedies that might have been averted! By the time the Tsunami hit, why, Indonesia might have had a modern government, instead of a club of cronies, to monitor and distribute foreign aid to the victims!
Benn is pushing the fallacy that there is an either-or aspect to development lending: either development banks go easy on rules about dealing with corrupt governments, or the same governments won't allow critical help to the poorest.
Benn's fallacy ignores that the effects of widescale corruption are not limited to cushy lifestyles for thieving officials. Just how do you deliver education, AIDS medicine, clean water, and food to millions of people when there's no electricity, no means of travel through jungle, no functioning water purification plants?
Consider the debacle in Nigeria:
Another casualty [of corrupt government] has been the nation's infrastructure, which has deteriorated despite a massive surge in oil revenue. Billions of dollars supposedly have been spent improving Nigeria's electrical system, but poorly maintained power plants generate far fewer megawatts than they did when [President] Obasanjo took office, prompting many Nigerians to conclude that much of the money for repairs and upgrades was simply stolen.Corruption kills; it kills in large numbers and puts a country at the mercy of corrupt foreign governments that rip off natural resources and reduce citizens to beggars and slaves -- and captives of organized crime, which owes much of its funding in the Third World to money stolen from foreign aid and development projects!
They also blame corruption for the aging schools, crumbling roads and meager supplies of clean water. The economic toll has been severe. ...
Without a steady supply of electricity and water, or decent roads and railways to deliver goods, factory owners say they struggle to compete in an increasingly global, open market.(5)
Clearly these points are details in the minds of slicks who want to lend without taking responsibility for what happens to the loan money. But as Britain's decision to withhold funds illustrates, the World Bank is now hostage to officials who won't hesitate to withhold replenishment funding if the Bank upholds strong anti-corruption measures.
The other side of the coin, which William Easterly touches on in his essay, is that the World Bank is in the business of lending, and it has to keep lending to stay in business. Considering the large number of corrupt governments, the Bank couldn't continue if it applied strict anti-corruption measures across the board.
How to resolve the conflict? The same advice I gave earlier applies. It is virtually impossible to closely monitor the many 'soft' loans the IDA makes, and which often are actually aid micro-projects. But the Bank has worked out effective measures for monitoring where the money goes for large infrastructure projects.
Am I proposing to kick the can down the road by fobbing corruption issues onto an outright aid agency? The multifaceted furor over Paul Wolfowitz's presidency is the most visible sign that the Bank is in deep trouble. So I am thinking in terms of triage: to save the World Bank, ditch the IDA and transfer redundant Bank employees, of which there are many, to a new aid agency. Once the agency is operational, Bank funding will be exclusively for infrastructure projects that build a modern society and the machinery of fair government.
Will the new aid agency's aid projects be subject to graft? Yes, and probably to the tune of 20% of the project money. But one removes a gangrenous arm to save the patient; by the same reasoning much graft will be off the table if the Bank concentrates on large-scale infrastructure programs and projects. These are more easily quantified -- and thus, more easily monitored -- than outright aid projects.
And by leaving off aid projects the Bank can stop being a football for politicians who use aid to placate governments they want to increase trade with.
Finally, by restoring the Bank to its original function as a development lender, the concerns that Hilary Benn expresses can find their outlet in outright aid. Let the donor governments eat losses from grafted donations if Mr Benn wants to suspend close scrutiny in the name of aiding the poorest individuals.
Could Paul Wolfowitz scrape up enough of a mandate for the surgery? Not at the present; that's for sure. But neither should he retreat in disarray. He's still the World Bank president; in whatever time he has left at the Bank he needs to fight Benn's Fallacy, not bow to it.
Wolfowitz should always keep before him that Benn's argument flies against the World Bank's own voluminous research. In 1998 the bank's research department published a landmark paper, Assessing Aid, which concludes that aid is effective only when given to a nation with honest government and efficient economic policies.
1) Does He Hear the World's Poor? Don't Bank on It by William Easterly, The Washington Post, April 22, 2007.
2) The Next Crusade: Paul Wolfowitz at the World Bank by John Cassidy, The New Yorker; April 9, 2007.
3) Democide includes deaths arising from a government's "intentionally or knowingly reckless and depraved disregard for life" [...] See Wikipedia discussion of democide. The AIDS deaths in China from HIV-infected state-run blood banks might be termed genocide if it could be demonstrated that officials in China suspended HIV tests on the blood as a means of depopulating the countryside. But finding evidence to support such an accusation would be impossible under China's present government.
4) For more on the China deaths arising from HIV-infected plasma, see The Truth About China by Guy Sorman, The Wall Street Journal, April 20, 2007.
5) As Vote for New President Nears, Democracy Disappoints Nigerians by Craig Timberg, The Washington Post, April 20, 2007.
No comments:
Post a Comment