[list_indonesia] [ppiindia] Democracy in Inaction at the World Bank (Joseph E. Stiglitz)
- From: sidqy suyitno <sidqy_suyitno@xxxxxxxxx>
- To: sidqy suyitno <sidqy_suyitno@xxxxxxxxx>
- Date: Sun, 20 Mar 2005 21:38:51 -0800 (PST)
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Democracy in Inaction at the World Bank [1]
by Joseph E. Stiglitz[2]=20=20
=20
James Wolfensohn, the president of the World Bank, has announced his intent=
ion to leave, and the search is on for a new head of the world=92s most imp=
ortant multilateral organization promoting development. The choice is espec=
ially important now, when poverty in the Third World is finally being recog=
nized as our greatest problem and challenge.
The World Bank=92s designation as a =93bank=94 understates its importance a=
nd its multifaceted roles. It does lend money to countries to undertake a v=
ariety of projects, and to help them through crises (such as the $10 billio=
n it provided to Korea in 1997-1998). It has been, and is, playing a vital =
role in post-conflict reconstruction around the world.
But the Bank also provides grants and low-interest loans to the poorest cou=
ntries, particularly for education and health, and advises these countries =
on development strategies. It has often joined with the IMF in strong-armin=
g countries into accepting this =93advice=94: unless they do, they will no=
t only be cut off by the IMF and the World Bank, but also by other donors, =
and capital markets will be discouraged from providing funds.
Sometimes =96 its critics will say often =96 the advice provided by the IMF=
and World Bank is misguided. This was certainly true in the 1980=92s and e=
arly 1990=92s, when right-wing ideology dominated, producing a one-size-fit=
s-all prescription entailing privatization, liberalization, and macroeconom=
ic stability (meaning price stability), with little attention to employment=
, equity, or the environment.=20=20
The term =93bank=94 is a misnomer in a second sense: while the World Bank r=
efers to its members as =93shareholders,=94 it is hardly a private bank. On=
the contrary, the World Bank is a global public institution. But, while th=
e G-7 countries, which dominate voting at the Bank, all declare their commi=
tment to democracy and good governance =96 and espouse promoting them as on=
e of their central objectives =96 there is a yawning gap between what they =
preach and what they practice.
Indeed, the entire process of choosing these international institutions=92 =
leaders is a historical anachronism that undermines their effectiveness and=
makes a mockery of the G-7 countries=92 commitment to democracy. This proc=
ess, established at the outset 60 years ago, is framed by an agreement that=
an American would lead the World Bank and a European would lead the IMF. T=
he American president would choose the Bank=92s head, and Europe would coll=
ectively decide on the IMF leader, with the understanding that the other si=
de would exercise its veto only if a candidate were totally unacceptable.
Within the United States, all major presidential appointments must be ratif=
ied by the Senate; even if rejections are rare, the vetting process is impo=
rtant, for the president knows that he can go only so far. But the presiden=
cy of the World Bank is a rare presidential plum =96 an appointment that is=
not subject even to Congressional hearings.
How can advice on democratic reforms be taken seriously when the multilater=
al institutions that offer it do not subscribe to the same standards of ope=
nness, transparency, and participation that they advocate? Why should the s=
earch for Wolfensohn=92s successor be limited to an American (and especiall=
y an American loyal to a particular political party)? Why is the search pro=
cess going on behind closed doors? Shouldn=92t these international public i=
nstitutions be looking for the best-qualified person, regardless of race, r=
eligion, gender, or nationality?
The two names that have been floated so far ­=96 presumably leaked as t=
rial balloons =96 are particularly disturbing. To put it bluntly, given the=
World Bank=92s importance, consideration of either putative US candidate, =
Assistant Defense Secretary Paul Wolfowitz or former Hewlett-Packard CEO Ca=
rleton Fiorina, have been highly controversial around the world. Even if co=
nvention allows the American president to appoint the World Bank=92s head, =
the organization=92s success depends on the confidence of others. Neither W=
olfowitz nor Fiorina have any training or experience in economic developmen=
t or financial markets.=20
Of course, some past appointees turned out to be far better than anticipate=
d; they rose to the occasion, despite qualifications that, in any open and =
objective selection process, would never even have left them on the short l=
ist. They proved that there is always a chance of outperforming. But this d=
oes not outweigh the risk of underperforming, which is why the best policy =
is to look for the best candidate.=20
There are some absolutely first-rate individuals who could step into the jo=
b, people who have shown their command of economic development, their intel=
lect and personal integrity, and their political and managerial skills. Suc=
h potential candidates include former Mexican president Ernesto Zedillo, a =
Yale Ph.D. who now teaches there and has been strongly supported in an edit=
orial in the Financial Times; Arminio Fraga, a Princeton Ph.D. and former h=
ead of Brazil=92s central bank; and Kemal Dervis, a former World Bank vice-=
president who has taught at Princeton and successfully managed one of Turke=
y=92s crises as finance minister. Why should the world settle for anything =
less than candidates of this caliber?
It is time that the G-7 countries back up their democratic rhetoric with ac=
tion. Many stood up to the US as it pushed for the war in Iraq. They were r=
ight to be skeptical about US claims of an imminent danger from weapons of =
mass destruction.
What is at stake here is no less important: the lives and well being of bil=
lions in the Third World depend on a global war on poverty. Choosing the ri=
ght general in that war will not assure victory, but choosing the wrong one=
surely enhances the chances of failure.
---------------------------------
[1] Copyright: Project Syndicate, 2005. http://www.project-syndicate.org/co=
mmentaries/commentary_text.php4?id=3D1896&lang=3D1&m=3Dseries=20
[2] Joseph E. Stiglitz, a Nobel laureate in economics, is Professor of Econ=
omics at Columbia University and was Chairman of the Council of Economic Ad=
visers to President Clinton and Chief Economist and Senior Vice President a=
t the World Bank. His most recent book is The Roaring Nineties: A New Histo=
ry of the World=92s Most Prosperous Decade.
=09=09
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