There has been much debate in recent days about the Bush administration’s nomination of Paul Wolfowitz, the No. 2 man at the Pentagon, to head the World Bank.
Outside the administration there are justified concerns that leadership of the world’s most important development bank would be colored by ideological dogma and excessive focus on security issues. Within the administration, there is much logic to the appointment, ranging from strong confidence in the nominee to his commitment to democracy building to his experience as ambassador to Indonesia.
And indeed there are clearly potential advantages to the appointment. The most obvious is that this would be a World Bank president who can rely on the strong backing of an administration that has, until now, largely ignored international financial institutions. The most optimistic view is that Mr. Wolfowitz’s nomination is an attempt to reorient the administration’s agenda more toward international development, via an institution that is truly international in character.
A more pessimistic (and perhaps realistic) view is that the administration wants to steer the bank, best known for its support of economic development and poverty reduction, toward Bush’s democracy-building agenda. The problem is that it is an area where there are few proven prescriptions for reform – and few success stories based on externally driven efforts to force democracy.
While neither of the extreme interpretations is likely to prove justified, there is one major danger that Wolfowitz – or any other bank chief appointed by this administration – must watch out for. That is, inserting a US political debate – which is sharply divided along ideological lines – into international development policy, where decades of progress have resulted in overcoming such divides.
There are two areas in particular where consensus has been established: population policy and the role of free markets.
On population policy, the benefits of educating girls and of lower fertility rates for both maternal and child health — as well as for general economic development — are now well established: Better-educated girls means lower fertility rates, which in turn is associated with lower infant- and child-mortality rates, more years of education for children, and ultimately better economic performance overall. And the strong ideological divide in America over reproductive rights, and the translation of that divide into strong opposition to foreign assistance for countries that support abortion practices run counter to the established trajectory of success in this arena.
On the role of free markets: Decades of experience with market reforms highlight their important role in poverty reduction. Yet we’re far from the heady days of the post-communist transitions, when free-market euphoria reigned and international institutions, academics, and development practitioners alike had faith that the adoption of free-market policies alone — such as open trade and capital markets — could promote successful transitions to prosperous capitalist democracies. There were, of course, vociferous critics, but most debate was about the pace of reform rather than its direction.
Since then, even the most enthusiastic supporters of free-market policies — myself included — have seen their enthusiasm tempered by crisis after crisis in international financial markets. These crises have hurt nations that were essentially innocent bystanders as much as the profligate borrowers themselves. Profligate lenders mainly got off with little or no penalty.
At the same time, imposing essentially identical market reforms on very different countries did little except to highlight that nations with better preexisting institutions and resources and less poverty and social unrest to begin with fared better. In addition to the market, development economists rediscovered the public sector, geography, governance, and the distribution of income and assets, among other factors.
Debate has essentially come full circle, and both market enthusiasts and believers in the public sector recognize that they need one another to succeed.
The debate on market reforms, poverty reduction, and development is at a point where ideology has become irrelevant. There is strong agreement on the recipes for success — such as market-friendly policies, clear property rights, sound public sector institutions, and safety nets for the poor and vulnerable. There is also agreement on the questions that still need answering — such as timing of capital-market opening, the effects of trade liberalization on weak labor markets, the appropriate role for privatization, and the management of a host of international public goods ranging from intellectual property rights to the environment. The debate among development experts now recognizes where progress has been made, but also accepts the need to learn much more in other areas.
Injecting the often acrimonious ideological divide that characterizes domestic American debates on population control and the regulation of markets into what is now a mature, nonideological debate in the international-development arena would be a very costly step backward. And the world’s poor would be those who would pay most dearly.
So please, Mr. Wolfowitz — or whoever takes on the leadership of the World Bank — do not lead us down this path.