Ask the expert: Wolfowitz and the politics of development

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How does the former Pentagon hawk and new World Bank president Paul Wolfowitz plan to effect real change in the developing world? His role in the Bush administration inevitably meant his appointment at the Bank last June was a controversial one. Indeed, the 61-year-old neoconservative believes any intelligent discussion of development must be political, as Andrew Balls reported in the FT Magazine. How will such a famous proponent of unilateral action use a multinational institution to tackle such challenges as corruption and economic growth in sub-Saharan Africa?

Read the FT Magazine article here:

Loan Wolf

What is the bank doing about corruption? I mean about the misappropriation of funds from World Bank funded projects. There seems to have been little progress. Shouldn’t the Bank be firm on corruption considering this is effectively western taxpayers’ money being given to the bank to assist the needy, particularly in the third world?
Rajan A Rijhwani, Nairobi,Kenya

Andrew Balls: Wolfowitz is careful not to criticise his predecessor James Wolfensohn on this - and constantly applauds Wolfensohn for having put corruption on the agenda. But he thinks that there has been a lot of talk about corruption and not enough action. But I don’t think he has worked out what he wants to do yet on this issue which involves corruption involving bank projects but also corruption in developing country governments that holds back development.

On bank projects - there has been a great effort to stamp out corruption, there is a unit of the bank which monitors this effort, and the bank has named and shamed individuals and companies. At the same time, the bank inevitably is dealing with difficult environments. If made loans and grants to Norway and Sweden only then it would be an easier challenge.

I think there will be an effort to impose zero tolerance for corruption involving bank projects - and there was already little tolerance. Beyond that there will be an effort to promote transparency and accountability around projects.

Beyond that there is what may be the bigger challenge of what to do to turn the bank’s rhetoric on the importance of reducing corruption in developing countries into results and the kinds of things Wolfowitz and the bank may try to do. (The waste of resources is far larger surely). I discussed that in the story but I think we are going to have to wait a little longer to see what will be new in the approach.

In regards to the World Bank’s role what are your thoughts on the IGO which has not successfully (as some claim) dealt with poverty, what needs to change and are developed nations willing to let go of the status quo of protecting their agriculture thus giving the less developed nations a chance to get out of their current situation?
George Corolis

Andrew Balls: Wolfowitz said at the weekend that opening up trade in a way that helps poor countries was probably more important than debt relief - and appealed to the 184 countries that agreed on debt relief at the weekend to follow this up with a speedy outcome at the WTO ministerial in Hong Kong that makes the Doha round a true development round. There was much talk at the Development Committee - the bank’s oversight committee - along similar lines and about building on this year’s momentum at the G8 and at the bank and the fund in Hong Kong. I would have thought that Hong Kong is a much more serious test of the rich countries’ resolve than debt relief and that standing up to their domestic agriculture lobbies a much more politically demanding challenge than forgiving debt that was not going to be paid back anyway.

The gap between rich and poor countries is growing but countries like China, India, and Bangladesh have shown major improvements over the last two decades. The problem, I see, is that these countries are encouraged to do business with the West instead of building ties with countries in the poverty hole like Uganda or Rwanda. Shouldn’t these two be the primordial target of the World Bank? Will the World Bank ever end poverty in these countries if it focuses mostly on building infrastructure and basic services?
Carlos Centeno, President, KU UNICEF, The University of Kansas

Andrew Balls: I would have thought that China or India does business with the west because there are large economies to trade with and that African markets are small. Investing in infrastructure and human development would seem like a sensible way to try and connect African economies with the global market.

Wolfowitz has clearly identified sub-Saharan Africa as the continent where the bank’s role is most important (though he also sees a continuing role in middle income countries where there are 1bn people in dire poverty).

One of the key elements in the bank’s African strategy is promoting trade between African economies. That involves bringing down trade barriers between African countries. It also involves building infrastructure - like roads.

Wolfowitz has indicated last week that getting the World Bank back into the business of agriculture is something that he’d “want to look at”. How serious do you think Wolfowitz really is about agriculture and how do you evaluate his ability to focus the World Bank on agricultural development?

Today, investing in agriculture must be about so much more than just increasing productivity- farmers also need help to get their goods to markets: both local and international. How can Wolfowitz re-focus other areas of the bank (transportation, communications, institutional) to support rural areas, when for so long their focus has been on urban communities?
Kai Bucher, Communications Director, International Food and Agricultural Trade Policy Council, Brussels, Belgium

Andrew Balls: I think he is serious that he wants to improve the quality of the bank’s expertise and advice in agriculture, bring in new people and improve performance in that area. He thinks it is an area that has not been given enough emphasis in recent years and that the bank does not have the leading technical expertise as it does in other areas.

In his speech in Washington at the weekend he said the bank needs to focus on its core areas - and listed agriculture, education, energy, health and infrastructure. And working to improve agricultural productivity is a key part of the bank’s new Africa agenda.

But some observers are sceptical about the issue - saying that the call to get more involved in agriculture has come with great frequency without much evidence of any change in policies. Others say that the bank should focus on land ownership and reform and leave the technological aspect to other experts.

The World Bank and the IMF now play a big role in the management of the budgets of the poor countries. Globalisation has seen a gradual transfer of money and resources from poor to the rich countries in an extremely unfair world economic system.The corruption that the international community talks about goes to fatten the banking system of the west. The poor have been asked to pay the price of the prosperity of the rich. How are the World Bank and other international institutions going to respond to the needs and aspirations of the poor taking into account that they have failed them in the past?
Jan Goonetilleke

Andrew Balls: I don’t buy the idea that poor people in developing countries are suffering because of globalisation.

One interesting point you raise is corruption and flows of resources stolen by powerful people in poor countries that ends up in bank accounts in the west. Wolfowitz wants a greater focus on getting that money back, though of course he thinks that will be difficult.

Also - based on his comments at the World Bank/IMF meetings at the weekend, and previously, he does seem to accept the case that poor countries were saddled with “odious debt” from past regimes and that this was one reason for debt relief. But it is far from obvious to me that the bank and the fund should be blamed for that past lending. The big shareholders - the G7 - determined the policy and the loans.

Wolfowitz’s view that loans and grants should go to governments that make good use of them and fight corruption is interesting. I feel compelled to ask what would be the role of the bank to promote the agenda in its own backyard (Latin America and the Caribbean). There are countries in these regions where poverty, corruption, lack of democracy, lack of access to education and healthcare is at levels similar to those of Africa and Asia. Shouldn’t the Wolrd Bank focus more and stabilise and develop its own region and then go and take care of the rest of the world?
Jose Perez, Boynton Beach, Florida, USA

Andrew Balls: The bank is a multilateral institution - 184 members - so it has a global mission. Wolfowitz has said that Africa must be the top priority - that is where the poverty and lack of progress is worst - but he has also said clearly that he sees an important role for the bank in middle income countries, including Latin America and the Caribbean. One of the things Wolfowitz wants to do is to make it a better partner for these countries, make the process for the countries have access to private markets faster, making the bank a more attractive lender at the same time as providing its technical expertise. (Wolfowitz does not seem to have adopted the position of the 2000 Meltzer Commission, which reported to the US Congress, and said the bank should stop lending to middle income countries and close the IFC). Latin America’s peformance has been disappointing for a range of reasons you cite, and the World Bank and the Inter American Development Bank is working in the region.

The World Bank was effective because it engaged the working level civil servants in the developing countries, apolitically, and more than money brought know how, transparent procurement procedures, discipline. Indeed it started losing its effectiveness when it went political, with structural adjustment loans, essentially lending to the countries’ budget as general creditor, conditional on the adoption of certain macroeconomic policies. In my opinion, to increase its effectiveness now the World Bank, just like the IMF, should try to do less and do it better. Do you agree?
Damianos Damianos, Athens, Greece

Andrew Balls: You raise lots of interesting points. There is a lot of criticism in some circles, and notably in the US congress, about the bank wasting money. From his comments at the weekend Wolfowitz would definitely agree with your point that the bank should do less and do it better.

I quoted Wolfowitz in the story saying: “I think I feel even more strongly than before that you can’t talk intelligently about development if you exclude anything that sounds political.”

He wants to address, for example, the fact that when roads, ports,irrigation works, power generation plants etc are planned and that the money is available to fund them - from domestic tax revenues or from overseas assistance - that projects are started or not finished and the money that was meant to pay for them disappears or is wasted. Wolfowitz thinks that if you want to address that kind of problem then you have to address leadership and the accountability of governments - politics. Interestingly - I think one of the issues he wants to raise is whether the bank can sometimes bypass corrupt governments and work more directly with civil servants, civil society groups, the private sector. That may not be easy given the bank’s rules of engagement, but it is something he is certainly looking into.

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