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04/07/2005:

"I'm with Wolfowitz"

Liberal handwringing over the World Bank simply reflects a failure to recognise the role it exists to fulfill.

by George Monbiot
It's about as close to consensus as the left is ever likely to come. Everyone this side of Atilla the Hun and the Wall Street Journal agrees that Paul Wolfowitz's appointment as president of the World Bank is a catastrophe. Except me.

Under Wolfowitz, my fellow progressives lament, the World Bank will work for America. If only someone else were chosen, it would work for the world's poor. Joseph Stiglitz, the bank's renegade former chief economist, champions Ernesto Zedillo, a former president of Mexico. A Guardian leading article suggested Colin Powell or, had he been allowed to stand, Bono. But what all this hand-wringing reveals is a profound misconception about the role and purpose of the body Wolfowitz will run.

The World Bank and the IMF were conceived by the US economist Harry Dexter White. Appointed by the US Treasury to lead the negotiations on postwar economic reconstruction, White spent most of 1943 banging the heads of the other allied nations together. They were appalled by his proposals. He insisted that his institutions would place the burden of stabilising the world economy on the countries suffering from debt and trade deficits rather than on the creditors. He insisted that "the more money you put in, the more votes you have". He decided, before the meeting at Bretton Woods in 1944, that "the US should have enough votes to block any decision".

Both the undemocratic voting arrangement and the US veto remain to this day. The result is that a body that works mostly in poor countries is controlled by rich ones. White demanded that national debts be redeemable for gold, that gold be convertible into dollars, and that exchange rates be fixed against the dollar. The result was to lay the ground for what was to become the dollar's global hegemony. White also decided that the IMF and the bank would be sited in Washington.

At the time, no one doubted that these bodies were designed as instruments of US economic policy, but all this has been airbrushed from history. Even the admirable Stiglitz believes the bank was the brainchild of the British economist John Maynard Keynes (he was, in fact, its most prominent opponent). When Noreena Hertz wrote on these pages last month that "the Bush administration is a very long way from the bank's espoused goals and mandate", she couldn't have been more wrong.

From the perspective of the world's poor, there has never been a good president of the World Bank. In seeking contrasts with Wolfowitz, it has become fashionable to look back to the reign of that other Pentagon hawk, Robert McNamara. He is supposed to have become, in the words of an Observer leader, "one of the most admired and effective of World Bank presidents". Admired in Washington, perhaps. McNamara was the man who concentrated almost all the bank's lending on vast prestige schemes (highways, ports, dams) while freezing out less glamorous causes such as health, education and sanitation. Most of the major projects he backed have, in economic or social terms or both, failed catastrophically.
Full Article: guardian.co.uk