Thursday, March 17, 2005

Good luck, Mr. Wolfowitz

Kash over at Angry Bear seemed pretty angry about Paul Wolfowitz's new appointment to head the World Bank. He said sarcastically:
Knowledge of economics be damned. Multilateralism be damned. We own those organizations, and it's time they know it.
The U.S. is the largest "shareholder" of that mostly worthless institution. We don't "own" it because we're not a majority shareholder, but we certainly ought to have the greatest say.

Second, there was a very nice editorial today defending Mr. Wolfowitz's qualifications. And of all the places, it's from the Washington Post:
Unlike several of his predecessors, Mr. Wolfowitz would come to the World Bank presidency with real knowledge of development. He served as U.S. ambassador to Indonesia in the late 1980s, when that country was one of the World Bank's biggest clients and a poverty-reduction success story. Mr. Wolfowitz is also a persuasive communicator, an essential quality in the leader of an institution that is frequently attacked by ideologues on both the left and the right. And Mr. Wolfowitz has experience as a public-sector manager. The World Bank is an unwieldy, 10,000-strong bureaucracy. Mr. Wolfowitz's stint as No. 2 at the Pentagon should have prepared him for that.
But the Post didn't get it completely right:
Mr. Wolfowitz will have to modulate his admirable passion for democratization, the idea that has animated his thinking since his experience, as a State Department official, of the people-power uprising against Filipino dictator Ferdinand Marcos. The World Bank is a poverty-fighting institution, not a democracy-spreading one, and in the short term the link between development and democracy is tenuous: Some of the greatest recent advances against poverty have come in autocracies such as China and Vietnam. To be true to its mission, and to survive as a financial institution, the World Bank needs to stay active in these undemocratic development success stories.
That's one of my problems with the World Bank's efforts. I don't believe you can effectively fight poverty in an autocratic nation unless it institutes both economic and democratic reforms. For that reason, I believe "in the short term the link between development and democracy is tenuous" is a wholly absurd statement. The World Bank must fight not just poverty, but the infringements of liberty (particularly violations of the rule of law) that perpetuate the poverty.

Certainly China and Vietnam are still far from real democratic rule, but their major strides against poverty did not occur until after they abandoned some of their authoritarianism and enacted market reforms. I consider those not just economic reforms, but also democratic. Private property rights are at the very heart of individual liberty, and the first step for the Chinese and Vietnamese people to shake off their chains. Once you're able to control your land, you'll want to control your government.

China's best economic growth has been largely confined to cities; there are still untold millions of rural Chinese in exceeding poverty. They've always been kept poor by Beijing's economic planning, and more so by the lack of private property ownership. At least the end of the "People's Commune" in the 1980s, with the reforms allowing farmers to decide for themselves what to grow, helped end food shortage problems. But that's only the first step. While the cities grow wealthier, the rural areas barely advance, and anecdotes abound of the many problems rural workers have experienced while trying to find city jobs. I just can't see how China will ever significantly reduce its rural poverty until it establishes real private property ownership -- the sort of initial democratic reform that gives people pride in their land, and real incentives to work it. Right now there's only token wording: "A citizen's lawful private property is inviolable." All the state has to do is declare your private property unlawful, and it can seize it like before.

Vietnam's Communist leaders officially abandoned Marxism in the 1980s and implemented some basic elements of the free market. That is what really helped reduce poverty. The market reforms invited foreign investment starting in the 1990s, which led to greater economic output. Like China, while the leaders are still very autocratic, the increasing levels of freedom were the fuel for prosperity. In recent years there have been unemployment spikes from government cutbacks in military and other spending, but it's the growing pains of a transition.


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