World Bank President: Respectful Debate thread

You are here: HOME - Respectful Debate thread

Respectful Debate thread Ok, so there is some demand to politely and respectfully discuss the finer points of free market theory. Let's give it a try...

Lycanthropologist wrote Sameer:
There is a lot of value in infrastructure, electricity, water supply, telecom, roads. There is even some value on structural adjustment lending if it allows to reduce subsidies and rent seeking and get close to some form of "efficiency" prices and prevent domestic and external inbalances. There are many examples of the success of these forms of lending. Even balance of payments loans were helpful to get countries out from the crises of the 80's and 90's.

I even dare to say that these institutions have done more good than harm. As agents of modernization and sources of capital and knowledge they have played a critical role. Even the efforts done to improve governance have some measurable results. All these institutions have done work on justifying their existence and there are empirical studies to evaluate the benefits (and costs) of aid and development financing.

Again, I can only refer you to your own reports. This report accuses the Bank of market fundamentalism and selective use of case studies in its research departments, to prove claims like those you make. This recent IMF report does the same thing with regard to sub Saharan Africa IMF programs. Economist Ha Joon Chang's Kicking Away the Ladder (and see book by same name) shows how developed countries have followed exactly the opposite of policies recommended by the IMF and World Bank, and the thorough research by friends at the Center for Economic and Policy Research shows how these policies have led to 25 years of diminished development.

Anecdotally, when I give talks even at conservative universities these days, I find it very hard to find anyone willing to support the economic status quo that is still represented in World Bank policies. I think the rest of the world is moving away from free market fundamentalism... At a macro level, the Bank has few supporters. The numbers simply do not look good.

Sameer Dossani ~ May 12, 2007

Comments

No comments yet. Maybe people are busy reading the excellent references you provided.

Maybe the topic of finer points of free market theory is a little abstract. Something that sounds more like raw meat will attract the wolfie lovers and haters.: "Annual Performance Report: is 63 years enough? Are the Bank and the Fund doing their job or should we fire them?" "Representation without taxation" " The Bank and Fund need structural adjustment before we privatize them. " You probably know what to do.

Nice wedding pictures, Mr. Pentagon and Ms. World Bank made a beautiful couple. But looks that a divorce is imminent. ( http://english.people.com.cn/200509/24/eng20050924_210665.html)

Best,
Lycanthropologist

Lycanthropologist ~ May 12, 2007, 06:38 PM

Let's see who replaces Wolfowitz before we talk about divorce, I think.

OK, let me see if I can make the argument without reference to lots of sources. Just know that, in my interpretation, the CEPR data and the Ha Joon Chang work back up what I'm saying.

1) There is no country historically or presently that has developed through free market mechanisms. Chang goes to great lengths to prove this case, looking in detail at the supposed one and only case study of a free market system - late 19th century Britain. Rather all countries are protectionist when it comes to industries that they want to develop, and "pro free trade" when it comes to industries in which they already have the upper hand.

2) If we look at the most competitive economies today - Japan, the EU and especially the USA - they rely totally on protectionism. Leaving aside ag subsidies and steel subsidies, which are relatively trivial in terms of amounts of money, the whole U.S. economy rests on military contracting. Well, that's massive state spending. There's nothing free market about it. In fact if we get into details and look at Boeing (which has been mentioned a lot on this site), Haliburton (Dick Cheney), the Carlyle Group (Bush sr.) and on and on, it's not only anti-free market, it's pure cronyism. Furthermore there are all kinds of products - airplanes, cargo shipping systems, computers, the internet, etc., that are developed in the State sector on the public purse and then handed over to private corporations for practically nothing who then make fortunes off of technology that is or should be public property. The NIH system works in a very similar way.

3) When there is a crisis, as the one that you refer to in the 1980s and 1990s, the solutions that are looked to by the IMF and the World Bank completely ignore these realities. Instead they ask questions about how to limit market interference and maximize comparative advantage. If the U.S. had followed the laws of comparative advantage, we would be a sparsely populated nation of fur traders and fisher people. Instead we developed highly market distorting mechanisms (slavery was among them) to change our comparative advantage. Japan did exactly the same thing in the 1950s, as did the Scandanavian countries. The so-called Asian tigers did this in the 1980s. As Chang's book shows, it's pretty easy to show what leads to growth and development. It's also pretty easy to show that those policies have nothing to do with IMF and World Bank recommendations. If they did, we'd have a lot more success stories.

Here's a question: do the IMF and World Bank have any success stories? The last time I asked this question to an IMF staff person, I was given the example of Argentina. It was early 2001.

Sameer Dossani ~ May 12, 2007, 08:38 PM

Sameer,

I would welcome engaging in a debate with you about the role of the state in development, however, I am rather concerned that it cannot be done as a 'thread' on this board that will gradually.... be moved further down the screen as it progresses.

Would the organizers of the board be willing to set up a special section (and with it, a commitment to keep the content up beyond the 'expiry date' of the world bank President problem?

Alternatively, this thread can be moved to another blogging site like Blogspot.

So please let me know what is best....

What you are talking about is too important an issue to be tangled up with the travails of World Bank Presidents.

If you wish to know, Alex and Jeff know who I am.

Night ~ May 13, 2007, 01:46 AM

Right, happy to take this thread somewhere else. I am talking with some friends to set up a space for blogging about alternative economics. This would be a good thread for that. Unfortunately, that will take some time to set up properly. In the meanwhile, shall we continue here? Or is there another space you would recommend? (The content won't go anywhere after the PW issue is over and done.)

Sameer Dossani ~ May 13, 2007, 01:32 PM

Tell Jeff you want to contact the prayer writer... we can chat off board.

Night ~ May 13, 2007, 03:02 PM

The op-ed written by Sebastian Mallaby in the Washington Post "Endgame at the World Bank"
of Monday, May 14,2007 provides a well reasoned perspective of the main issues. We will all benefit if you can find room to link these type of more thoughtful and balanced views to the debate.

Lycanthropologist ~ May 14, 2007, 04:43 PM

Right, both Alex and I posted links to the Mallaby piece already. I'm working with folks to try and find a more logical place for this discussion. BTW, friends at CEPR inform me that the numbers in their "The Emperor has no Growth" papers actually come from IMF data (World Economic Outlook and other sources). Seems that the numbers (no matter whose number you use) tell a consensus story: these policies have been a miserable failure at the macro level, both for growth and for "poverty reduction".

Sameer Dossani ~ May 14, 2007, 06:33 PM

"Keep track of the rumored candidates, power plays and buzz."
The Washington Post

Next & Previous

« More details on how a vote may look like. | HOME | Crucial info missing in Post defence of Wolfowitz. »