Questions for Robert Zoellick
Joseph E. Stiglitz Paul Wolfowitzs resignation from the World Bank solved one problem, but brought another to light. When Wolfowitzs name was first mentioned as a candidate to lead the worlds premier development bank, the idea that the architect of Americas failure in Iraq would be so rewarded was met by incredulity. But President George W. Bush had, from the beginning of his administration, sought to undermine multilateral institutions and agreements. Wolfowitzs nomination seemed to be part of that effort. Should Bush, a lame duck president with little support at home and less abroad, now be allowed to appoint the next World Bank president? Bush has already demonstrated his lack of judgment. Why give him another chance? The arguments against the old boy system by which the United States appoints the head of the World Bank and Europe the head of the IMF are especially compelling today How effective can the Bank be in promoting good governance and fighting corruption if its president is chosen in a process that demonstrates flaws in its own governance? How credible will an anti-corruption message be when delivered by an appointee of what is considered one of the most corrupt and incompetent administrations in US history? Interestingly, as several heads of US Congressional committees have pointed out, it is in Americas interest for the Bank to be led by the most qualified person, selected in an open and transparent process, regardless of nationality, gender, or race. This requires a change in how its president is chosen, and, at Congressional hearings on the World Bank the first in 13 years I, like everyone who testified, called for this key reform. Presidential appointments to senior posts in Americas government are subject to open hearings. Regardless of whether the old boy system is preserved but especially if it is the Banks Board should likewise conduct open hearings on Bushs nominee to succeed Wolfowitz. Here are some of the questions with some hints at right and wrong answers that it should ask any proposed candidate for the Banks presidency, including Bushs nominee, Robert Zoellick: Do you believe that the president of the World Bank should put the interests of developing countries first? Will you press for Europe and America to eliminate their agricultural subsidies? Will you advocate a development round that emphasizes liberalization of labor markets more than capital markets, elimination of non-tariff barriers that keep developing countries goods out of advanced industrial countries, and abolition of so-called escalating tariffs, which impede development? Will you be open to research even when that research shows that policies of the advanced industrial countries may, at least in some circumstances, not be in the interests of developing countries? During James Wolfensohns presidency of the Bank, there was a change in philosophy. We encouraged research-based policies, even when that research was critical of policies being pushed by certain advanced industrial countries and by some in the Bank. When our research showed that certain policies (like agricultural subsidies) were hurting developing countries, we publicized the findings, helping to redefine the debate. Will you support the initiative of developing countries to have a development-oriented intellectual property regime? What separates developing countries from developed countries is not only the gap in resources, but also a gap in knowledge. The Bank should be viewed, in part, as a Knowledge Bank, and it should advocate reforms that enhance developing countries access to knowledge. Access to generic medicines is essential if developing countries, with their limited budgets, are to improve the health of the poor. TRIPs, the intellectual property provisions of the Uruguay round, were designed to reduce access to generic medicines and they succeeded. But as bad as TRIPs are, the bilateral trade agreements that Bush has been pushing are worse. Any candidate claiming to represent the interests of developing countries must distance himself from these policies. Will you work to redefine the criteria by which countries get access to funds? Today, money goes to countries that are neither most in need nor can most effectively use it. Complying with current orthodoxies for example, on privatization and liberalization can earn you points on good governance, and thus increase aid allocationseven when they reduce true aid effectiveness. Do you think countries that are corrupt should be cut off from funding? If so, will do you so in a consistent way? If not, how should the Bank respond? Will you support a comprehensive anti-corruption agenda, including closing down secret bank accounts? One of the flaws of Wolfowitzs anti-corruption agenda that expansion or continuation of aid for countries favored by the Bush administration, like Iraq or Pakistan, was pushed, regardless of how corrupt they were, while there was little tolerance elsewhere. Problems with Uzbekistan were overlooked until it fell out of favor with the US. Likewise, the Bush administration opposed the OECD initiative to restrict bank secrecy until it realized that secret bank accounts help finance terrorists. Since then, it has shown that it can close secret bank accounts, but has chosen to do so only for terrorists. Do you think the World Bank should do more to encourage countries to adopt core labor standards? Not only has the Bank not been active in promoting these globally agreed standards, there is a concern that the Bank discourages collective bargaining and protections for workers when it talks about flexible labor markets and conditions that are conducive to private investment. The old boy system of choosing the head of the World Bank must go. It has done enough damage. But if the advanced industrial countries that control the Bank refuse to stand by their principles, at least they should give a nod to greater transparency. The world should know what it is getting. Open hearings would be a step in the right direction. ** Joseph Stiglitz is a Nobel laureate in economics. His latest book is Making Globalization Work. Copyright: Project Syndicate, 2007. http://www.project-syndicate.org/commentary/stiglitz88 Zoellick to the Rescue? Kenneth Rogoff Will newly anointed World Bank President Robert Zoellick be able to get the organization back on its feet after the catastrophic failed presidency of Paul Wolfowitz? Although hardly a megawatt star of the Bob Rubin category, he certainly brings some positive attributes to the job. First, as a key player in bringing China into the World Trade Organization, Zoellick is a proven internationalist in an American administration where internationalists have sometimes seemed like an endangered species. Second, he is a firm believer in the power of markets and free trade, which have clearly done far more to alleviate poverty over the past half-century than any aid program. Third, he seems to have been a consistent behind-the-scenes supporter of the Bank, whereas many of his Bush administration colleagues would be just as happy to see it shut down and its Washington headquarters turned into private condominiums and offices. So presumably he has a constructive vision for the Banks future. But Zoellick is not without his weaknesses. First and foremost, his appointment extends the embarrassingly outmoded practice of always installing an American in the job. With the Bank tirelessly preaching the merits of good governance, its failure to adopt democratic principles undercuts its own legitimacy. The claim that the World Bank needs an American president to ensure that the US keeps donating money is ridiculous. The annual cost of the US contribution to the World Bank, even taking into account off-the-books loan guarantees, is relatively minor. Any number of developing countries, from China to India to Brazil, could easily step up if the US foolishly stepped down. Zoellicks background as a lawyer hardly makes him perfect for the job, either. The World Bank presidency is not about negotiating treaties, as Zoellick did when he was US Trade Representative. The Banks most important role in development today is as a knowledge bank that helps aggregate, distill, and disseminate best practices from around the world. In this respect, the Banks technical assistance to governments is very similar to what private consultants offer to companies. Moreover, many of the World Bank presidents most important decisions involve economics in an essential way. Wrong economic decisions, such as in the 1970s, when Robert McNamara pushed grandiose, but environmentally devastating, infrastructure projects, have haunted the Bank for decades. The biggest question mark, though, is whether Zoellick will be able to hit the ground running and implement desperately needed reforms. Reform number one, of course, is to ensure that the next World Bank President is not an American. Rodrigo de Rato, Zoellicks counterpart at the European-dominated International Monetary Fund, has already suggested that his successor should be chosen in a more inclusive process. The World Bank should be ashamed that its president has not yet offered a similar proposal. Second, Zoellick should ask why the Bank spends only 2.5% of its budget on the knowledge bank research function that it trumpets so proudly in its external relations materials, while it spends three times that amount on maintaining its executive board. Third, Zoellick should use his formidable negotiating skills to cajole rich countries into greatly increasing the grant component of World Bank aid. The idea that a big government-guaranteed global bank is needed to fill holes in private capital markets is laughable nowadays. True, the Banks poorest clients have little access to private capital markets. By and large, however, the poorest countries need grants, not loans that they still wont be able to pay in 20 years. As the Bank switches from loans to grants, it can use some of its massive retained earnings to endow its knowledge bank function and related technical advice. But all this knowledge shouldnt be free. A lot of technical advice falls on deaf ears, with countries listening only long enough to get their hands on Bank money. Instead of merely pushing its agenda, the Bank should start charging for its technical advice on a graduated scale so that more of its engagements are client-driven. Last but not least, the Bank needs to play a much bigger role in environmental issues and, in general, in promoting good international citizenship by both rich and poor countries. (Some of us have been proposing this for almost two decades.) Of course, Zoellick could just attempt to fill the role symbolically and do little or nothing, as some of his predecessors have done. Or, less likely, he could embrace some megalomaniacal and over-reaching vision of government intervention, as others have tried. In any case, lets wish him luck. The world needs the World Bank a lot more than it needs another condominium. ** Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF. Copyright: Project Syndicate, 2007. http://www.project-syndicate.org/commentary/rogoff31 ____________________________________________________________________________________ Be a better Globetrotter. Get better travel answers from someone who knows. Yahoo! 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