Friday, March 18, 2005

Meltzer for Wolfowitz

Economics professor Allan Meltzer has a column in Opinion Journal strongly endorsing Paul Wolfowitz to head the World Bank. Link.
resident Bush's nomination of Paul Wolfowitz to lead the World Bank is an inspired choice. It suggests that the president's commitment to spreading democracy is not merely rhetorical. It shows also that he recognizes that democracy involves more than the ballot box. Institutional reforms that encourage development of markets, the rule of law, protection of human and property rights, and openness to trade -- all these sustain democracy by giving people opportunity, hope and higher living standards. (...)

The World Bank could, and should, play a leading role in making the case for democracy, improved living standards and the quality of life in the poorest countries of the world. As part of its efforts to spread democracy around the world, the U.S. and its friends must encourage the Bank to set standards for countries that receive its assistance. It should require evidence that loans do not go to tyrants and dictators and that they are used effectively. Democracy and institutional reform do not guarantee good outcomes; they increase the probability of a good outcome.

Paul Wolfowitz is exceptionally bright, engaging and imaginative. He knows the developing world and many of its problems from his very successful service as U.S. ambassador to Indonesia. At the time, Indonesia had rapid growth, rampant corruption and cronyism; the latter problems are repeated in many countries. He knows how to function, and get things done, in a large bureaucracy, as his service as undersecretary of defense demonstrated. In these positions and others, he demonstrated a rare ability to introduce new approaches and make them work. (...)

Development assistance works best when local officials commit to making it work. The success stories are rarely, if at all, the result of outside experts leading the way. The critical word is "incentives." If a local leader wants to improve living standards and the quality of life, the Bank can provide support and technical assistance. It must give up the myth that it can negotiate some conditions on its loans and expect them to be implemented. It doesn't happen unless local leaders choose to make it happen. Often they take the money and run from reforms.

My comments of March 16 are much in line with Professor Meltzer's, so I will just point to them rather than commenting again here.


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