Minister Al-X

Krugman On Wolfowitz's Nomination To Head World Bank

Krugman takes a look today at the nomination of
Paul Wolfowitz to head the World Bank. Krugman chooses not to focus on the numerous failures of Wolfowitz and his neo-Con(artist) ilk in securing Iraq, and instead looks at the free-market ideology behind some of the screw-ups.

Before the Iraq war, Pentagon hawks shut the State Department out of planning. This excluded anyone with development experience. As a result, the administration went into Iraq determined to demonstrate the virtues of radical free-market economics, with nobody warning about the likely problems.

Journalists who spoke to Paul Bremer when he was running Iraq remarked on his passion when he spoke about privatizing state enterprises. They didn't note a comparable passion for a rapid democratization.

In fact, economic ideology may explain why U.S. officials didn't move quickly after the fall of Baghdad to hold elections - even though assuring Iraqis that we didn't intend to install a puppet regime might have headed off the insurgency. Jay Garner, the first Iraq administrator, wanted elections as quickly as possible, but the White House wanted to put a "template" in place by privatizing oil and other industries before handing over control.

Imagine that- the Bush Administration is guided by radical ideologues who scorn the advice of experts. The hell you say!

But, Kurgman notes that the rest of the world, and especially those parts of the developing world that might need help from the World Bank, have soured on Free Market thinking.

Latin Americans are the most disillusioned. Through much of the 1990's, they bought into the "Washington consensus" - which we should note came from Clinton administration officials as well as from Wall Street economists and conservative think tanks - which said that privatization, deregulation and free trade would lead to economic takeoff. Instead, growth remained sluggish, inequality increased, and the region was struck by a series of economic crises.

The result has been the rise of governments that, to varying degrees, reject policies they perceive as made in America. Venezuela's leader is the most obstreperous. But the most dramatic example of the backlash is Argentina, once the darling of Wall Street and the think tanks. Today, after a devastating recession, the country is run by a populist who often blames foreigners for the country's economic problems, and has forced Argentina's foreign creditors to accept a settlement that gives them only 32 cents on the dollar.

And the backlash has reached our closest neighbor. Mexico's current president, Vicente Fox, a former Coca-Cola executive, is a firm believer in free markets. But his administration is widely considered a failure. Meanwhile, Mexico City's leftist mayor, Manuel López Obrador, has become immensely popular. And his populist rhetoric has raised fears that if he becomes president he will roll back the free-market and free-trade policies of the past two decades.

How dare he even suggest that the ideologies of these friggin wingnut economist "thinkers" might be far from reality. Doesn't this Mayor know that free market dreamers have thin skin?

Not long ago, the growing alienation of Latin America from the United States would have been considered a major foreign policy setback. So much has gone wrong lately that we've defined disaster down, but it's still not a good thing.

Where does Mr. Wolfowitz fit into all this? The advice that the World Bank gives is as important as the money it lends - but only if governments take that advice. And given the ideological rigidity the Pentagon showed in Iraq, they probably won't. If Mr. Wolfowitz says that some free-market policy will help economic growth, he'll be greeted with as much skepticism as if he declared that some country has weapons of mass destruction.

Moisés Naím, editor of Foreign Policy, says that the Wolfowitz nomination turns the World Bank into the American Bank. Make that ugly American bank: rightly or not, developing countries will see Mr. Wolfowitz's selection as a sign that we're still trying to impose policies they believe have failed.

They believe have failed? C'mon Paul, I know you can hit harder than that. Maybe it's a bit of Krugman's own ideology getting in the way of his usually dead-on criticism? The policies of the IMF (often confused with the World Bank) have been almost universally horrid to the countries who had their free market snake-oil sold to them at the tip of a bond-market gun barrel, why not just come out and say it?

posted by Anonymous @ 9:57 AM