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Bringing the D word into the World Bank
While Paul Wolfowitz's history of promoting democracy abroad caused critics to voice concern that he would mainly push U.S. foreign policy as president of the World Bank, Wolfowitz should not be afraid to embrace his pro-democracy instincts as head of the bank, author Joseph Siegle of the University of Maryland argues in this commentary. History shows that democracies, including those in poor countries, have an easier time fostering development, Siegle writes. International Herald Tribune (6/29)
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Bringing the D word into the World Bank |
Joseph Siegle International Herald Tribune
WEDNESDAY, JUNE 29, 2005
| WASHINGTON With Paul Wolfowitz, the former U.S. deputy defense secretary, having taken the helm at the World Bank this month, many are warily eyeing whether the bank's policies will be aligned more closely with U.S. interests. On no subject is this concern more palpable than on the matter of democracy promotion.
After Wolfowitz's nomination, critics zeroed in on his reputation as an ardent democracy supporter to claim that Wolfowitz was unfit to head the world's leading economic development institution. This view was so pervasive that Wolfowitz felt compelled to assure his critics that "I think there's a political stream and an economic stream ... If I'm president of the World Bank, I know which stream I'm focused on."
In fact, the democracy and economic development streams are not distinct but often converge. Rather than distancing himself from this synergy, Wolfowitz should build on it.
Experience over the past 45 years demonstrates that democracies are much more likely than other forms of government to enjoy stable and sustained growth, enabling them to accumulate assets and generate wealth more rapidly. This holds true in the developing world, where democracies, on average, attain for their people life expectancies that are nine years longer, secondary school completion rates 40 percent higher, agricultural yields 25 percent larger, and infant mortality rates 20 percent lower than their authoritarian counterparts. And democracies realize these superior outcomes without incurring higher levels of debt.
This is a reality that private investors have capitalized on in recent years. Foreign direct investment in emerging markets has flowed to democracies at double the rate of authoritarian systems, on average, as a share of gross domestic product, since the mid-1980s. Investors candidly acknowledge that supporting democracy is not their goal. Rather, given the tenuous durability, economic volatility and legal uncertainty that threatens their investments in many autocracies, investors are merely opting for the greater transparency and legal predictability that democracies offer.
As head of the leading public sector investor in emerging markets, Wolfowitz should not shy away from making democracy a consideration in World Bank financing. Indeed, disregarding the influence of political governance on economic effectiveness remains a major flaw in the operations of the international financial institutions. Maintaining these blinders inadvertently facilitates greater levels of corruption and undercuts the effectiveness of development resources intended to combat poverty, disease, malnutrition and illiteracy.
Many committed professionals at the World Bank recognize the link between open, accountable and democratic government and superior development outcomes, but they are hamstrung by the restrictive guidelines under which they are required to operate.
The World Bank charter, little changed since 1944, expressly prohibits considering how a government came to power when making financing decisions. This compels bank staff to engage in an intricate facade of talking about controlling corruption, civil service reform and the rule of law as if attaining these objectives were somehow independent of who is enforcing the law.
With the support of the world's democracies, which control 88 percent of the bank's voting shares, Wolfowitz should lead the process of rescinding the bank's political prohibition clause; 80 percent of shareholder support is required for such an amendment.
In so doing, the bank charter would be harmonized with the organizing principles of the only multilateral bank that has been created since the end of the Cold War, the European Bank for Reconstruction and Development, whose charter explicitly makes the support of democratic governance an institutional objective alongside expanding market economies. Its success demonstrates the viability of this approach.
By adopting this reform, Wolfowitz would be tackling what is perhaps the central impediment to economic growth and development in the developing world - unaccountable government.
(Joseph Siegle researches economics and democracy at the University of Maryland and is co-author of ''The Democracy Advantage: How Democracies Promote Prosperity and Peace.'')
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