A challenge from within for the World Bank

LETTER FROM CHINA
By Howard W. French
Published: January 25, 2008
Copyright The International Herald Tribune
SHANGHAI: A quick look at his résumé suggests that Justin Lin Yifu is just the kind of person one would expect to occupy a top job in one of the most important global financial institutions, the World Bank.
Lin has a clutch of degrees, including a doctorate in economics from the University of Chicago. He founded a prestigious economic research institute in China, his home country. And the man who is about to be named as the World Bank’s chief economist has, appropriately, published a slew of scholarly articles.
But that is not the half of the story. Lin defected from the Taiwan Army in 1979, swimming to China, the country that he longed to make “prosperous and powerful.” Those were bold dreams coming the very year when Beijing began its market reforms, and just three years after the Cultural Revolution, the decade in which thousands died fleeing China.
Nor is Lin’s academic pedigree remotely half of the story of the significance of an appointment like his to an institution born of the ashes of World War II but one that has increasingly lagged behind the times since the end of the Cold War.
Before his appointment as head the World Bank recently, Robert Zoellick made waves as U.S. deputy secretary of state with the idea that a rising China should become a stakeholder in a global system largely created and maintained today by the United States.
Opening the doors of the World Bank to China at such a high level succeeds as a powerful symbolic fulfillment of this thought. It is also overdue.
The creaky postwar system of which the World Bank is a cornerstone has been slow to reflect the gigantic changes of the last two decades. This merely begins with the rise of China, and includes the stirring emergence of countries like India and Brazil, as well as Africa’s impatience with old-fashioned Western tutelage.
And how to explain that China, whose economy, which is growing at 11 percent a year, dwarfs those of most members, is not yet a part of another Western-run club, the Group of 8?
Though unstated, a logical corollary to Zoellick’s stakeholder theory is that as new global forces arise, the already powerful either find constructive ways to make room for them, or this happens through confrontation. Either way, the furniture gets rearranged.
Scarcely concealed, and yet never frankly acknowledged, ideology has long reigned supreme in institutions like the World Bank, and its sibling development aid agency, the International Monetary Fund. Chief among the doctrines is what is broadly known as free market capitalism. While touting its virtues, however, clubby Western powers have managed to take care of their own, while carefully looking after favored third world clients, sparing them when need be from the tough medicine the organizations are famous for.
Here again, Lin’s arrival as chief economist is both welcome and long overdue. China does not subscribe to the Western orthodoxies, but rather believes in doing whatever works, finding its way across the river by feeling the stones, in the famous words of Deng Xiaoping. Lin’s writings are full of this kind of refreshing pragmatism.
The recent takeoffs of East Asian countries like China and Vietnam, he argues, have come from shunning these orthodoxies – things like massive privatization, comprehensive market liberalization and strict fiscal discipline. At least since Ronald Reagan, the Western-supported development model has treated the market as the magical answer to nearly every problem, and quite often treated government suspiciously as the source of most woes.
By contrast, Lin has written that the government is the most important institution, and the quality of a government determines the success or failure of development. That, in itself, represents a sea change, and it will be fascinating to watch the degree to which the international financial institutions absorb this new thinking.
As a force for change, Lin has one ace up his sleeve: the World Bank’s creeping irrelevance in Africa, due in large part to China itself, which is mightily flexing its financial and diplomatic muscle on the continent.
Africans are as eager to learn from China as they are weary of the discourse of the West, which heaps blame on them for their failings but rarely acknowledges the errors of the solutions it imposes, or for that matter the many basic injustices built into the international economic system.
So, with the arrival of a new hope-giving force for change, will all suddenly be goodness and light in the world of multilateral development assistance? We are now reaching the portion of the column that will likely be censored by Chinese media that savor applause for Lin. The answer is, of course, no.
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