It's generally considered bad form in reviewing books to complain that the author hasn't written the book you wanted him to write. But in this case, I think it might be fair to put readers on notice.
The ostensible subject of the book is World Bank head James Wolfensohn, who certainly is a character, but Daniel Drezner recommends it as a reference on the bank itself -- clear eyed, searching, and engagingly written:
- How well-researched is this book? Mallaby's description of Wolfensohn's first trip to Africa as World Bank president has a lot of eye-grabbing detail, including one graf that describes how Wolfemsohn looks at an airplane tarmac. The description was a bit thick, and I was ready to chide Mallaby for inserting colorful details that neither he nor anyone else could have remembered -- until I checked the footnotes. Mallaby had recreated the scene using a World Bank video recording. It sounds like a small thing, but is indicative of the excellent sourcing in The World's Banker.
The thing is, my interest was less in cute James Wolfensohn stories than in a defense of the Bank, and its sister institution, the IMF, from its recent critics, like the Nobel Laureate, and erstwhile chief economist for the World Bank, Joe Stiglitz. The book certainly looks like it ought to answer the critics. It's a Council on Foreign Relations book -- the establishment speaking for itself -- with back-cover blurbs from Robert Kagan and Fareed Zakaria. Unfortunately, you can't judge this book by its cover.
As a sample of the depth of the book's arguments: early on, Mallaby discusses the "structural readjustment" policies that the Bank and IMF forced on the governments it financed in the '70s and '80s:
- The Bank rightly urged developing countries to devalue their currencies ... oil was affordable only if countries boosted their exports, and that meant ... having a low exchange rate. The Bank simultaneously urged developing countries to cut government spending, a harsh policy but ... governments had lived far beyond their means during the 1970s. Little by little, these two core prescriptions were broadened: the Bank started to urge Latin Americans and Africans to cut trade barriers, to free prices, and generally to undo the state-directed development model that many had followed for the past two decades. Poor countries had not much choice but to comply ...
Some of this justification seems straightforward enough: Mallaby points out that there was triple-digit inflation in Brazil and Argentina. But then the argument starts to take a genuinely weird turn:
- ... while limited state direction of a developing economy does not have to be a bad thing, as East Asia's experience shows, Latin Americans and Africans went on to make a crucial error. The East Asian formula was to back industries that exported successfully; by using foreign markets as a test of firms' mettle, they avoided backing losers. But Latin Americans and Africans backed industries to supply their own markets; since these markets were often protected by trade barriers, their flagship firms escaped a competitive test of their efficiency. Pretty soon, Latin Americans and Africans found themselves pouring subsidies into white-elephant factories.
What's odd about this is that the Bank and IMF were not directing the Latin Americans to emulate the successful policies of, say, the South Koreans -- which included state support for industry and (though you won't learn it from Mallaby) substantial management of trade -- but rather to get out of supporting industries altogether. And when describing the upshot, well... let me just quote:
- The trouble was that the Bank wrapped its sound advice in evangelistic market rhetoric. Echoing the free-market faith of its leading shareholder in Washington ... the Bank declared that structural adjustment would take no longer than five years ... This, like many development promises, proved wildly optimistic. Having grown 39 percent richer in the 1970s, the average Latin American grew 10 percent poorer in the subsequent decade[.] ... Budget austerity ... triggered riots in Zambia, Morocco, Bolivia, and the Dominican Republic; in Sudan they precipitated the fall of a government.
So Mallaby begins by saying that the "advice" was "sound", and the only problem was that it was, perhaps, a little tone deaf, even though it advocated policies rather different from what had actually worked in East Asia. And he goes on to say that in the areas subjected to the "sound advice", it just didn't work. Which leaves the reader wondering why exactly he considers the advice to have been sound. It's a conundrum that echoes throughout the book; a bit later, for instance, Mallaby states ex cathedra that "Africa's continuing misery was explained to a large extent by the failure to implement [structural adjustment] faithfully", while not saying a word on what signalled the Africans' disturbing lack of faith. Or he will talk about advice being based on "sound theory". Personally, I would have thought that when theoretically sound advice consistently fails in the real world, we should stop trying adjust the world, and adjust the theory.
Echoing his ostensible subject, bank head James Wolfensohn, Mallaby does cite third world corruption as a drag on development. But his poster case of an economy riddled and wracked by corruption is Indonesia -- where, he notes, it was awkward for the Bank to try to clamp down precisely because both economic development and antipoverty efforts were, by African standards at least, a smashing success. And later on, in a discussion of a controversial Chinese project near Tibet, he casually drops this bombshell:
- China ... borrowed more from the bank during the 1990s than any other country. There was an extremely good reason for this: not only was China the world's most populous nation, it was also the most spectacularly efficient at eliminating poverty. Indeed, China's performance was so strong that it transformed the global picture, rescuing the Bank from some embarrassment. In the rest of the developing world, according to the Bank's own statistics, the number of people living below the dollar-per-day line actually increased between 1987 and 1998, and not by a small number: 100 million extra people were living in abject poverty despite all the efforts of the world's development agencies. But fortunately for the aid folk, China lifted the same number of people out of poverty over this period. So if you added China in to the picture, the embarrassment vanished.
But does it? The Chinese Communist Party may be friendly to market mechanisms now than in the days of Mao, but it is still quite active in managing the country's economy, with (as elsewhere in Asia) an emphasis on developing exports -- a State Department report from the period describes a still large State Sector in the economy, indirect subsidies for exports, and import barriers. And those favoring corruption as an explanation for the laggard third world won't be pleased to know that the Chinese model is spectacularly corrupt, and its comparative success has come despite that. At any rate, the upshot is that where the free-marketeering advice of the Bank and IMF was followed, the trend was consistently, over decades, that it failed.
Mallaby does cite countries that are doing it right -- Uganda, for instance, which has a good bunch of tough local technocrats. But while the Ugandan governments problems are not all its fault -- they're hardly to blame for the depredations of the Lord's Resistance Army, less a resistance movement than a violent death cult that sounds like something that wandered out of a Clive Barker novel -- the fact is that they are not doing as well as spectacularly corrupt governments elsewhere. (Besides, there's an odd note in the discussion of Uganda. One of the programs Mallaby praises is the governments drive towards universal, free elementary school education. Which strikes me personally as a good idea -- but it hasn't always struck the IMF that way; in other countries, they have insisted that the government collect school fees, under the rubric of "cost recovery". If Mallaby discussed those measures directly, I missed it).
At this point, we come around to Mallaby's discussion of critics of the Bank's approach. The central figure here is, of course, Joe Stiglitz, who Mallaby introduces as:
- the brilliant and mischievous future Nobel laureate who had joined the bank as chief economist at the start of 1997. Stiglitz had helped to create a branch of economics that explained the failure of standard market assumptions; he was like a boy who discovers a hole in the floor of an exquisite house and keeps shouting and pointing at it. never mind that the rest of the house is beautiful ... Stiglitz had found a hole, a real hole, and he had built his career on it.
And that's pretty much it for Mallaby's discussion of Stiglitz's theoretical contributions. As to his critiques:
- [Stiglitz] made much of the fact that IMF-prescribed austerity in Thailand had bankrupted local companies ... and he frequently implied that the IMF economists were to blinkered to realize that this might happen. This last insinuation was utterly preposterous. The IMF had indeed pressed too much austerity on Thailand and then later reversed course, but it was slanderous to suggest that the IMFs policy makers didn't know that raising interest rates could lead to bankruptcies.
But Mallaby's weasel words ("implied", "insinuation") implicitly concede that Stiglitz never made that accusation; what he did say, in very plain English, was that the IMF underestimated the risk and was indifferent to the danger, and in this, Mallaby effectively concedes that he was right. But that doesn't keep him from further describing Stiglitz as an immature bomb thrower -- not for being wrong; Stiglitz's arguments qua arguments are never seriously and thoughtfully addressed, but for having the temerity to air critiques of the IMF and U.S. Treasury in public, and worse, to suggest that anti-globalization street protesters weren't buffoons like the ones Mallaby describes (and like respectable people know them all to be), but that some of them might have valid points.
(Ironically, Stiglitz is presented as a less serious figure than Wolfensohn, who was sympathetic to a lot of the critiques, but whose temper and poor management style disrupted attempts to implement changes in policy, and alienated subordinates to the point of outright sabotage).
I started by saying that it's bad form in reviewing books to complain that the author hasn't written the book you wanted him to write. But it's still reasonable to ask what kind of book Mallaby has written. It's a kind of book which doesn't present even a half-hearted explanation of the theories underlying the policies it describes, but has room for entire pages full of anecdotes about Wolfensohn's service as a trustee at Carnegie hall, and the goings on at his retreat in Wyoming:
- For Wolfensohn, those days in his "log cabin" -- actually a log cathedral build around astonishing spruce columns that soar thirty feet up to the roof -- were not merely downtime. They were a chance to connect with the World Bank's main shareholder, President Bill Clinton, who had morphed from stranger to firm friend in the few months since Wolfensohn's appointment. The shareholder in chief was also vacationing in Jackson Hole, testing his wits against Wolfensohn's neighborhood golf course and dining with Wolfensohn's friend Harrison Ford. The World Bank president had introduced the American president to a president from Hollywood, since Ford was soon to appear in the movie Air Force One as President James marshall. On August 19, Wolfensohn threw a party at his home to celebrate Clinton's forth-ninth birthday. The photos show the two men kitted out in denim shirts and bolo ties, surrounded by senators and film stars and other natural soul mates.
This is a book which presents the glamorous life of our national leadership, and treats their policies as informed by wisdom beyond our ken, which is too recondite to be properly considered in public. Readers of an earlier age -- accustomed to second hand reports of the glories of royal courts -- would have looked at a passage like this and known instantly what it is. But we live in a democracy where policies are ultimately judged by the will of the people, so it must be something else.
By the way, there's a lesson for Democratic politicians in that last bit I quoted. It's precisely the sort of thing that Republicans use to paint Democrats to their poor and middle class constituents as "not like us." Bill Clinton hangs out like movie stars; Tom DeLay, for his part, may have turned into a spectacularly corrupt Washington power broker, but he still looks the part of an exterminator from Texas. This stuff matters.
Above note and Uganda paragraph added late...