Global Development Cartel in Full Dungeon – World Bank Chief Economist Says: Not So Fast

The global development cartel is in full dungeon over the prospect of the U.S. waking up to the impossibility of reforming the international development agencies.  They fear most that U.S. taxpayers will realize that if the U.S. withdraws, they will get a refund of $70 billion.  

World Bank officials meeting in Pakistan this week made repeated demands for massive sums to support their Green New Deal initiatives.   

Valerie Hickey, the global director for climate change at the World Bank,claimed that “to move from $100 billion to $300 billion, it sounds like a lot of money.  It’s not.” 

Tell that to a family in Georgia or Mississippi.

Yet, the World Bank’s Chief Economist and his deputy tell a far different story than bureaucratic bloat and continued dependency.  

In a paper titled “Why Developing Economies Need a New Playbook“, Indermit Gill and M. Ayhan Kose write:

As the first quarter of the century comes to a close, it’s clear that the lofty goals of the past few decades will not be met. The long-term growth outlook for developing economies is now the weakest it’s been since the start of the century.

This glum outlook is underscored by the reasons for failure to reach the “lofty goals”:  

Domestic reforms stalled. Government debt surged to record highs as public expenditures ballooned without an attendant rise in revenues. Global economic integration faltered: as a share of GDP, foreign direct investment inflows into developing economies today are at just half the level of the 2000s.

Gill and Kose make a clear statement of what needs to be done:

Developing economies should have no illusions about the struggle ahead: the next 25 years will be a tougher slog than the last 25. They need a fresh game plan, one that strengthens their capacity to fend for themselves and seize growth opportunities wherever they can be found. With the right policies, some challenges can be turned into opportunities.

Interestingly, their prescription makes no mention of layering on more debt to multilateral development banks. 

Rather they cite opportunities: “developing economies can reap significant rewards by increasing reforms to attract investment and deepen trade and investment ties”. 

The operative condition being “increasing reforms”, i.e. establishing reliable legal systems for business and removing barriers to free markets.  

None of this requires more funding for foreign aid.

The authors make a clear case for self-determination of these nations:

In a time of exceptionally high global policy uncertainty, however, developing economies would be wise to take nothing for granted. It’s far better to redouble the effort to take control of their own destiny.

Friedman, Bauer or Hayek could hardly have stated it better.