Wednesday, February 10, 2016

Economists endorse Unicorn World Bank

Two of my favorite Michaels (right behind Mungo of course!), Clemens and Kremer, have a new paper arguing that even though the access to financing mission of the World Bank is no longer relevant, we still need it for poverty reduction and knowledge dissemination.


There's just two problems with that viewpoint.

1. Most of the global poverty reduction we've seen has come from the simple adoption of capitalism (China and others), not World Bank projects or initiatives. And, in my view, the Bank is more anti-capitalism now that it has ever been.

2. The World Bank's "knowledge" has been consistently off base for at least the past 50 years.  We've gone from the financing gap to education to institutions to you name it. Countries have spent real scarce resources following the advice and by and large it hasn't worked. Take the great universal primary enrollment goal (please). Whoever would have thought that governments would end up creating Potemkin schools where learning is often absent.

Phone call for Bill Easterly. Paging Lant Pritchett!

Even old, bad, discredited advice never seems to die out at the Bank as evidenced by this tweet:


Note the date. 2016!! Not 1955. Apparently the Harrod-Domar model and the financing gap still live in the executive suites of the bank.

The tweeter is Vice President for Equitable Growth, Finance and Institutions at the Bank.

Now Clemens and Kremer are both way smarter and more successful than me. I had been thinking about a post like this but only decided to write it after seeing that incredible tweet this morning.

But Clemens and Kremer are committing the Mungowitz Unicorn fallacy.

They are conjuring up an idealized World Bank that has never existed and claiming we still need that unicorn Bank, rather than evaluating the desirability of the World Bank we actual have.

If we think about the actual World Bank, it's not so obvious that the cost-benefit calculation comes out positive.

2 comments:

ColoComment said...

"...the cost-benefit calculation comes out positive."

When does it ever?

The IMF, World Bank, UN, even NATO now, and all the rest of their global institutional siblings, all seem to exist primarily to suck funding from the United States to other countries and none of the stated objectives ever seem to actually, measurably, verifiably, improve. Yet, it does no good to say so: for example, Veronique de Rugy has exhaustively exposed the IMF for the ineffective, inefficient institution that it is..., and it got refunded.

It's global welfare funded for the most part by the U.S. taxpayer (present and future), and as Bill Voegeli states so succinctly in his book, "It's never enough." There is no point at which anyone employed by one of these institutions will say, "We've reached our goal here. We're done. Let's dissolve."

They are perpetual motion machines. They either expand their charters to include other [unattainable] goals, or increase their universe of beneficiaries, or change strategies, in order to extend their shelf lives. There are too many interests invested in their perpetual existence. ...so long as the U.S. continues to fund their bank accounts.

I despise them... And our own politicians for their unthinking & self-interested support of them. Can you tell? :-)

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