Ahem...
I read an article in the May/June 1996 New Left Review, by Robert Wade, called "Japan, the World Bank, and the Art of Paradigm Maintenance: The East Asian Miracle in Political Perspective." The article's main thesis is that the World Bank is (indirectly) under the thumb of the U.S. "state." Yet if the word "state" means anything, the article's narrative so completely deconstructs its thesis as to leave this reader puzzled as to what Robert Wade means.
The article tells the story of the writing of the World Bank study, The East Asian Miracle, of how the attempt by the Japanese government to make the World Bank face up to the inadequacy of the laissez-faire-market-economy-is-always-optimal paradigm was contained and diffused, and of how even the--limited--support for the efficacy of East Asian "developmental states" in boosting growth provided by the staff-written study was then eviscerated by the East Asian branch of the World Bank bureaucracy.
The moral that New Left Review editor Robin Blackburn draws from Wade's article is that it is "...a classic instance of reality being tailored to fit dogma and vested interests." The moral that Wade draws from it is that people who claim that "the World Bank [is]... an 'autonomous variable' in the international system" are wrong: "...by focusing only on morphological variables like "professionalism"... it misses other variables like "correspondence of organizational actions with the interests of the U.S. state". If the Bank is propelled by its budgetary, staffing, and incentive structures to act in line with those interests, the U.S. state need not intervene in ways that would provide evidence of "lack of autonomy"; yet the Bank's autonomy is clearly questionable..."
And here is where things get very strange indeed.
As Wade recounts the story of the writing of The East Asian Miracle, the names of two economists pop up frequently. One is Lawrence Summers:
--(On page 10) "Lawrence Summers... joined [the World Bank] as chief economist and vice-president in January 1991.... From January to June... drafts of the Bank's World Development Report 1991... underwent disucssion.... [T]he report restated a largely free-market view of appropriate public policy for development, under the label 'market-friendly'. The term was coined by Summers who exerted influence at this late stage of the report to moderate the extreme free-market position of the earlier drafts..."
--(On page 18) "The core study [that was to become The East Asian Miracle] was to be bsed in the Bank's research complex under Lawrence Summers and Nancy Birdsall... They appointed John Page... to head the study."
--(On page 19) "Summers bypassed the East-Asia vice-presidency [of the Bank], aware that its senior managers and economists held views towards the free market extreme of the Bank's range."
--(On page 19) "Lawrence Summers urged [John Page] to think in new ways, to listen carefully to the Japanese arguments."
--(On page 19) "Indeed, Summers' reaction to Page's proposed names for the [project] team was: 'Too neoclassical, you will be seen as trying to force East Asian data into a neoclassical strait-jacket'."
--(On page 22) "Other parts of the report also came in for strong criticism from elsewhere in the Bank--all the more so now that Summers had left."
--(On page 23) "A senior [World Bank] manager later remarked: 'Without the strong leadership of Larry Summers, Nancy Birdsall, and John Page, the report would not have moved anything like as far [from Bank orthodoxy] as it did'."
A second is Joseph Stiglitz:
--(On page 18) "The main consultants [to the study that was to become The East Asian Miracle] included... Joseph Stiglitz (American, economic theorist, working on finance)..."
--(On page 22) "[T]he text's explanation for why the normal adverse effects on growth [from financial repression]... [was the] section of the report... of greatest interest to its Japanese sponsors. Its credibility was bolstered by the pre-eminent status in the American economics profession of its main author, Joseph Stiglitz.... In the event, despite all the criticism [from the East Asia vice-presidency], the section was left largely unchanged."
They play an important part in Wade's narrative. They are powerful intellectual actors seeking a more open-minded view of the East Asian experience, and waging bureaucratic war against he opposition of the closed-minded East Asia vice-presidency within the Bank.
I read the conclusion to Wade's narrative where he says: "The story of The East Asian Miracle shows the determining influence of essentially American values and interests.... The influence comes partly through the Bank's dependence on world financial markets, and the self-reinforcing congruence between the values of the owners and managers of financial capital and those of the U.S. state. It also comes through the Bank's staffing and professional norms.... The Bank forms part of the external infrastructural power of the U.S. state..."
And I shook my head. I looked back at the date on the cover of the issue: May/June 1996. And I thought: Hasn't Robert Wade figured out--hasn't anyone told Robert Wade--that today, as far as development policy is concerned, Joseph Stiglitz and Lawrence Summers are the "U.S. state"?
Joseph Stiglitz was then Chairman of the President's Council of Economic Advisers (he is now Vice President and Chief Economist at the World Bank). Lawrence Summers was then and is now Deputy Secretary of the U.S. Treasury. They are the only principal-level members of President Clinton's National Economic Council who have views on issues of economic development. Subject to the constraints placed on U.S. government actions by the broader issue of fiscal stability, and subject to past foreign aid commitments (chiefly to Israel and Egypt), they make U.S. development policy.
If the phrase "U.S. state" means anything--if the "U.S. state" has opinions, makes judgments, has preferences--then they can only be the opinions, judgments, and preferences of the high officials (elected, appointed, and career) who have the freedom of action and the power to "make policy": in the sense of using the executive branch's implementation powers to shift the money the U.S. government spends, the attention it pays, and the incentives it offers to developing countries, and using the executive branch's lobbying authority to direct the congressional budget process on issues (like development policy) that are far from the central political core concerns of the median member of congress. If the phrase "U.S. state" meant anything in the spring of 1996, when Wade's article was published, it meant Summers and Stiglitz.
Yet Wade's entire narrative sees Summers and Stiglitz being the good guys, fighting for truth, justice, and a better world--and fighting against dogmas, entrenched interests, and the power of the "U.S. state." The only coherent interpretation I can place on all this is that when Wade is confused when he says that the World Bank is not "autonomous," but forms "part of the external infrastructural power of the U.S. state." He really means something else. Perhaps he means that he thinks the economics profession has drawn the wrong lessons from the cratering of state-led development everywhere but East Asia. Perhaps that Anne Krueger's and Ian Little's arguments have been too persuasive for Wade's liking. Perhaps that international financial markets and their assessments of the likely private profitability of investments in countries following different development strategies do not serve the global social interest...
Brad DeLong
P.S.: Robert Wade writes "... I recall seeing your critique of "Japan, the WB, and the art of paradym maintenance", and thinking that you had missed something important, which would answer your point. Damned if I can remember what..."