:)
All best
Christian
----- Original Message ----- From: Brad De Long <delong at econ.Berkeley.EDU> To: <lbo-talk at lists.panix.com>; Robert Wade <Robert_Wade at brown.edu> Sent: Thursday, January 27, 2000 2:13 PM Subject: RE: Now Stiglitz makes more trouble!
> >Brad De Long wrote:
> >
> >>It's a good article. Wade did a lot of legwork for it. But you will
> >>not be surprised to learn that I have some--sharp--disagreements
> >>with it.
> >
> >Such as?
> >
> >Gosh, why are people so reticent?
> >
> >Doug
>
> 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..."
>
>