In July, World Bank economist William Easterly published a widely praised new book, "The Elusive Quest for Growth" (MIT Press). In it, he is highly critical of both economic theorists and foreign-aid providers, including his employer, for failing to come up with a workable theory of economic growth or a means of implementing it. The fact that many developing countries are worse off today, by any measure, than they were 40 years ago is ample proof that Easterly is correct.
Shortly before Easterly's book hit the shelves, he did what many authors often do and published a summary of it as an op-ed article. It appeared in London's Financial Times newspaper on July 4.
In the article, Easterly wrote: "Contrary to conventional wisdom, aid to the developing world has been a big disappointment. Consider the facts, and it soon becomes evident that the $1 trillion spent on aid since the 1960s, with the efforts of advisers, foreign-aid givers, the International Monetary Fund and the World Bank, have all failed to attain the desired results."
Easterly's statement is simple fact, which cannot be denied. But, like the little boy who said the emperor is not wearing any clothes, Easterly soon found himself suffering the wrath of those who fear the truth. According to a report in The New York Times on Sept. 7, shortly after Easterly's Financial Times article appeared, the World Bank launched an official inquiry into it. The Bank says Easterly violated its policy by publishing this article without prior approval.
The absurdity of the bank's policy is that it was perfectly permissible for Easterly to say exactly the same thing in his book or in an academic journal. The policy only requires clearance for publication in newspapers or popular magazines. In other words, bank economists can say what they want as long as it is in a forum no one reads. But if they say the same thing in a publication people actually do read, then it is restricted.
Perhaps Easterly was wrong not to go through the motions of getting prior approval for his op-ed. But the bank's response is far out of proportion to the offense. This is a case where his supervisor should have just said, "Don't do it again." Launching an "official inquiry" that could lead to dismissal is overkill, using a cannon to swat a fly.
Many observers believe that Easterly is being made the scapegoat for recent attacks on the World Bank's policies and its president, James Wolfensohn. In particular, the just-published issues of Foreign Affairs and Foreign Policy both contain devastating critiques of the bank and Wolfensohn.
In the Foreign Policy article, journalist Stephen Fidler is highly critical of Wolfensohn's management of the World Bank since his appointment by Bill Clinton in 1995. Says Fidler, "Since June 1995, James D. Wolfensohn has presided over what many close to the bank view as a tragic deterioration of the world's premier development institution, which they describe as rudderless and lacking strategic vision."
Writing in Foreign Affairs, former World Bank Managing Director Jessica Einhorn, whom Wolfensohn pushed out, says the problem isn't so much that the bank lacks a vision as that Wolfensohn's vision is completely unmanageable. During his tenure, Wolfensohn has jumped from one development fad to another, adding new responsibilities to the bank in areas such as the environment under pressure from outside interest groups. Former Treasury Secretary Lawrence Summers believes that Wolfensohn is allowing NGOs (non-governmental organizations) to guide bank policy rather than its member governments.
The Bush administration is clearly concerned about the direction of the World Bank. Treasury Secretary Paul O'Neill and Undersecretary for International Affairs John Taylor have publicly stated reservations about where the bank is going. But unfortunately, their hands are largely tied because Wolfensohn's second term runs for another four years. He was reappointed by Bill Clinton last year.
Wolfensohn always was an odd choice to be World Bank president. Although a banker by profession, he came to the job without any experience in international economic development and has had to learn it on the job. His main qualifications seem to have been heavy contributions to the Democratic Party and being a pal of Bill Clinton. (Clinton has stayed at Wolfensohn's luxurious estate in Jackson Hole, Wyo.)
No one denies Wolfensohn's enthusiasm for the job. But, at the same time, no one has a good word to say about his temperament. He is said to be insecure, unwilling to tolerate criticism and a bit of a dilettante, which has caused great consternation among Bank staff and lowered morale there to the lowest level in memory. Wolfensohn's vendetta against Easterly looks like an effort to "kill the messenger," rather than deal with the World Bank's real problems.