``We are facing ... competition (from the capital markets). I think it's important that we effectively compete. Increasingly ... if the fight against poverty is successful, more and more countries will be in this middle-income category, and if this institution is going to remain relevant to the world, it obviously needs to be relevant to the middle-income countries.''
Wolfowitz's words are those of a man who has been in government much too long. He says private capital markets have become competitive with the bank's functions. But when those markets are not ``competitive,'' that means only that they question the value added by loans the World Bank has wanted to make. That is the meaning of the capital markets' supposed bias against developing countries. If those markets are now eager to compete with the World Bank for clients, it is time for the bank to get out of the way.
The World Bank's problem, as Wolfowitz seems to see it, is humanity's blessing: Middle-income countries are proliferating. This means that the bank is losing its battle to retain whatever relevance it once had. The bank's real mission statement is the non sequitur that makes government undertakings immortal: We were created for a reason, therefore there must forever be a reason for us to exist.
When the bank was born, a war-shattered world was haunted by memories of the collapse of global trade in the 1930s. Capital markets in the late 1940s were small and risk-averse. Today the problems the bank was created to address are long gone. The world is awash in capital available at low rates. For example, China's central bank has $1.2 trillion in foreign reserves and more than $60 billion arrives annually in direct investment by investment bankers flush with cash.
It is said that the Wolfowitz matter might damage the bank's reputation. But its reputation that matters concerns the waste and corruption that inevitably attend the political yet unaccountable distribution of many billions of dollars.
It is said that unless Wolfowitz goes, some donor governments might withhold funds. At the bank, the right thing, even done for a silly reason, would be an improvement.
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