Magazine article Insight on the News

Free-Market Economic Miracles Mock Bank's 'Statist' Programs

Magazine article Insight on the News

Free-Market Economic Miracles Mock Bank's 'Statist' Programs

Article excerpt

In early December, Russia returned to the world capital markets for the first time since 1917, when the Bolsheviks renounced the debt of the czars and defaulted on their loans. Russians raised $1 billion from financiers on Wall Street and elsewhere around the world.

Yet the Washington-based World Bank and its bureaucratic cousin, the International Monetary Fund, continue to finance projects in Russia and other "developing countries" such as China and India, which find plenty of willing investors in New York, London and other market centers.

The bank, concerned about criticism from policymakers such as House Budget Committee Chairman John Kasich of Ohio, has tried to restructure its loans, about one-fifth (or $25 billion) of which now go to private companies; it wants to increase that amount to four-fifths in the coming years.

But many conservative policy analysts believe such reform is insufficient. The United States should pull out of the World Bank entirely, they argue, and take its $1 billion in annual payments with it.

"I don't believe that the World Bank is reformable," says Ian Vasquez, director of the Project on Global Economic Liberty at the Cato Institute, a libertarian think-tank. "There have been numerous reforms in the past. Each time, there is a promise that performance will improve. But each time performance deteriorates."

The world has changed dramatically since the bank was founded in 1948 at the Bretton-Woods conference. Liberal British economist Lord Keynes, the champion of statist funding of the private sector who helped shape the banks charter, distrusted the free markets ability to generate economic growth around the world. The World Bank, he and his colleagues concluded, would encourage the most promising projects.

Since then, bank programs have supported government-fostered economic development, though most of the monies have gone for infrastruture activity such as roads and dams. …

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