It has been written that disappointment is the nurse of wisdom. If that is true, then after reading Robert Samuelson's Economic Focus column about the Reagan administration's "perverse hostility" to the World Bank Oct. 13, 1981 , I should be well on my way to wisdom. Regrettably, I am not wiser--just sadder because, unfortunately, an excellent opportunity was missed to "tell it like it is" in the Third World.
As a banker involved in the Third World, I see the world--and the World Bank--differently than does Samuelson. So, I believe, does the new administration, whose approach is refreshing, not threatening to the interests of developing countries, as the column implies.
First of all, the assertion that the administration has a "stand-offish," slightly hostile attitude toward the bank is a significant misconception. On the contrary, what is emerging in the administration's policy approaches is recognition of the Third World's plight and the expression of a powerful commitment and belief in the private sector as a remedy for many ills in poor countries. It could be the beginning of a new era when the appropriate blend of private sector, bilateral and multilateral aid for the developing countries will be found and effective policies implemented--for the first time.
Simply pouring an endless stream of aid dollars into poor nations not only troubles the new administration, but also many Third World leaders. It is finally being recognized that a giant welfare agency, such as the World Bank has become, is not the most appropriate mechanism to create stable market-oriented economies in most developing countries. Faced with the choice of teaching people to fish or handing them free tackle and bait, the administration--and hopefully, World Bank President A. W. Clausen--prefers to teach people to fish, and that is a welcome change.
In another striking turnabout, some developing countries are moving out ahead of the World Bank. No longer railing against capitalism, their leaders are actively seeking foreign private investment; Jamaica, Ghana, even communist Tanzania are seeking advice on creating private financial institutions.
Truth to tell, much of the Third World appears to be less concerned about the administration's new thrust than Samuelson seems to be.
Instead of the administration's trying to "undermine" the World Bank, as the column suggests, I am persuaded that the reverse is true. Within the World Bank family, the International Finance Corporation is charged with a catalytic role, assisting various ventures in developing nations to attract financing from private sources. In the fiscal year that ended in mid-1980, the IFC had committed $681 million to equity investments and loans. In total, some $1.5 billion of financing is now in place. A large sum, to be sure, but paltry beside the World Bank's $29 billions in loans outstanding.
Many of us believe--and the administration agrees--that if it were to be unleashed, the IFC could play a powerful global role in mobilizing private capital. In recent years, the IFC has put heavy emphasis on spurring projects in association with private investors to develop energy resources and to increase production of foodstuffs, especially poultry and fish. Moreover, it has financed facilities for a number of basic commodities, such as fish, flour, milk, cocoa and sugar.
In all these projects, the IFC, unlike the World Bank, participates directly with the private sector and provides ownership opportunities for Third World citizens.
All these efforts are applauded by many influential people in the Third World. The column by Samuelson argues that "the administration lacks a sense of broad national interests." One wonders how much analysis has been conducted in the Third World to support such a statement.
In point of fact, the interests of both the United States and the Third World would be better served if the administration, in all its foreign assistance activities, were to encourage poor countries to become less dependent on others for food; to promote the free market system as the incentive mechanism best able to bring stability to Third World nations --provided, of course, that capitalist countries are generous with their know-how and cooperative with local populations in those regions.
To sum up, the hostility Samuelson perceives in the administration's attitude toward the World Bank is, in reality, the kind of deep disappointment one feels about a friend who fails to live up to great potential and whose ways are counter-productive. Exporting welfare to poor countries is not the ideal way to show that the market system works and that it works better than socialism, communism, state capitalism or any other "ism." With the new administration's support, an important new role for the private sector is emerging in the developing nations. All that is required for success is for the World Bank to adjust to that reality and permit those forces to function and the momentum to build.
The new administration needs the World Bank, functioning in an umbrella-like role, and it needs a more comprehensive understanding of what it is trying to accomplish than Samuelson, a most able economic journalist, was able to muster.