A column by David Warsh in yesterday's Business section may have misstated the role of Treasury Undersecretary David Mulford in the recent appointment of Harvard professor Lawrence Summers as World Bank chief economist. Mulford said yesterday he was not consulted on the appointment. (Published 11/1/90)

What's the best-read and most widely discussed economic policy document in the world? Not the report of the chairman of the Council of Economic Advisers, though plenty of work goes into that. Not the annual report of the Bank for International Settlements, though this account by the central bankers' central bank probably has the most well-heeled audience, chiefly global financiers.

Instead, it's the World Development Report, the annual survey that is published each July by the World Bank. Assembled by the top guns of an enormous research staff (1,000 economists work for the bank), co-written by editors seconded from London's Economist magazine, it is the view from one of the citadels of world capitalism: shrewd, dry-eyed and carefully defended. As the implicit agenda for the world's largest lender to developing nations, the report makes a determined attempt to be persuasive to the widest-possible range of views, from Eastern Europe to Latin America to New York and Tokyo. Last summer, for example, it published an analysis of global poverty and what could be done about it that was the equivalent of a lay-down hand at bridge.

For the past eight years, the job of chief economist was done by Hollis Chenery, Anne Kreuger and Stanley Fischer. All were distinguished, each was representative of a distinctive tradition: a lifetime development economist, a free-market enthusiast who specialized in trade and a well-traveled sophisticate who was coauthor of a best-selling macro text, respectively.

Friday, the bank named Lawrence Summers, 35, to the job -- but not before the young Harvard University professor had run into a flurry of opposition. The trouble was, of course, that Summers had been the principle economic adviser to Michael S. Dukakis in his failed presidential bid.

"Larry Summers is the last of the die-hard Keynesians," growled Melanie Tammen, director of the global economic liberty institute of the Cato Institute. "We could have had Alan Walters!" (Walters, a frequent consultant to the bank, was Margaret Thatcher's personal adviser for many years.)

Dan Mitchell of the Heritage Foundation said, "A fiasco! They take, not just another liberal economist, but the head adviser to the guy who tried to beat them and give him one of the best jobs in Washington, $180,000-plus a year, tax free. {A bank source says the figure, which was published last week in the Washington Times, is a little on the high side, although he refused to disclose the salary}. Summers is a kind of a dinosaur, anyway, preaching theories of central planning that have been discredited. They could have appointed somebody like Richard Rahn of the Chamber of Commerce, who has been working on theories that have helped the world turn away from socialism. It's just another sign of the disintegration of the Bush administration."

Said Massachusetts Institute of Technology's Rudiger Dornbusch, "The Dukakis campaign gave a bad name to everybody associated with it. This is a chance for Larry to clear his name."

Despite opposition within the bank that was slowly overcome -- Summers is in no very profound sense a "development" economist, having worked little outside the United States -- his appointment seemed unchallenged from the outside until last Wednesday.

Chief economic adviser Michael Boskin, Federal Reserve Chairman Alan Greenspan and Treasury Undersecretary David Mulford were said to have signed off on it. At the last moment, however, a little countercharge developed: Sen. Robert W. Kasten Jr. (R-Wis.) spearheaded the drive, as chairman of the appropriations subcommittee that oversees the American contribution to the bank. Treasury sources said deputy chief of staff Andrew Card and deputy personnel director Ron Kaufman also were enlisted at the White House to fight the appointment.

After a flurry of angry calls, the effort came to naught. World Bank President Barber Conable, who had offered Summers the job in the first place, stemmed the tide and won a vote from his board Thursday. Conable had been a longtime Republican congressional leader before being appointed by Ronald Reagan to head the bank; he knows his way around Capitol Hill. He maintained, apparently without much difficulty, the bank's tradition of insulation from partisan politics.

But the question remains, why does Reagan's man at the bank appoint Dukakis's chief adviser with the concurrence of the Bush White House?

Part of the answer is that Summers was always on the right wing of the Dukakis campaign. He fought a continual rear-guard action against a slew of other would-be lieutenants who sought to push the candidate further to the left: industrial policy buffs, heavy tax advocates and populists of all sorts. These advisers, in turn, like to beat Summers over the head with the fact that he had served for a year as a senior staff economist on Ronald Reagan's first-term Council of Economic Advisers.

Another part of the reason for his appointment is that he is clearly one of the three or four most gifted economists of his generation. A specialist in taxation, Summers had much to do with undermining traditional Keynesian views of the nature of unemployment. He holds the largest no-strings grant ever made to an economist by the National Science Foundation; he's been serving as economic adviser to the government of Lithuania in its battle to secede from the Soviet Union; and he's a champion practitioner of policy-oriented research.

But probably the factor that ultimately accounts for Summers's appointment has to do with the World Bank's need to have stronger technical leadership than its sister organization, the International Monetary Fund, if it wants to avoid being pressed into service as a mere debt collector. Jacob Frenkel, a conservative University of Chicago monetary specialist who is the IMF's chief economist, is no slouch at technical analysis, so Conable had to reach for an equally powerful figure to keep his organization's edge in the fast-breaking debate over world economic integration.

Summers's appointment will do nothing to diminish the World Bank's role as a bright red flag to "supply-side" conservatives. The bank has rarely been a partisan of the kind of grass-roots rebellion against the center that they favor. And it remains a top-heavy bastion of privilege. Its employees pay no taxes on their princely salaries, and when a senior officer recently suggested that the organization try to save money by flying its functionaries on missions business class instead of first class, the bank negotiated an agreement with British Airways that provided for free upgrades to first-class Concorde instead.

It is also true, however, that the bank in the 1980s has been an extremely persuasive advocate of free-market economics, emphasizing free trade, identifying unproductive agricultural policies, calling for efficient finance sectors, advocating privatization and the down-sizing of overgrown public sectors.

Although Summers's appointment is not likely to appeal to the Cato Institute, it symbolizes faith on the part of the president that the mainstream economics consensus knows something, that politics is ultimately secondary to technique and the dispassionate search for truth. It is further evidence that what the Bush presidency is about is the rebuilding of the American establishment, much as the Ford presidency was in its day. This time, let's hope it sticks.

David Warsh is a columnist for the Boston Globe.