No Real Development Without Economic Growth – Part 1

WASHINGTON – International development is generally defined by practitioners of this craft as “the fight against poverty“. I totally disagree with this approach that focuses on poverty, the practical manifestation of lack of economic growth, instead of dealing with the real problem that I define as: “What does it take to get sustained growth, since growth is the prerequisite for economic and social progress in all societies”? Fighting poverty is about fighting the symptoms, the practical manifestation of a lack of economic growth. What we want is healthy, productive societies that will create more wealth, and thus more widespread well-being. More growth means less poverty.

Fighting poverty

Indeed, how an issue is defined goes a long way in shaping the nature of the efforts aimed at dealing with it. And, in this instance, the definition of both the problem and the solution is wrong. As I said above, the broad objective of the international development community vis-a-vis poor countries, (politely described as lesser developed countries), has been defined as “poverty reduction”, or “the fight against poverty”.

The World Bank, the most important multilateral lending institution focusing on development, is “Working for a World Free of Poverty”. Its Mission statement is “To fight poverty with passion…

So, poverty as a condition, rather than promoting sustainable policies that will allow societies to get out of poverty for good, is the focus of donors’ attention. 

Public relations

To some extent, this emphasis on “fighting poverty, or “poverty alleviation” is simply public relations. It is an attempt to deflect the critiques of the anti-global movement that, years ago, while elaborating its bizarre conspiratorial theories that would capture the root causes of all the planet’s ailments, bunched together the World Trade Organization, the International Monetary Fund, the World Bank, and Multinational Corporations. It defined all of them as a clique of demonic players working together to further mankind’s misery in general, and the exploitation of the third world in particular.

Hence the pressure on the maligned “development industry” to do something in order to improve its image. It tried to do this by presenting to its critics noble institutional objectives that would humanize their institutions. “Hey, Mr. & Ms. No Global, you are mistaken. We are the Good Guys. We are with you. We are fighting poverty. We are completely focused on helping the poor. There is no other agenda”.

Christians ethics encourage giving

Undoubtedly there are other cultural/religious factors that can help explain this “fight against poverty” focus. At least to some extent, the Good Samaritan attitude stems from religiously derived ethics formulated by the Christian cultures that shaped the values, and therefore policy propensities, in many of the Western countries which “invented” the development industry.

Indeed, if we go back to the roots of this humanitarian approach, we see that over the centuries within Christendom we have seen the proliferation of a vast universe of charitable initiatives –many of them organized and run by religious institutions– aimed at aiding the poor.

Within Christianity, the moral obligation to give to the poor is the other side of a parallel moral bias against excessive wealth ever present in Christian ethics. The remedy to social inequality is for the rich to give away some of their (ill-gotten?) excess wealth to the poor, sometimes called “the less fortunate”.

But, in general, the Christian moral obligation to give to the poor was never aimed at having a truly transformative economic and social impact. It was meant as a good deed that would somewhat alleviate the painful conditions deriving from a state of poverty  which was, however, considered to be a permanent feature for some segments of society.

Plenty of relief activities that are not transformative

At a different level, it is difficult to evaluate the deep motives of modern day wealthy philanthropists who contribute to relief initiatives, whether defined as “poverty reduction” or otherwise. But it would appear that the likes of Bill Gates fall pretty much in the same category of those who attempted to redress and alleviate.

For instance the children immunization goal pursued, no doubt very competently, by the Bill & Melinda Gates Foundation, noble as it is, taken by itself, is not transformative. True enough, immunized children in Africa will not die of common diseases. But chances are that, unless other critical changes will take place within their societies, they will be alive but still condemned to a miserable (and short) life of abject poverty.

(This approach based on partial interventions that do not help economic development may be changing. The Gates Foundation and other wealthy donors are now shifting to initiatives aimed at fostering the creation of opportunity in poor countries, for instance through upgrades in education. They begin to appreciate that a new mind set, new values and new skills can and should be the foundations for wealth creation activities that will help transform these societies).

Poverty as “bad luck”

More broadly, the issue of poverty is really not well understood in Western Christian culture. So much so that it has been explained away. Historically poverty has been regarded as a product of bad luck for some that can and should be somehow mitigated through faith-inspired charity performed by the rich. Indeed, even today in polite company in the Western World the poor are often described as “the less fortunate among us”.

Let’s think about it. We, the well off, “have” because we have been fortunate. The poor, alas, less so. Again, words have meaning. According to this definition, our economic station in life is determined by having been more or less “fortunate”. Which is to say that the possession of material wealth is all about random distribution of luck. The poor happen to be poor because –look at that– they have been less fortunate than we have.

Successful capitalism has nothing to do with luck

At some level this is true, especially in the case of children. Some are born in rich circumstances and some are born poor. Clearly those who were born in privilege have an enviable head start in life.

But this is only a small slice of reality.

Please, consider this. Most millionaires in the U.S. are self-made people, as opposed to being mostly “lucky” beneficiaries of inherited wealth. This means that an open economic system, protected by laws and independent courts, free institutions, transparent rules and no artificial barriers to entry, encourages people to try and forge a better life for themselves.

It is abundantly clear that all this has nothing to do with “being fortunate”. And yet the use of these misleading definitions distracts us from confronting the real issues.

Poverty will be eliminated through successful enterprise

Poverty is mostly about the bad combination of lack of education, lack of capital and economic opportunity, and lack of entrepreneurial drive – all of them necessary preconditions to start and fuel wealth creating activities.

If we do not tackle these issues –education, opportunity, entrepreneurship– by creating at least an embryo of the institutional eco-system that opens up opportunity and by instilling the will and the ability to create enterprise, we shall continue to provide humanitarian relief to the poor, without offering a realistic new path to growth.

Borrowing from the old story about the qualitative difference between giving somebody a fish and teaching them how to fish, to date the fish hand outs continue, while the fishing schools are scarce, or non existent.

The eco-system

Even the most superficial analysis shows that wealthy societies did not become wealthy because of random circumstances; because people who live there won a major lottery.

Leaving aside all the defects of capitalism, at a macro level capitalistic economies have been successful because the institutions created by capitalistic societies allowed –or better yet promoted– a reasonably good functioning of the engines of wealth creation mobilized and run by private initiatives. As a result of the productive activities created through these engines, poverty, at least extreme poverty, has been eliminated.

Which is to say that prosperity is the outcome of a mind set focused on wealth creating activities on the part of many inventors, innovators and risk taking capitalists. They create the businesses that create employment and therefore more prosperity. The aggregate outcome of all these efforts, consisting in a vastly improved standard of living for most, has nothing to do with “being fortunate”. it is all about being creative, industrious and persistent.

Relief as opposed to growth

But this is not how the issue is framed by the development community. The development practitioners have identified “poverty elimination or reduction” as the core development mission.

In so doing, wittingly or unwittingly, they focus (and make us focus) mostly on the effect of lack of economic development (poverty) and what we should do about alleviating it through donations and relief activities, rather than on a credible way out of it that can only be centered on a viable economic development agenda fully owned and promoted by the people who live now in poor countries.

(See the rest and conclusion in Part 2, to be posted tomorrow)

 




Walking in Lusaka

LUSAKA (Zambia) – I was walking in a nice area, with beautiful Jacaranda trees, now almost in full bloom, lining the streets. In this part of Lusaka you can find some of the best hotels, plus the local offices of many international organizations. The Word Bank is here, plus the International Monetary Fund, The International Finance Corporation, and the African Development Bank.

These days, one glitch is represented by frequent power cuts, due to limited production capacity caused by a persistent drought. (Zambia depends in a significant way on hydro power generation. Low water levels in the dams mean less electricity production).

As I got to a busy intersection, I realized that the traffic lights were not working, most likely
due to a power cut. This presented a real problem. Even without a functioning traffic light, cars were zipping by at high speed.

I looked around and saw a young woman in the same predicament. She was also reviewing the situation. I concluded that it would be wise to follow her lead. “She is local”, I thought. “She understands the traffic, and how drivers react to pedestrians crossing the street”. Sure enough, during a short lull in the incoming traffic, the young lady started crossing. And I followed her.

When we safely got to the other side, I looked at her and I commented that I was lucky to have had the opportunity to follow her. In reply, she said something polite.

But then, in a simple and direct way she said to me: “You know, you are the very first white person I have ever talked to in my life”. “Really?”, I commented in disbelief. “And what do you do? What is your name?”, I asked. “I work as a marketing specialist for a firm in the Cairo Road. My name is Mary”.

Mary spoke clearly, in a nice way, in very good English. I was a little confused. “How is it possible that she never interacted with any white foreigners?”, I reflected.  There are several Europeans, Americans and Asians in Lusaka. Some actually live here, some come for business, or tourism. Others work in Lusaka as diplomats, or aid workers.

Well, may be an explanation is that “globalization” is still work in progress. Below a rather thin veneer of increased connectivity, we –Africans, Europeans, American, Asians– are not yet part of “One World”. There are plenty of interactions, of course. But we have not reached critical mass.

No doubt, the process is unfolding; but we are not there yet. Well, I just hope that we can move faster.

And I am sure that as the level and quality of international connections improves open-minded people like Mary will see that this process creates new and interesting opportunities.




World Bank And Chinese Think Tank Recommend Overhaul Of China’s Large System Of State Run Enterprises – A Surprise That Such A Sensitive Issue Is Publicly Debated – Economic Reforms Coming Up In Beijing?

[the-subtitle ]

By Paolo von Schirach

February 25, 2012

WASHINGTON – Many believe that China’s spectacular growth rates are due to its ability to expertly manage a combination of state run corporations and relatively new privately owned companies. China seems to be the best and most successful expression of a mixed economy model in which state owned enterprises, SOEs, still control almost half of the entire economy, including most strategic sectors, such as banking and telecoms. But it would appear instead that China has done so well in the past 30 years in spite of state capitalism. And it would also appear that, in order to maintain a high rate of growth, China should make sure that going forward its many SOEs are run as real profit making enterprises, as opposed to being in large part powerful tools to assert government control over the rest of the economy.

China 2030

This is some of what is coming out of a preview of “China 2030“, a report prepared by the World Bank, (acting in an advisory capacity), jointly with the Development Research Center, or DRC, a very influential Chinese think tank that is supervised by China’s top policy-making body, the State Council.

Open debate?

What is most surprising about this report is not really the content, but the fact that it was commissioned in the first place and that its key finding and recommendation are becoming public. Just a few years ago, a document discussing issues that go to the very core of the Chinese state and economy would have never been aired in public. So, I would call this “openness” very good news. At least in principle, this is beginning to look like a debate on public policy.

SOE model worked well

As to the key findings, I am perfect agreement. China did very well in harnessing most of its national resources in a gigantic effort to create an export- led economy. It had all the key components to capture a huge slice of labor intensive manufacturing: cheap land for industrial sites, cheap capital provided by state owned banks and tens of millions of migrant workers willing to move into cities and work in factories for really low wages. What Chinese migrant laborers turned into factory workers lacked in terms of skills they compensated with low wages.

Chinese products, while not the best, especially at the beginning of this industrial effort, were certainly the cheapest. And so it did not matter that inexperienced Chinese workers were not particularly productive.

Besides cheap products, the Chinese were smart enough to understand that in order to gain and keep overseas customers they needed massive infrastructure investments. Cheap labor is a huge asset, but quick reaction time and time to market are equally important.

Tomorrow is about value

But this is the old story. Tomorrow’s story will be about quality, innovation and moving up the value chain. And here is where state run enterprise will show their weaknesses. And this is mostly because SOEs are still large bureaucracies run by government appointees. While China for sure has its own variation on the SOE model, by and large the state is not a good entrepreneur. It was fine when the matter at hand was to mass produce cheap consumer goods for Wal-Mart, with the obvious advantage of ridiculously low labor costs.

But now China has to assert itself by becoming a flexible, innovative and high quality producer. Even intuitively we can appreciate that a state run bureaucracy is not the best instrument to foster innovation. Invariably, SOEs are influenced by politics and tend to allocate resources on priorities that have little to do with increasing value. And, in the long run, this is their fatal weakness, be it in China or anywhere else.

Will there be serious reforms?

That said, reforming the Chinese SOEs system would be a monumental effort, precisely because SOEs are so relevant and so deeply entrenched in the very fabric of the political system. Still, if China wants to rise to the next level economically, this issue will have to be tackled.

Ironically, by privatizing –if it will come to that– large SOEs that have also been used as levers to exert political influence, the Chinese Communist Party would diminish its powerful grip on the Chinese society. Should serious reforms take place, how all this will end up is anybody’s guess. Meantime, we should welcome this Chinese debate, especially if it will be carried out in the open.




Development Work Should Be About Economic Growth, Not About “Poverty Alleviation” – Part 1

WASHINGTON – International development is generally defined by practitioners of this craft as “the fight against poverty“. I totally disagree with this approach that focuses on poverty, the practical manifestation of lack of economic growth, instead of dealing with the real problem that I define as: “What does it take to get sustained growth”? Fighting poverty is about fighting the symptoms, the practical manifestation of a lack of economic growth. What we want is a healthy, productive person/society.

Fighting poverty

Indeed, how an issue is defined goes a long way in shaping the nature of the efforts aimed at dealing with it. The broad objective of the international development community vis-a-vis poor countries, (politely knows as lesser developed countries), has been defined as “poverty reduction”, or “the fight against poverty”. The World Bank, the most important multilateral lending institution focusing on development, is “Working for a World Free of Poverty”. Its Mission statement is “To fight poverty with passion…So, poverty as a condition, rather than promoting policies that will allow societies to get out of poverty for good, is the focus of donors’ attention. 

Public relations

To some extent, this emphasis on “fighting poverty, or poverty alleviation” is simply public relations. It is an attempt to deflect the critiques of the anti-global movement that, years ago, while elaborating its bizarre conspiratorial theories that would capture the root causes of all the planet’s ailments, bunched together the World Trade Organization, the International Monetary Fund, the World Bank, and Multinational Corporations. It defined them as a clique of demonic players working together to further mankind’s misery in general, and the exploitation of the third world in particular. Hence the desire on the part of the “development industry” to improve its image by presenting to its critics objectives that would humanize their institutions. “Hey, Mr. No Global, you are mistaken. We are the Good Guys. we are with you. We are fighting poverty. We are completely focused on helping the poor”.

Christians ethics encourage giving

Undoubtedly there are other factors that can help explain this “fight against poverty” focus. At least to some extent, the Good Samaritan attitude stems from religiously derived ethics that were shaped by the Christian cultures that shaped the values and therefore the policy inclinations in many of the Western countries which “invented” the development industry.

Therefore, over the centuries, within Christendom we have seen the proliferation of a vast universe of charitable initiatives –many of them run by religious institutions– aimed at aiding the poor. The moral obligation to give to the poor is the other side of a parallel moral bias against excessive wealth ever present in Christian ethics. The remedy to this inequality is for the rich to give away some of the excess wealth to the poor, sometimes called “the less fortunate”.

But, in general, the Christian moral obligation to give to the poor was never aimed at having a truly transformative economic and social impact. It was meant as a good deed that would somewhat alleviate the painful conditions deriving from a state of poverty that was, however, considered to be a permanent feature for some segments of society.

Plenty of relief activities that are not transformative

At a different level, it is difficult to evaluate the deep motives of modern day wealthy philanthropists who contribute to relief initiatives, whether defined as “poverty reduction” or otherwise. But it would appear that the likes of Bill Gates fall pretty much in the same category of those who attempted to redress and alleviate.

For instance the children immunization goal pursued, no doubt very competently, by the Gates Foundation, noble as it is, taken by itself, is not transformative. Immunized children will not die of common diseases. But chances are that, unless other critical changes will take place within their societies, they will be alive but still very poor.

(This approach based on limited interventions that do not help economic development may be changing. The Gates Foundation and other wealthy donors are now shifting to initiatives aimed at fostering the creation of opportunity in poor countries, for instance through upgrades in education. They begin to appreciate that a new mind set, new values and new skills can and should be the foundations for wealth creation activities that will help transform these societies).

Poverty as “bad luck”

More broadly, the issue of poverty is confusing for Western Christian culture, so much so that it has been explained away. Historically poverty has been regarded as a product of bad luck for some that can and should be somehow mitigated through charity performed by the rich. Indeed, even today in polite company in the Western World the poor are often described as “the less fortunate among us”.

Let’s think about it. We, the well off, “have” because we have been fortunate. The poor, alas, less so. Again, words have meaning. According to this definition, our economic station in life is determined by having been more or less fortunate. Which is to say that the possession of material wealth is all about random distribution of luck. The poor happen to be poor because –look at that– they have been less fortunate than we have.

Successful capitalism has nothing to do with luck

At some level this is true, especially in the case of children. Some are born in rich circumstances and some are born poor. Clearly those who were born in privilege have and enviable head start in life. But this is only a small slice of reality.

Most millionaires in the US are self-made people, as opposed to being mostly “lucky” beneficiaries of inherited wealth. This means that an open economic system, protected by free institutions and transparent rules and no artificial barriers to entry, encourages people to try and forge a better life for themselves. And all this has preciously little to do with “being fortunate”. And yet the use of these misleading definitions distracts us from confronting the real issues.

Poverty will be eliminated through successful enterprise

Poverty is mostly about the bad combination of lack of education, lack of economic opportunity and lack of entrepreneurial drive – all of them necessary preconditions to start wealth creating activities.

If we do not tackle these issues –education, opportunity, entrepreneurship– by creating at least an embryo of the institutional eco-system that opens up opportunity and by instilling the will and the ability to create enterprise, we shall continue to provide humanitarian relief to the poor, without offering a realistic new path to growth.

Borrowing from the old story about the qualitative difference between giving somebody a fish and teaching them how to fish, to date the fish hand outs continue, while the fishing schools are scarce, or non existent.

The eco-system

Even the most superficial analysis shows that wealthy societies did not become wealthy because of random circumstances, because people who live there won a major lottery.

Leaving aside all the defects of capitalism, at a macro level capitalistic economies have been successful because the institutions created by capitalistic societies allowed –or better yet promoted– a reasonably good functioning of the engines of wealth creation mobilized by private initiatives. As a result of the productive activities created through these engines, poverty, at least extreme poverty, has been eliminated.

Which is to say that prosperity is the outcome of a mind set focused on wealth creating activities on the part of many inventors, innovators and risk taking capitalists. The aggregate outcome, consisting in a vastly improved standard of living for most, has nothing to do with “being fortunate”.

Relief as opposed to growth

But this is not how the issue is framed by the development community. The development practitioners have identified “poverty elimination or reduction” as the core development mission. In so doing, wittingly or unwittingly, they focus (and make us focus) mostly on the effect of lack of economic development (poverty) and what we should do about alleviating it through donations and relief activities, rather than on a credible way out of it that can only be centered on a viable economic development agenda.

(See the rest and conclusion in Part 2, to be posted tomorrow)




How “World Bank War I” Really Ended

by Paolo von Schirach

May 22, 2007

WASHINGTON – ‘World Bank War I’ is over. President Paul Wolfowitz has been routed. He is out. The Europeans and their allies won. The allegedly unpalatable, non collegial, president has been successfully removed. However, almost all would agree that his baffling bad judgment in the now infamous matter of the overgenerous financial arrangements related to his partner’s secondment -serious as it may be– would have never developed into a crisis in a different political climate. Wolfowitz, representing most of what the Europeans (and others as well) strongly dislike about America’s recent policies, unfortunately, with his own doing, created a valid pretext leading to his removal.

The score is clear: Paul Wolfowitz and President George Bush who sent him there lost. By conceding tactical defeat on Wolfowitz, (thus not forcing an embarrassing vote by the World Bank Board), the Bush White House regained some leverage and the right to put forward another American candidate of its choice.

This is more or less the gist of it.

But there is another level to this story that merits attention. And this is the discrepancy between official acts (the Word Bank Board statement that ended the crisis) and previously declared beliefs and intentions. A hiatus between what is formally declared and what everybody who knows anything knows that the declaration ‘really’ means. The Board v. Wolfowitz case is just one of many instances of a dissonance between the wording of public statements that supposedly should reflect for the record feelings, beliefs and judgments and the actual situations and beliefs. The cognoscenti are fully aware that what is formally stated is not what is meant. And this is perfectly fine. We are so used to this dissonance that it does not provoke any reaction. Those who are dismayed are the naive and the unsophisticated. 

Because this particular case is fresh, it is worth commenting upon. And it is worth commenting upon because it should matter that in our civilized world in which the paramount importance of ‘values’ as the true pillars sustaining societies is so often trumpeted, it is perfectly alright, in fact an indication of superior wisdom and diplomatic mastery, to make statements for the record that would indicate a certain sincere judgment, while everybody knows that this is not what is meant. The realists and the sophisticated really know what is going on. They know the real story and they can read between the lines. As for all the others -well, who cares?

In the case of the World Bank, the realists would say, a crisis has been resolved, without open confrontation and ensuing further embarrassment and weakening of the institution. The intended result (getting rid of Wolfowitz) wanted by the majority has been achieved. The fact that this has been accomplished through an official Board statement that, in its substance, openly contradicts the validity of the initial accusation and findings, apparently, does not matter.

The sequence of events is well known. First the revelations about “the girl friend deal” and the ensuing fracas. Then the results of the formal inquiry that found Mr. Wolfowitz guilty on many accounts were presented to the Board. And then, what happened?.

Well, and then the Board official statement that Wolfowitz in his defense said he acted in good faith and “we accept this”. In a normal world in which words mean what they are supposed to, the Board statement equals to a full and complete exoneration.

The Board’s words mean: “We listened to the report and its conclusions that Wolfowitz acted wrongly on many accounts. But we accept as a fact that he acted in good faith. Furthermore, we (the Board) also accept that there is plenty of blame shared by others. Indeed, the procedures at the origin of this mess are so confusing that the Board thinks that a thorough review of such procedures is now in order.”

 Of course, the Board’s statement does not say that the accusations of the committee are false. However, it says that the good faith of president Wolfowitz is established. It goes on to say that many good things happened during his two year tenure. So, by any reasonable standard, the president of the institution may have materially committed some errors; but his good intentions and his ethics (this is what the inquiry was about) have been affirmed.

And so, in the light of this assessment by the Board, the formally and officially exonerated president resigns? Talk about non sequitur. Well, yes. He goes because this was the deal. He agreed to resign, in a backroom deal negotiated by his lawyers, in exchange for this very statement that would formally exonerate him.

So he can produce for now and for posterity a face saving document, while the Board can produce what (they would argue) really matters: a political result. He is out; and that is what we all wanted, no? The fact that the Board, in order to secure its political end, in complete and utter cynicism, was willing to state as fact what it clearly does not believe in and that, in principle, undercuts the rationale for removing the Bank’s president, shows that principle means nothing whatsoever in this matter.

And all this, let us not forget, in a matter that was about ethics, a matter in which supposedly the Board had to evaluate character and motives, more than just actions.

So, the fact of the matter is that all concerned, friends and enemies alike, know that Paul Wolfowitz, whatever his bad judgment and errors, has been successfully stabbed by a coalition of people who dislike whatever they imagine he represents (the Iraq War, bad management style, arrogance, and, probably central to all this, a real threat to the opaque modus operandi of a complex institution). He has been effectively tarred and feathered and run out of town.

However, both he and the Bush White House can exhibit the only official document that counts in which it is clearly said that his good faith is established, that unknown others contributed to this mess and that the Board praises his two year tenure. So there. Wolfowitz resigned. But the record established with unequivocal words that his bona fides has been recognized. He is a good man who can stand tall. Next question?

Prior to this conclusion, the media had leaked this very scenario: forced departure; but with the fig leaf of formal exoneration. And this is precisely what happened. It is fully understandable that, having lost any residual political support and thus the war, Mr. Wolfowitz wanted to extract at least this token ‘victory’. So, he is being ousted for being a ‘bad guy’, the hypocrite who does not walk the talk when it comes to governance and favoritism; but he can say that “No, this is not true; and I have the Board document that exonerates me”.

The fact that Mr. Wolfowitz wanted this document is understandable, also because he honestly believes this to be the truth. The fact that the Board of Directors of the World Bank, in an issue of ethics and thus transparency, agreed to this sadly demonstrates that they were not really concerned with establishing the truth or in recognizing and assigning blame in a matter of unprecedented gravity, as it had been claimed all along.

They wanted a political result and they got it. The fact that, in order to get what they wanted, they had to officially affirm, for the record, the opposite of what the allegations and the findings had concluded, is a glaring contradiction. Yet, on the whole, this appears to be a trivial detail. So trivial that it has not been noted by most commentators.

Only the radical opponents of Mr. Wolfowitz who most likely believe that he truly is the devil incarnate expressed dismay at the wording used to finally resolve the matter. Indeed the record does not say that he is fired because he is the devil, as it should, according to them. It does not even say that he is a despicable person. So, what was this all about? Where is the indignation of a Board determined to fire Wolfowitz?

Misguided as they may be, at least the “purists” believe in coherent behavior, and thus they cried foul. (However, the indignation of the Bank’s staff, a significant factor in the Wolfowitz crisis, becomes irrelevant when it comes to criticism of the way in which the Board handled the matter).

By choosing to be “realistic” and by accepting this quid pro quo that formally exonerates Wolfowitz, the Board proved that this whole exercise was about politics and not about principle, as it had been declared by the vociferous army of the righteous which includes many of the Goverments represented within the Board. 

Alright, many may conclude. It may very well be so. And so what? All this to make a case about the prevalence of cynicism in politics? ‘What a revelation”! Of course, this is not a great new finding. It is a banal statement of the obvious.

Indeed. But if we think that any principle based political process, at the World Bank, in the US Congress, or in any other democratic institution, western or non western, can thrive in the long run in an environment in which it is established, indeed postulated, that utter insincerity is the norm, we are really kidding ourselves.

Principle based institutions can survive only if there is the shared perception that the principles are truly believed and sincerely upheld, if not by all, at least by most, and not just mouthed. This may very well be banal; but continuing to ignore this truism will not do us any good.