Fresh start for the World Bank?

Where will the World Bank be heading under its new president Bob Zoellick? What is the real extent of the damage done by Paul Wolfowitz to the Bank? The FT has today a quite amazing analytical piece on the matter (walled for non-subscribers).

Here a few extracts:

Random comments on last week’s events

• The non-event of failure of the EU, US, India and Brazil to resolve their divergences on agricultural and industrial tariff talks in the Doha Round in Potsdam. Agricultural negotiations are like ETA terrorists in Spain and other radicalized terrorist groupings in the world – not having accepted that the world goes on without them they still manage to spoil the game quite dangerously. “Globalisation lives” despite lack of understanding on multilateral rules within the WTO system. But the already questionable fairness of those rules is in serious jeopardy without a global agreement in the Doha talks. Both Brazil and India are not doing themselves nor the poorer developing countries they say to represent any favour in blocking liberalisation of their industries. The EU and the US are not doing any good to their own agricultural sector (from ending overproduction to securing market access in new markets) nor to their industries (India and Brazil are not going to open) if they remain timid in their offers on agricultural tariffs and subsidies.

• The agreement on the “reform treaty” in Brussels to replace the defunct “constitution”. A typical compromise text – the best you can get in current circumstances, and an impressive diplomatic achievement by Angela Merkel. Funny how a constitutional text that was meant to bring the EU closer to the heart of citizens who perceive it as aloof and technocratic is now watered down such as to maintain the EU’s same aloof and technocratic nature. It maintains many old inefficiencies, such as the lack of a proper foreign minister. The self-delusion of governments jealous of their sovereignty in an era of European decline that needs radical approaches to its engagement with the world, ranging from peacekeeping to dealing with Russia, is unbelievable. No comment on Sarkozy’s victory regarding competition – of course the issue is less sexy than human rights, but signalling that he sees the French business model as optimal worries me given the recent performance of the French economy (read two interesting editorials 1 and 2….)

Is labour really losing out from globalisation?

In its latest Economic Outlook, the OECD assessed the impact of globalisation on labour. The conventional wisdom goes that labour, especially low-skilled labour, in the developed world is on the losing side of globalisation. Globalisation is said to raise inequality and to drive people out of work. The OECD’s research gives a differentiated and much more optimistic view. Its main findings are:

Global backwaters

Foreign Policy just published its Failed States Index 2007.

A bit of a reverse correlation with the countries on the Globalization Index published by the same Foreign Policy.

Spotlight on the development aid debate - after the G8 Summit

The G8 Summit hosted by Germany in the Eastern German resort Heiligendamm achieved a few interesting things. It patched up rifts between the EU and the US on climate change, and between Russia and the US on missile defence; but not on Kosovo. The rising powers - “the +5” China, India, Brazil, South Africa and Mexico, with yet-blurred power-line contours - were not to be bullied into binding commitments on climate change [Read this and this]. That’s the world of hard politics such as practised by the world’s Powerful.

All this is far away from the Western Antigones - who prefer to “die” than to abide by the raison d’Etat - who held alternative meetings or sit-ins or demonstrated in the fields and streets of Heiligendamm against the Evils of Power. Some were put in cages by a police that learnt to be efficient after violent outbreaks in nearby Rostock the week-end before. Pop stars like Bob Geldorf of course needn’t fear cages. They are calling for more aid to poor countries. They are furious with the G8’s plain committment to finally provide the sums pledged back in 2005 at the Gleaneagles G8 Summit - which they haven’t so far. Only the budget allocated to the fight against AIDS is being increased. All these aid-apostles lost their pacifistic battle at the Dyke of the Saints (literal translation of the word Heiligendamm). In the meantime, Russian President Vladimir Putin turned the world upside down claiming he is the only “true democrat”, along with Mahatma Ghandi. Note: Ghandi was very much influenced by Russian literary-philosophic giant Leo Tolstoy. So Putin is playing two games here – nationalism for domestic use and preudo-identification with the world’s Oppressed for international audiences. Yet Putin needs to upgrade his credentials on non-violence. Also it is the ruthless Chinese who are currently doing the job of providing massive aid to Africa… Africa, conspicuously absent in the whole G8 show.

Development aid. Behind the refusal of the G8 countries to increase the sums dedicated to aid at the G8 not only lies the egoism of the rich and powerful; this refusal represents a different vision on the matter, showing how the ongoing policy debate on aid spills over into political decisions.

For those who have no time to start a degree in development studies, Shalendra D. Sharma in a review written for the journal World Economics this spring (walled for non-subscribers, unfortunately) provides an admirable synthesis of the aid debate at the moment. The title of this review is “Can Massive Foreign Aid Eliminate Extreme Poverty? The Sachs Easterly-Debate”.

Indeed two important economist figures dominate the current debate. On the one hand Jeffrey Sachs, Director of the Earth Institute, who initially made himself known by prescribing “shock therapy” market reforms in former Soviet bloc countries in the early 1990s. On the other, William Easterly, from New York University, a staunch free marketeer who does not believe in development aid. Sachs published a book in 2005 entitled The End of Poverty: Economic Possibilities for our Time. Easterly’s book was published a few months later, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done so much Ill and So Little Good.

What is the problem?

The numbers after the G: 7-8-13?

The G-8 is meeting in Germany tomorrow and the day after. Violent clashes have already taken place this week-end in Rostok, nearby, casting a shadow on that delicate event.

The FT has an interesting analysis of one of the underlying motives of this blog - the rise of new economic powers and how the rich countries and their institutions deal with them; here applied to the G8. It announces:

“German chancellor Angela Merkel, already struggling to avoid failure on climate change, is facing a new setback at the summit on her plans for closer ties with emerging economies, the Financial Times has learnt.

Several countries, including Japan, India and Brazil, have objected to her plan for the industrialised nations’ summit, starting on Wednesday on Germany’s Baltic coast, to kick-start a formal relationship between the G8 and a group of five emerging countries – China, India, South Africa, Brazil and Mexico.

(…)

Germany is against giving the five countries full G8 membership but wants to set up formal talks at ministerial level between summits on issues including intellectual property rights, freedom of investment, energy and “managing the social implications of globalisation”, according to a top German official.

While Japan is against extending dialogue to its rival China, the “outreach five” as they are called also:

“fear greater proximity to the G8 could damage their reputation in standing up for the interests of other developing countries.

Regarding the G8 - it is indeed something of a closed club of rich countries who do not like to share decision-making. Many of the critics on the streets will agree with this. The other problem that might raise furore in the same circles on the street: opening up the G8 to some emerging markets, like Russia (the fatal error was already done) and China poses a difficult political question: the D-question. Managing your way through this difficult task of engaging the new players while keeping to some of your basic principles, democracy, is a delicate task. Interesting though, that those targeted emerging markets, including the democratic ones, are also those who object most to being included…!

Russia, you need to become more sexy

Upon taking power, Vladimir Putin had one important ambition: bring back Russia into the fold of what he dubbed the “legal relationships of the civilized world” (a quote I have from a booklet on Russia’s WTO accession published by the Center for European Reform).

More generally, Putin wants to bring Russia back into the circle of the world’s leading powers.