Exactly What the World Bank Needs

President Bush's nomination Wednesday of neoconservative Deputy Defense Secretary Paul Wolfowitz to run the World Bank is predictably infuriating critics of the Iraq war. Already Wolfowitz is being likened in the New Republic and elsewhere to Robert McNamara, the Vietnam War architect who went on to mismanage the World Bank and mire the Third World in billions of dollars of debt.

But nothing could be more mistaken: As World Bank head, Wolfowitz would be far more likely to reverse rather than extend McNamara's legacy.

Though its origins are seldom remembered today, the bank was founded after World War II as a way of promoting New Deal-style state capitalism -- a kind of Tennessee Valley Authority for the world, aimed at creating investment in risky countries south of the Equator.

As the years passed, however, it became something quite different. First, in the late 1950s, development experts decided that socialist states would be the best at fostering development. Swedish economist Gunnar Myrdal, later a Nobel laureate, said in 1956: "The special advisors to underdeveloped countries who have taken the time and trouble to acquaint themselves with the problem ... all recommend central planning as the first condition of progress." Such nonsense only ended up harming the countries the bank was supposed to assist, while enriching the Third World elites who skimmed off its loans.

In the bank's early days, it was cautious about making enormous loans. But during McNamara's tenure, between 1968 and 1981, that caution was set aside. Famous for having relied on body-count statistics in the Vietnam War, McNamara brought his bean-counting approach to the bank. His credo was that the more money the bank lent, the more effective it was. So he went on a lending spree, the effect of which was to create billions of dollars of debt, prop up dictatorships in Ethiopia and Mozambique, and pay for shoddy roads and useless steel factories. McNamara made no distinction between democratic and authoritarian countries; Tanzania's Julius Nyerere was a favorite of his.