April 2, 2005

April 2, 2005 | Commentary on

No more business as usual

Sometimes you can judge the quality of a president's nominees by taking a look at who opposes them -- and why. By that measure, it's clear President Bush has done a highly commendable job of rounding out his foreign policy team by the recent appointments of John Bolton and Paul Wolfowitz.

These are men of remarkable accomplishments who have made the right enemies. They're unpopular with some because they are a threat to corrupt power structures in the United Nations and the World Bank.

Notice how the leaders of self-proclaimed antipoverty groups swiftly condemned Mr. Wolfowitz when Mr. Bush tapped him to head the World Bank. "As well as lacking any relevant experience, he is a deeply divisive figure who is unlikely to move the bank toward a more pro-poor agenda," claimed Patrick Watt, a policy officer at the British charity Action Aid.

A spokesman for the World Development Network in London went even further. Dave Timms called Mr. Wolfowitz a "terrifying appointment."

It's understandable Mr. Wolfowitz would terrify those who favor "business as usual." A retired foreign minister recently opined to me Mr. Wolfowitz will fail unless he adjusts to the World Bank culture -- "go native," if you will. Many Europeans share that view. But after knowing him for many years, I can tell you Mr. Wolfowitz will succeed because he never will "go native."

Mr. Wolfowitz understands too many of the Bank's loans are nonperforming. For far too long, the developed world has attempted to generate economic growth elsewhere by delivering huge handouts to corrupt nondemocratic governments. In many cases, we would have done better simply skipping the middleman and depositing that "aid" right into their Swiss bank accounts. At least then we would have saved handling fees. This isn't how to build a healthy global economy.

The real engine of international growth is foreign direct investment. In fact, while the World Bank now lends about $20 billion per year, private sources lend and invest vastly more.

And what do these lenders look for before they hand over their cash? Economic freedom. That includes property rights, a free market and an independent judiciary that protects those property rights, allowing for the full repatriation of investments. With foreign direct investment, a developing country leapfrogs into the 21st century, with the latest technologies, job creation and export potential back into the investing countries.

These are among the factors measured in the Index of Economic Freedom, published annually by the Heritage Foundation and the Wall Street Journal. It's no surprise that, year in and year out, the Index shows the world's freest economies are the most productive. As Marc Miles, Ed Feulner and Mary Anastasia O'Grady write in the latest Index, "Not only is a higher level of economic freedom clearly associated with a higher level of per capita gross domestic product (GDP), but GDP growth rates also increase as a country's economic freedom score improves."

Mr. Wolfowitz built his career supporting democracy and freedom and encouraging transparent governance. It's well known he was an architect of the Iraq war, which brought down Saddam Hussein and gave millions of Iraqis a chance to vote.

He also has backed democracy through other means. In the 1990s, Mr. Wolfowitz pushed for NATO expansion, knowing it would help spread and protect democracy in Eastern Europe. Of course, not everyone sees Mr. Wolfowitz's experience as a plus.

New York Times columnist Paul Krugman wrote: "The advice the World Bank gives is as important as the money it lends -- but only if governments take that advice. And given the ideological rigidity the Pentagon showed in Iraq, they probably won't. If Mr. Wolfowitz says some free-market policy will help economic growth, he'll be greeted with as much skepticism as if he declared that some country has weapons of mass destruction."

Well, Mr. Wolfowitz also has been ambassador to Indonesia, so it's pretty clear he is familiar with using diplomacy to encourage our allies. Plus, his experience in Jakarta should convince foreign leaders he understands the importance of economic growth. After all, he has seen its benefits firsthand.

If every recipient of World Bank assistance grew its economy as quickly as Indonesia has over the last 15 years, there would be less need for a World Bank.

And Mr. Wolfowitz has plenty of experience running large bureaucracies. If he can play a major role at the Defense Department, the World Bank should prove no problem at all.

The world is changing before our eyes. In the Middle East, democracy is breaking out. The world economy's steady growth generates jobs and lifts people out of poverty.

We're on the right track. And, much to his critics' chagrin, Mr. Bush's recent appointments will help us keep moving forward.

J. William Middendorf is a former secretary of the Navy, a former ambassador to the Netherlands, the European Union and the Organization of American States and a trustee of the Heritage Foundation.

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First appeared in The Washington Times