CAPITALISM'S ACHILLES HEEL Dirty Money and How to

“I Don’t Understand” and “Don’t Tell Anyone” 247
Robert McNamara, during his presidency of the World Bank from 1968
to 1981, expanded the institution into program lending, emphasizing a basic
human needs strategy stressing education, health, and agriculture. Under
his tenure, bank lending expanded from $1 billion to $12 billion a year, and
the staff grew to more than 5,000. Still, economic takeoff in Latin America,
Africa, much of the Middle East, and parts of Asia remained elusive.
The Third World debt crisis of the 1980s brought about another change
in policy. As prices for primary products dropped and interest rates on foreign
borrowings soared, poor countries could no longer pay their debts. The
World Bank and the IMF responded with “structural adjustment programs,”
demands for austerity to justify new lending to service old debts. The
mantra for strapped governments was cut budgets, cut subsidies, cut inflation,
devalue currencies, raise interest rates, retrench until you recover. These
tight-fisted policies contributed to a decade of no growth in Latin America
and severe economic decline in Africa.
Structural adjustment segued into the Washington Consensus, which
emphasized additional themes of deregulation, privatization, free trade, financial
liberalization, tax reform, and more fiscal prudence. The name itself
implied a dictated message to poorer countries, and its institutional sponsors
eventually adopted Poverty Reduction Strategy Papers as the new title for
the same set of prescriptions.
While not actually dropping the Washington Consensus formula, the
more recent thrust of the World Bank is toward institution building, ownership,
and participation by the leaders of borrowing countries. This means
property rights, contract law, effective judicial systems, good governance
practices, and anticorruption programs.
The point of this very brief tour of development theory and practice is
that many countries have now been brought full circle. Africa is, in terms of
growth prescriptions, right back where it started in the 1950s and 1960s,
seen as an exporter of minerals, resources, and produce and an importer of
light manufactured goods, which were in earlier years produced locally. I
asked a senior World Bank official recently what, given current Washington
policies, can ever move Africa beyond the stage of serving as a supplier of
primary goods. He had no answer. Apparently, the World Bank lacks an end
game for the poorest countries that will lift them any time soon out of their
dilemma: selling the yields of their lands cheap and buying the products of
our factories dear. Many Latin American and Middle Eastern countries are