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	Protecting the global poor by Ha-Joon Chang Prospect Magazine   July 2007   Almost all rich countries got wealthy by protecting infant industries and limiting foreign investment. But these countries are now denying poor ones the same chance to grow by forcing free-trade rules on them before they are strong enough says Ha-Joon Chang.   Once upon a time, the leading car-maker of a developing country exported its first passenger cars to the US. Until then, the company had only made poor copies of cars made by richer countries. The car was just a cheap subcompact ("four wheels and an ashtray") but it was a big moment for the country and its exporters felt proud.   Unfortunately, the car failed. Most people thought it looked lousy, and were reluctant to spend serious money on a family car that came from a place where only second-rate products were made. The car had to be withdrawn from the US. This disaster led to a major debate among the country''s citizens. Many argued that the company should have stuck to its original business of making simple textile machinery. After all, the country''s biggest export item was silk. If the company could not make decent cars after 25 years of trying, there was no future for it. The government had given the car-maker every chance. It had ensured high profits for it through high tariffs and tough controls on foreign investment. Less than ten years earlier, it had even given public money to save the company from bankruptcy. So, the critics argued, foreign cars should now be let in freely and foreign car-makers, who had been kicked out 20 years before, allowed back again. Others disagreed. They argued that no country had ever got anywhere without developing "serious" industries like car production. They just needed more time.   The year was 1958 and the country was Japan. The company was Toyota, and the car was called the Toyopet. Toyota started out as a manufacturer of textile machinery and moved into car production in 1933. The Japanese government kicked out General Motors and Ford in 1939, and bailed out Toyota with money from the central bank in 1949. Today, Japanese cars are considered as "natural" as Scottish salmon or French wine, but less than 50 years ago, most people, including many Japanese, thought the Japanese car industry simply should not exist.   Half a century after the Toyopet debacle, Toyota''s luxury brand Lexus has become an icon of globalisation, thanks to the American journalist Thomas Friedman''s book The Lexus and the Olive Tree. The book owes its title to an epiphany that Friedman had in Japan in 1992. He had paid a visit to a Lexus factory, which deeply impressed him. On the bullet train back to Tokyo, he read yet another newspaper article about the troubles in the middle east, where he had been a correspondent. Then it hit him. He realised that "half the world seemed to be… intent on building a better Lexus, dedicated to modernising, streamlining and privatising their economies in order to thrive in the system of globalisation. And half of the world—sometimes half the same country, sometimes half the same person—was still caught up in the fight over who owns which olive tree."   According to Friedman, countries in the olive-tree world will not be able to join the Lexus world unless they fit themselves into a particular set of economic policies he calls "the golden straitjacket." In describing the golden straitjacket, Friedman pretty much sums up today''s neoliberal orthodoxy: countries should privatise state-owned enterprises, maintain low inflation, reduce the size of government, balance the budget, liberalise trade, deregulate foreign investment and capital markets, make the currency convertible, reduce corruption and privatise pensions. The golden straitjacket, Friedman argues, is the only clothing suitable for the harsh but exhilarating game of globalisation.   However, had the Japanese government followed the free-trade economists back in the early 1960s, there would have been no Lexus. Toyota today would at best be a junior partner to a western car manufacturer and Japan would have remained the third-rate industrial power it was in the 1960s—on the same level as Chile, Argentina and South Africa.   Had it just been Japan that became rich through the heretical policies of protection, subsidies and the restriction of foreign investment, the free-market champions might be able to dismiss it as the exception that proves the rule. But Japan is no exception. Practically all of today''s developed countries, including Britain and the US, the supposed homes of the free market and free trade, have become rich on the basis of policy recipes that contradict today''s orthodoxy.   * Ha-Joon Chang is Assistant Director of Development Studies in the Faculty of Economics and Politics, University of Cambridge.   Visit the link below to access the complete article. Visit the related web page
	How I"d fix the World Bank by Jeffrey Sachs / Oxfam International   June 2007   How I"d fix the World Bank, by Jeffrey Sachs, (CNN/Fortune Magazine)   What hungry Africa needs is action, not ideology.   The scandal-ridden departure of Paul Wolfowitz from the World Bank doesn"t end its crisis. The trouble runs deeper. It goes to the core of the bank"s mission to cut extreme poverty, hunger, and disease. In the earth"s poverty hot spot, sub-Saharan Africa, the bank"s approach is failing.   Just when the world has ramped up its verbal commitments to fight Africa"s misery, the world"s confidence in the bank is at low ebb. Despite endless talk, countless "missions" by bank staffers, and expensive studies, the bank has accomplished little in Africa for 20 years. Africans know it, and so do the bank"s financial backers in the U.S. and Europe.   Africa will be the bank"s test under incoming President Robert Zoellick. If it fails there, not only Africa but the bank will be in mortal peril.   World leaders have given Zoellick and his team a clear assignment: to achieve the Millennium Development Goals, a set of targets for cutting poverty, disease, and hunger by the year 2015.   The World Bank claims on its Web site that "our work focuses on achievement" of the goals, which "provide us with targets and yardsticks for measuring results."   Yet the bank"s managers have not been held accountable. Senior bank officials actually whisper to African leaders not to dream about achieving the goals, since the managers don"t want to be responsible for ambitious targets. They hope that the goals will just fade away.   Part of the problem has been that Wolfowitz had no background in African development and no coherent approach to it. Based on his perceptions rather than evidence, Wolfowitz decided that the best path was a campaign against corruption among the bank staff and Africa"s governments.   American conservatives cheered, as this crusade played to their prejudices about the bank and about Africa. Yet the bank"s problem has not been staff corruption but rather weak leadership and accountability.   And the core problem in Africa is not corruption but the lack of basic infrastructure and services. Like all poor regions (and rich nations like the U.S.), Africa has its corruption problems, but they do not explain its distinctively poor economic performance.   The causes are obvious to anyone who has spent a few days in African villages. There are almost no roads, electricity, doctors, nurses, fertilizers, high-yield seeds, and all the other things that constitute the first step out of extreme poverty.   These villages live at subsistence or below, trying to eke out survival on soils depleted of nutrients, with children dying of malaria and mothers and fathers dying of AIDS, and without the most rudimentary help of technology.   When poor American farmers lacked electricity, the U.S. established the Rural Electrification Administration in 1935 to provide low-cost credits to bring electricity to the countryside.   When India needed a Green Revolution in the 1960s, the Rockefeller Foundation brought high-yield seeds, and the U.S. government shipped massive amounts of fertilizer.   When China"s countryside needed roads and electricity, the Chinese government, not the private market, did the job, and the World Bank helped with financing.   Yet when it comes to Africa, according to Washington"s free-market ideologues, all those wonderful things are supposed to spring up by themselves, with markets coming to the rescue. And when those things don"t arrive, since there is no way to pay for them, African governments are blamed for corruption.   As any junior IMF staffer could tell the bank in a heartbeat, the African governments do not have the fiscal means to invest in what"s needed, and that would be true even if Mother Teresa were running the local treasury.   New bank chief Zoellick needs to tell his staff that their jobs depend on meeting the goals in Africa. Here are four areas where the bank can have a quick and dramatic success:   It can help Africa raise food production at least 50 percent by 2010. Malawi introduced a voucher scheme to ensure that every farmer could obtain fertilizer and high-yield seed. This program could be implemented Africa-wide within two years. African governments are ready, and the Gates and Rockefeller foundations will provide valuable support.   The bank can help Africa defeat malaria. By 2010 every sleeping site in malaria-transmission regions can be protected with a long-lasting bed net, and every village can be protected with first-line medicine. More than one million lives per year can be saved, with massive add-on effects on schooling and harvests.   It can help Africa achieve electrification by 2015. It is a cruel myth that development without electricity is possible in the 21st century. Rather than helping countries ship their oil abroad and then remain dependent on wood for energy, the bank should be helping Africa develop its hydrocarbons to support regional power grids.   The bank urgently needs to help Africa finance roads and rail upgrading, starting with a major highway (rather than a two-lane, broken- down road) linking the port of Mombasa in Kenya with Nairobi and Uganda, Rwanda, Burundi, and eastern Congo. A road and rail network would enormously expand trade between Africa and the world.   Seasoned practitioners not held back by ideology and posturing know how rapidly results can be achieved. The philanthropy Millennium Promise, which I helped start, has raised over $100 million in private funds for Millennium Villages. This demonstrates how rural life can be improved dramatically from one season to the next.   Zoellick"s success will depend little on his Bush administration connections and not at all on a simplistic free-market ideology. What will count are his management skills.   The goals for Africa can be achieved, but only through action, not through more talk or studies. Time is running out for the goals - and for the World Bank.   June 2007   Oxfam to Robert Zoellick: 100 days for a new deal at the World Bank.   Ambassador Robert Zoellick"s confirmation today as the new president of the World Bank is a vital opportunity for a new deal at the Bank, following the controversial exit of its previous president, said international agency Oxfam today.   “Zoellick must begin a series of reforms in his first 100 days to create a new deal between the Bank and the world’s poor. We can’t continue with business as usual,” said Jeremy Hobbs, Executive Director of Oxfam International.   This would include changing the goals of the Bank, stopping inappropriate strings to Bank lending, reforming the governance structures, and overhauling the Bank’s research work.   “For too long the Bank has paid lip service to the Millennium Development Goals (MDGs) but has never genuinely put them at the heart of its work. World Bank success should be measured by what contribution it has made to helping countries achieve the MDGs – not by the amount lent, or whether or not they’ve implemented certain blueprint policies," said Barbara Stocking, Executive Director of Oxfam Great Britain.   Oxfam says Zoellick should also ensure the Bank plays a role in addressing the effects of climate change in developing countries. It must make it clear that finance to help poor countries adapt to climate impacts is additional to existing aid commitments.   "He should give clear support for a transformation of the institution’s governance, guaranteeing his successor is chosen in an open, transparent manner,” said Ray Offenheiser, President of Oxfam America.   One of the first litmus tests of the Zoellick presidency, Oxfam says, is the on-going IDA replenishment process. Oxfam is calling for full replenishment of the Bank’s coffers, while pointing out that tax payers still need convincing that the World Bank is the right place to put the money.   “We know that tax payers in donor countries want to be sure that the money is being spent to fight poverty in the most effective way, so the Bank will need to commit to changing the way it operates to be more accountable and transparent if the public is to be convinced of this,” said Hobbs.
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